What is Disbursement Float?

What is disbursement float?

Disbursement float is the gap between when a business initiates a payment and when the money actually leaves its bank account. During that gap the funds still sit in your account and stay available, which is why disbursement float briefly works in the payer's favour. It is most visible with cheques and slower payment rails, and shrinks as payments move to instant methods.

It is one side of a company's total float. Disbursement float (money you are paying out) works for you; collection float (money owed to you that has not cleared yet) works against you.

Key takeaways

Pay now, clear later.The lag between initiating a payment and the cash leaving your account.

It favours the payer.Funds stay available during the gap, so disbursement float works in your favour.

Shrinking with instant rails.Faster payment methods leave far less float than cheques once did.

How to calculate disbursement float

The simplest measure multiplies your average daily payments by the average number of days they take to clear. Enter your figures to estimate the cash kept in play.

Your figures

Average daily payments out$

Average days to clear

Disbursement float $30,000 Cash kept available on average during clearing.

Disbursement float vs collection float

Disbursement float is the delay on money you pay out, which keeps cash available to you for longer; collection float is the delay on money owed to you that has not yet cleared, which keeps cash out of reach. Net float is disbursement float minus collection float. On the receivables side, the bigger lever is not bank-clearing delay but how long invoices take to be paid in the first place, which you manage by collecting faster. Track that with cash positioning and the wider cash conversion cycle.