Components of Collection Time

Based on our previous discussion, we can depict the basic parts of the cash collection process as follows: the total time in this process is made up of mailing time, check-processing delay, and the bank's availability delay.

Customer mails payment

Time

Company receives payment

Company deposits payment

Mailing _ time

Processing _ delay

Cash available

Availability delay

The amount of time that cash spends in each part of the cash collection process depends on where the firm's customers and banks are located and how efficient the firm is in collecting cash.

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