Remote disbursement definition
/What is Remote Disbursement?
Remote disbursement involves the use of check payments that are drawn on remote bank locations, thereby lengthening the duration of the disbursement float. A payer with a substantial disbursement float can use the associated cash for a longer period of time, which incrementally increases its investment income. At its most sophisticated level of usage, a company can have multiple remote bank locations set up around the country, and pay suppliers using bank accounts located the furthest from them.
The usefulness of remote disbursement has declined over time, as central banks have gradually driven down clearing times, with a particular emphasis on those regions where clearing intervals are unusually long. In addition, many suppliers demand to be paid via electronic payments, which eliminates the benefit that a payer gains from using remote disbursements.
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What Risks are Associated with Remote Disbursement?
Remote disbursement carries risks such as reputational damage and loss of trust from vendors who perceive delayed payments as unethical. It may also attract regulatory scrutiny if used to manipulate cash positions or mislead stakeholders. Additionally, the practice can disrupt supplier relationships and expose the company to penalties for late payments.