Remote Disbursement
 |
Definition of 'Remote Disbursement'A cash-management technique that some businesses use to increase their float by taking advantage of the Federal Reserve System's check-clearing inefficiencies. A company that practices remote disbursement intentionally draws its checks on a bank in a location that is geographically remote from whomever it needs to send checks to. It does this to maximize disbursement float, which represents a reduction in book cash but no current change in actual cash in the bank. This means the company still has the money in its bank account and can keep earning interest on it. Using remote disbursement can also allow a company to keep a smaller amount of cash on hand and more of its money in higher-interest-paying accounts.A company that wants to use remote disbursement to its full advantage needs to also minimize its collection float, or the time it takes to receive payments. Companies can speed up their collections through techniques that reduce float, such as concentration banking and lockbox banking. By slowing down payments and speeding up collections, a company increases its net float and therefore its cash balance. |
 |
Investopedia explains 'Remote Disbursement'The Federal Reserve discourages the practice of remote disbursement. It clears almost all checks within two business days, so it is the Fed, not the writer nor the recipient of the check, that loses in the remote-disbursement game. The recipient never has to wait more than two days to receive payment, so it will not necessarily object to doing business with companies that practice remote disbursement.Other ways companies extend disbursement float include zero-balance accounts and purchasing supplies and services on credit (managing trade payables). |
Related Definitions
Articles Of Interest
-
Breaking Down The Fed Model
Learn what pundits mean when they say that stocks are undervalued according to the Fed model. -
How The Federal Reserve Was Formed
Find out how this institution has stabilized the U.S. economy during economic downturn. -
Ben Bernanke: Background And Philosophy
Get some insight into the man at the forefront of key U.S economic decisions. -
Depreciation: Straight-Line Vs. Double-Declining Methods
Appreciate the different methods used to describe how book value is "used up". -
Leading Economic Indicators Predict Market Trends
Leading indicators help investors to predict and react to where the market is headed. -
Introduction To The Continuing Claims Report
This weekly economic release contains important information concerning unemployment levels and insurance. -
Financial Statement: Extraordinary Vs. Nonrecurring Items
When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ... -
Lessons Learned From the Banking Crisis
There are lessons to be learned on how to handle severe financial downturns, and while the Fed is learning, politicians may not be. -
Austerity: When The Government Tightens Its Belt
When a government tightens its belt in tough economic times the entire nation feels the squeeze. -
Get A Career In Showbiz Accounting
An accounting career doesn't have to be boring. If you love numbers, but want excitement as well, consider the field of showbiz accounting.
Free Annual Reports
