What are the three components of float? Which are under the control of the firm seeking to reduce

QUESTION

What are the three components of float? Which are under the control of the firm seeking to reduce collection float?
a). Float are the funds that are dispatched by a payer (one who pays) to the payee (one who receives), but not in a form that can be spent by the payee. The three components are Mail Float, Processing Float and clearing float . Mail float is the time required to post a check from payer to payee through the postal system. Processing float is the time required to process customers payment. Even though the customer may have dispatched on time but due to banking regulations or holidays the company might not be able to process the payment and it might take several hours and days to process the

ayment. There can be a case where the customers check is on hold. Clearing float is the delay between, when the check was deposited and when it was presented to payers bank for processing. b). The firm decides to reduce collection float so that investment in Accounts Receviables is decreased. Benefits can be achieved by increasing payment float and reducing net working capital investments.

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