CA Intermediate · Financial Management and Strategic Management · Treasury and Cash Management
Which of the following is a method of speeding up cash collections, as distinct from slowing down cash payments?
Concentration banking speeds up collections because customers pay into local collection centres and funds are quickly pooled into a central account. The other choices, playing the float, paying on the last due date and using distant-bank drafts, are techniques for slowing down disbursements.
- AConcentration bankingCorrect
- BPlaying the float on cheques issued
- CMaking payments on the last day of the credit period
- DUsing drafts payable at distant banks
Explanation
Concentration banking collects receipts through local branches in many regions and pools them at a central account, shortening mailing and clearing time. The other options are ways of delaying payments.
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