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CA Intermediate · Financial Management and Strategic Management · Treasury and Cash Management

Which of the following is a cash management tool used by a company to speed up collections from customers spread across many cities?

Concentration banking is the technique for speeding up collections. The firm uses collection centres in various cities so customers pay locally, reducing mail and clearing delays, and funds are then moved to a central account. Delaying payables or holding inventory does not accelerate receipts.

  1. ADelaying payments to suppliers up to the due date
  2. BConcentration bankingCorrect
  3. CIssuing post-dated cheques to creditors
  4. DMaintaining a higher inventory

Explanation

Concentration banking involves collecting payments through multiple local bank branches near customers, then transferring funds to a central account. This shortens mailing and clearing float and speeds up collections. The other choices concern payments or inventory, not accelerating collections.

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