The buying company cuts a check and mails it to the selling company. There’s the time that it takes for the check to be mailed to the selling company. Once it reaches the selling company, then the company has to open it, deposit it into their bank, and then wait for that check to process before it shows up in their bank account. This entire process is called cash float. 

The buyer wants the cash float to be as slow as possible because the longer it takes for the check to get to the selling company and then be deposited, the longer the funds stay in our bank account. The seller wants the cash flow to be quick as possible because the selling company wants to receive its money from its sales. 

There are two good options for decreasing the cash float. Instead of using checks to pay for goods, the company could use an electronic funds transfer (EFT). An EFT is an instant transfer between two banks. With an ETF, we don’t have to cut a check, send the check, and then wait for it to be deposited. Rather, an EFT provides an instant transfer that decreases the cash float. 

The second option for decreasing cash flow is having a lockbox. A lockbox is a secure box at the bank. When the buying company sends the check to the selling company, they could send it directly to the lockbox. Therefore, the funds are deposited into the account more quickly, thereby reducing the cash float.