Watch sessions from Transfer 2024. Featuring Joe Montana, Ben and David from Acquired, and more.Watch Now →

Learn

What is Cash Float?

Welcome to Learn, where we provide straightforward, easy-to-understand definitions of the payments industry.

Follow us

In business terms, float refers to the time delay between the movement of funds from one account to another. There are several instances in which float occurs, all of which involve managing cash effectively.

One example of float occurs during the processing time for checks: when a person writes a check those funds exist as float in their account, because the funds technically belong to the recipient, but the check has not yet been cashed.

The term cash float can also be used to reference a small amount of cash kept on hand by a company to cover minor expenses and day-to-day operations. This type of cash float is typically used for small, immediate purchases where using regular payment methods may not be practical or efficient.

Float can also occur when businesses move money on behalf of their customers, in the period of time where the funds are held in the business’ accounts before being transferred to their end destination. However, it is important to recognize here that in these types of instances, customer funds are generally not commingled with the business’ funds—rather they are held in separate accounts. In many instances, businesses can actually leverage cash float to generate revenue via smart and secure investments.

Similarly, cash float can refer to the time lag between when a payment is received by a business (such as customer payments or incoming funds) and when it is available for use or ready for withdrawal. For example, when a company receives a payment via credit card, there may be a delay between the time the transaction occurs and when the funds are actually deposited into the company's bank account.

In general, businesses need to closely monitor their cash float to ensure that they have sufficient liquidity to cover operational expenses during this processing period. It becomes even more critical for businesses with high transaction volumes, as delays in processing can lead to temporary cash flow constraints.

In all cases, cash float management is crucial for businesses to ensure smooth operations, maintain proper cash flow, and have access to readily available funds when needed. Efficient management of cash float can contribute to overall financial stability and support a business’ ability to meet its financial obligations effectively.

Try Modern Treasury

See how smooth payment operations can be.

Talk to sales
More from

Learn

Learn topic image

Explore the fundamentals behind back office finance processes and the accounting principles underlying them.

BAI2 files are a cash management reporting standard. They are widely accepted by banks across the United States for exchanging data regarding balances and transactions.

Read more

Bank reconciliation is the process of verifying the completeness of a transaction through matching a company’s balance sheet to their bank statement.

Read more

A banking API is software that facilitates a digital connection between a company and a bank.

Read more

The term "cash position" pertains to the quantity of cash or assets that can be readily converted to cash, held by an individual, company, or financial institution at any given moment.

Read more

Continuous accounting is the ongoing process of updating a business’s general ledger with reconciled bank statement transactions as soon as they become available.

Read more

The Flow of Funds is the movement of money in and out of bank accounts.

Read more

ISO 20022 files are a collection of XML-based schemas which standardize any type of financial message.

Read more

An invoicing API allows companies to create, send, manage, and reconcile invoices, as well as track related payments end to end.

Read more

An MT940 (Message Type 940) file is a detailed SWIFT statement that provides information about account transactions.

Read more

Month-end close is a critical process where the accounting team reviews and records financial transactions to close out the month.

Read more

The National Automated Clearing House Association (NACHA) is responsible for overseeing the Automated Clearing House (ACH) Network, which is used to send money electronically between banks throughout the United States.

Read more

NACHA files are the standardized file format that banks use to initiate and manage batches of ACH payments. These files help banks execute large volumes of ACH payments through The Clearing House (TCH) and Federal Reserve.

Read more

Payment operations is an umbrella term that refers to the entire lifecycle of money movement for a company.

Read more

While both are essential for managing online transactions, there are several differences between payment processors vs. payments gateways.

Read more

Recoupment refers to the recovery of spent or lost funds, especially in business operations.

Read more

Revenue recognition is a key accounting principle in which a company records its revenue as it earns it, not necessarily when paid for.

Read more

Two options for financial transaction settlement—differing in both speed and style—here, we’ll look at how both Net Settlement and Gross Settlement work in action.

Read more

Treasury Management Systems (TMS) are software applications that serve to help businesses simplify their payment operations by automatically tracking things like cash flow, assets, investments, and more.

Read more

Incoming payment details are notifications that a company is going to receive a payment it didn’t originate—meaning the receiving funds were not initially requested.

Read more

Payment controls help accounts payable (AP) departments avoid losing money due to fraud, late payment fees, and other errors. They are a necessary part of a company’s overall payment operations to keep payments secure, accurate, and authorized.

Read more

Account-to-Account (A2A) banking, sometimes also called Me-to-Me banking, is the transfer of funds from one account to another account.

Read more

Asset risk management is essentially a fusion of asset management and risk management.

Read more

Batch processing is a method of processing various types of transactions. As the name suggests, transactions are processed in a group or “batch.”

Read more

In business terms, float refers to the time delay between the movement of funds from one account to another.

Read more

Cash forecasting is a way for companies to look at “cash in” vs. “cash out” for a business over a window of time.

Read more

Cash management is the monitoring and maintaining of cash flow to ensure that a business has enough funds to function.

Read more

Cash pooling is a centralized cash management tool that companies with multiple subsidiaries sometimes use to optimize the cash balances of all legal entities.

Read more

IBAN, or an International Bank Account Number, makes it easier and faster for banks to process cross-border financial transactions.

Read more

Liquidity management provides visibility into cash positions over past, present, and future dates and provides an overview of the financial health of a business.

Read more

Treasury management is the act of managing a company’s daily cash flows and larger-scale decisions when it comes to finances.

Read more

Popular in the banking and finance world, penny tests are a simple way to verify the validity of a bank account or bank integration, prior to a large finance transaction taking place.

Read more

Identity Verification APIs allow businesses to streamline the process of checking the identities of new users by automatically, and in some cases instantly, verifying their provided identifying information.

Read more

Subscribe to Journal updates

Discover product features and get primers on the payments industry.

Subscribe

Products

Platform

Modern Treasury For

Case Studies

Insights

Documentation

Company

Legal


Popular Integrations

© Modern Treasury Corp.