Remote Disbursement Strategy 2025: Boost Your Cash Flow with Smart Check Clearing Techniques

Adam Hayes, Ph.D., CFA, brings over 15 years of Wall Street experience as a derivatives trader and expert in economics and behavioral finance. Holding a master's degree in economics from The New School for Social Research and a Ph.D. in sociology from the University of Wisconsin-Madison, Adam also holds CFA and FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and finance at Hebrew University in Jerusalem.

What Is Remote Disbursement?

Remote disbursement is an advanced cash management method used by companies to extend their cash float by exploiting delays in the Federal Reserve's check clearing process. This approach involves issuing checks from banks located far from the payee, maximizing the time between check issuance and actual fund withdrawal.

By doing so, businesses temporarily reduce their book cash balance without an immediate decrease in actual bank funds, allowing them to maintain higher balances in interest-bearing accounts. This technique helps companies optimize liquidity and reduce the need to keep large cash reserves on hand.

Key Insights

• Remote disbursement leverages geographic inefficiencies in the Fed's check clearing system to improve cash flow management.
• The Federal Reserve typically clears checks within one business day, crediting depositors immediately while the actual funds transfer completes shortly after.
• Although the Fed discourages this practice, it benefits companies by increasing their disbursement float without affecting recipients' payment timing.

How Remote Disbursement Works

The Federal Reserve has minimized check clearing times, usually completing them within a single business day, which limits the effectiveness of remote disbursement. However, companies still gain by drawing checks on distant banks to delay fund withdrawals. The recipient receives payments promptly, so business operations remain unaffected.

Other strategies to extend disbursement float include using zero-balance accounts and managing trade payables by purchasing on credit. Float refers to the temporary duplication of funds in the banking system between deposit and withdrawal processing, and it plays a significant role in currency liquidity and valuation.

Pro Tip

Financial institutions invest heavily in managing float and cash flow, often employing remote disbursement alongside best cash management practices to optimize liquidity.

Important Considerations

To maximize benefits, companies must also reduce collection float—the time taken to receive payments. Techniques like concentration banking and lockbox services accelerate collections, increasing net float and improving cash balances.

When banks receive checks drawn on other institutions, they may process them directly, through local clearinghouses, correspondent banks, or Federal Reserve Banks. The Fed credits the collecting bank's account and debits the paying bank's account accordingly, completing the funds transfer.

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