9.2 MANAGING CASH INFLOWS AND OUTFLOWS

After the cash requirements are assessed, the finance manager then strives to make do with a minimum level of cash. If the time lag between the cash inflows and cash outflows is significantly reduced, the cash requirement will definitely be lower. To this end, the finance manager expedites cash collection or cash inflows and controls disbursements or cash outflows.

9.2.1 The Concept of Float

The process of accelerating cash collection and controlling disbursements is essentially related to the concept of float. Float represents the difference between the cash balance appearing in the bank records and that appearing in the firm’s books. It may be either negative or positive. A negative float occurs when the ...

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