## Managing Cash Collection and Disbursements

Objective: The finance manager should minimise the gap between projected and actual cash flows through efficient collection and disbursement.

### Two key goals

1. Accelerate cash collections as much as possible.

2. Delay cash disbursements within a permissible time frame.

> The aim is to keep cash available within the firm for as long as legitimately possible without harming supplier relationships.

## Accelerating Cash Collections — Types of Float

Float is the time delay between a transaction and the actual movement of funds. Reducing collection float speeds up cash availability.

Type of Float	Meaning
Billing Float	Time between a sale and the issue of the invoice to the customer
Mail Float	Time the cheque is in transit (post, courier, messenger)
Cheque Processing Float	Time the seller takes to record, sort, and deposit the cheque after receiving it
Banking Processing Float	Time from cheque deposit to the actual crediting of funds in the seller's account

Minimising each of these floats accelerates the conversion of sales into usable cash.

⚠️ Common exam mistakes

Confusing the direction of the two goals — collections should be accelerated, but disbursements should be (legitimately) delayed.
Mixing up the float types: billing float (sale-to-invoice) vs cheque processing float (receipt-to-deposit) vs banking processing float (deposit-to-credit).
Thinking 'delaying disbursements' means defaulting — it means using the full permissible credit period without damaging supplier relations.

Reference:

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Managing Cash Collections and Disbursements; Types of Float

⚠️ Common exam mistakes