Playing with the float - How to increase your returns with better fund management ?
The balance in your cheque leaves hardly represent the accurate available amount of dollars/euro available in your bank account. The funds available in your account are generally greater than what the amount against the balance columns shows in your cheque leaves. The dollar / euro difference between a company’s bank balance and book balance is referred to as float. The float is the difference between the time period when the checks are written and clearing done by the bank.
So it is possible for a company to have a negative bank balance in its books while positive balance in the bank, because the checks written by the company might still be not presented in the bank or they might be in the clearing process and would be outstanding. If the size of this float can be measured accurately the float funds can be used to earn some extra returns. This activity in the finance corporate world is known as ‘playing with the float’.
