Page 153 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes the location of the cheque collection centre and speed of delivery. Some banks even buy the
cheques and pay the corporate immediately; charging an interest fee for the number of days it
takes them to encash the cheques. Since CMS allows companies to track their cash flows on a
daily basis, financial decisions happen faster and more efficiently. The following is a list of
services generally offered by banks and utilized by larger businesses and corporations:
1. Account reconciliation: Balancing a cheque book can be a difficult procedure for a very
large business, since it affects so many cheques it can take a lot of human monitoring to
realize which cheques have not cleared and therefore what the company’s true balance is.
To cover this, banks have developed a system which allows companies to upload a list of
all the checks that they issue on a daily basis, so that at the end of the month the bank
statement will show not only which checks have cleared, but also which have not. Lately,
banks have used this system to prevent cheques from being fraudulently cashed if they are
not on the list, a process known as positive pay.

2. Advanced web services: Most banks have an Internet-based system which is better than the
one available to consumers. This helps the managers to create and empower special internal
log-on credentials, permitting employees to send wires and access other cash management
features normally not found on the consumer web site.
3. Armoured car services/cash collection: Large retailers who collect a great deal of cash may
have the bank pick this cash up via an armoured car company, instead of asking its
employees to deposit the cash.

4. Automated clearing house: It is usually offered by the cash management division of a
bank. The automated clearing house is an electronic system used to transfer funds between
banks. Companies use this to pay others, especially employees (this is how direct deposit
works). Certain companies also use it to collect funds from customers (this is generally
how automatic payment plans work).
5. Balance reporting: Corporate clients who actively manage their cash balances usually
subscribe to reliable web-based reporting of their account and transaction information at
their lead bank. These advanced compilations of banking activity may include balances in
foreign currencies, as well as those at other banks.

6. Cash concentration services: Large or national chain retailers are often in areas where
their primary banks do not have branches. Therefore, they open bank accounts at various
local banks in the area. To prevent funds in these accounts from being slug and not earning
sufficient interest, many of these companies have an agreement with their primary bank,
whereby their primary bank uses the automated clearing house to electronically “pull”
the money from these banks into a single interest-bearing bank account.
7. Controlled disbursement: In this the bank provides a daily report, typically early in the
day, that provides the amount of disbursements that will be charged to the customer’s
account. This early knowledge of daily funds requirement allows the customer to invest
any surplus in intraday investment opportunities, typically money market investments.
This is different from delayed disbursements, in which payments are made through a
remote branch of a bank and customer is able to delay the payment due to increased float
time.

8. Lockbox - wholesale services: Often companies which receive a large number of payments
via cheques in the mail have the bank set up a post office box for them, open their mail,
and deposit any cheques found. This is referred to as a “lockbox” service.
9. Lockbox - retail services: Lockbox are for companies with small numbers of payments,
sometimes with detailed requirements for processing.

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