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Overview of Cash Transfer Methods

This document discusses various cash transfer methods including their advantages, disadvantages, and controls. It covers check payments and the check processing flow. It also discusses wire transfers, ACH payments, letters of credit, procurement cards, and cash payments. For each method it provides details on how the method works and considerations around fees, timing, and uses. It also provides examples of controls that should be implemented for different cash transfer methods to prevent fraud and ensure accurate payments.

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Jewelyn Ciocon
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90 views26 pages

Overview of Cash Transfer Methods

This document discusses various cash transfer methods including their advantages, disadvantages, and controls. It covers check payments and the check processing flow. It also discusses wire transfers, ACH payments, letters of credit, procurement cards, and cash payments. For each method it provides details on how the method works and considerations around fees, timing, and uses. It also provides examples of controls that should be implemented for different cash transfer methods to prevent fraud and ensure accurate payments.

Uploaded by

Jewelyn Ciocon
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Cash Transfer Methods

Module II

Berito,
Berito, Quennie
Quennie
Bernal,
Bernal, Jessamie
Jessamie
Cacho,
Cacho, Carmina
Carmina
Check Payments
A check payment is made on a paper
document, which has traditionally been
physically routed from the payer to the
payee, to the payee’s bank, and then back to
the payer’s bank.
Check Process Flow
Check is Payer’s bank
Payee’s bank
Payee transmitted transfer cash Payer’s bank
sets value Payer’s bank
Payee records to payers to payee’s credit
Payer issues date for debits
check receives check and bank bank payee’s
entry in payer’s
check deposits at through through account on
payee’s bank account
bank settlement settlement value date
balance
system system
Mechanics of Check Payment

Processing Presentation Availability


Mail float
Float Float Float
CHECK PAYMENTS
THROUGH A LOCK BOX
Remote Deposit Remote
A company can have Capture Disbursement
it’s bank receive and
• Allows a A float concept can
process checks on its company to also be applied to a
behalf, which is avoid the company’s
termed a lockbox physical payments. The key
service. movement area that can be
of received lengthened is the
checks to its presentation float.
bank.
Wire Transfer
A wire transfer is a way of sending funds to the
recipient’s bank account more easily than any
other form of payment, and is mostly used in
international payment.
The following information are
needed in wire transfer:
The following information are needed in
1
wire transfer:
2 Recipient’s name and account number
Recipient bank’s name and bank
3
identification number
4 Amount of the payment
How does wire transfer work?
What is ACH Payments
The ACH is an electronic network for the
processing of both credit and debit transactions
especially in the United States and Canada. ACH
payments include:

• direct deposit payroll,


• Social Security payments,
• tax refunds,
• bills
What is ACH Payments
ACH Debits Global
ACH Payments

The existing global ACH payment system is not


perfect. Here are two limitations that are of
particular concern:

• Limited coverage.
• Limited remittance information.
Letters of Credit
Procurement Cards
It is a type o company charge card used in
making smaller purchases for greater cost
efficiency, control and convenience. It is also
known as purchasing cards and PCards.
System of Managing
Procurement Cards
ItIt is
is important
important to
to The
The employees
employees cancan
understand
understand how
how simply
simply charge
charge the
the
they
they can can be
be used
used items
items to
to their
their
by
by aa company.
company. pcards.
pcards.

The
The employees
employees are
are
ItIt is
is use
use aa
expected
expected to
to follow
follow
replace
replace checks
checks to
to
the
the companies
companies
make
make payments.
payments.
policies.
policies.
Advantages of P-card
1 Information

2 Convenience

3 Efficiency

4 Rebates
Cash Payments
It is a bills or coins paid by the recipient of
goods or services by the provider. It can also
involve a payment within a business to
employees.
Advantages of Cash Payments

No Security
1
breaches

2 No overspending

3 Less Marketing
Fees for Cash Transfers
The fees charged by the banks vary
considerably for different types of cash
transfers.
Cash Transfer Methods
ADVANTAGES DISADVATAGES PRIMARY USE

Automated Clearing Assured delivery on


House Debit scheduled date Risk of fraud Recurring payments

Requires setup, so not


Automated Clearing Low cost and efficient
as efficient for one- Corporate payables
House payment processing time pays.

Payment requires time


Bank check Less efficient process Corporate payables
to clear.

Low cost and fast cash Payments between


Book transfer accounts at the same
transfer
bank
Requires strong
Cash controls and expensive Retail sales
to handle
Cash Transfer Methods
ADVANTAGES DISADVATAGES PRIMARY USE

Timing is under the


Payment may not clear
Company check control of the payer and has a less efficient Corporate payables
and the payer takes
process.
advantage of float.

Administratively International
Letter of credit Secure for the seller
tedious payments

Consolidate small Significant fee for cash


Procurement card Retail and small sales
billings recipient

Can experience delays Large one time


Relatively fast and in some countries and payments that are
Wire transfer
assured delivery it requires more required on short
manual processing. notice.
Controls for check Payments

The following controls should be used to create and monitor check payments:
Controls for Remote Deposit
Capture
Controls are needed in converting the checks to an electronic format
Controls for Electronic
Payment
The controls for electronic payments:
The following controls address these additional issues in electronic
payments such as unauthorized account debits and potentially
incorrect or fraudulent payments.
Controls for Letter of Credit
The following controls should be implemented prior to finalizing a letter of credit:
The following controls involves the creation of the seller’s invoice to
the buyer, to ensure that it will be acceptable to the bank:
Thank You
Any Questions ?

Common questions

Powered by AI

Procurement cards offer several advantages, including convenience, cost efficiency, and rebates. They provide greater control over small purchases and simplify the payment process by replacing checks . However, their disadvantages include the potential for misuse if not properly monitored and the risk of overspending by employees .

Remote deposit capture enhances efficiency by eliminating the need to physically move checks to the bank, thus reducing processing time. It offers greater control over funds as deposits can be made immediately upon receipt, unlike traditional methods that involve longer mail and processing floats .

ACH payments are more beneficial for recurring transactions due to their low cost and efficiency, especially in the U.S. and Canada where they are commonly used for direct deposits, social security payments, and bill payments. In contrast, wire transfers, while faster, are typically more suited for large, urgent payments due to higher costs and manual processing requirements .

The float types in the check payment process include mail float, processing float, presentation float, and availability float. These floats represent the time delays at various stages, affecting fund availability. A lockbox service can reduce these delays by receiving and processing checks on behalf of the company, thereby decreasing the presentation float and accelerating fund availability .

Companies must focus on convenience, efficiency, and cost control when managing procurement card information. Establishing clear policies and monitoring usage are crucial to prevent overspending and to ensure compliance with company financial goals, thereby optimizing the benefits of using PCards .

The global ACH payment system is limited by its coverage, as it may not be available in all regions, and by the level of remittance information it can provide, which affects tracking and reconciliation of payments .

Cash payments minimize security breaches as they do not involve electronic systems susceptible to hacking. However, the trade-offs include the need for strong controls to prevent theft, higher handling costs, and inefficiencies in transactions compared to electronic payments, which are faster and easier to process .

Wire transfers are advantageous due to their speed and reliability in delivering funds directly to the recipient's bank account, making them suitable for time-sensitive payments. Despite this, potential delays can occur in certain countries due to manual processing and varying banking regulations .

Controls for electronic payments include verifying recipient details, implementing fraud detection systems, and ensuring proper authorization processes to prevent unauthorized account debits and incorrect payments. These controls are essential for maintaining the integrity and accuracy of electronic payments .

A company might choose a letter of credit for international transactions due to the security it provides to the seller, ensuring payment once transaction terms are met. However, it is administratively tedious, requiring meticulous documentation and coordination with banks, which can lead to delays and increased complexity .

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