cash management service (concentration services)


Concentration Services:

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Movement of cash into single account from different lockbox is known as Concentration services. It is the account from which investments and disbursements are made.

The desirable and mandatory objectives of Concentration services are as follows:

a)      It helps in eliminating idle funds it outlying banks.

b)      It consolidates entire deposits into one single account.

c)      It increases the availability of funds.

d)     The most important objective of Concentration Services is that it helps in improving the cash flow information management and control.


Mandatory goals objectives of concentration services:

Transparency in Bank Transaction: One of the most important objectives is that Concentration services results in transparency that is a concerned person or a company will be knowing that there money is safe because previously there was no evidence to verify whether the money is actually deposited or not but now concentration services coming into picture, the scheme has been broadened and there exist a lot of transparency.


Improving the cash flow information management and control:

Concentration services help in knowing the management that how much cash is available with them instantly. This results in planning and making decisions immediately so that if any opportunity arises , there will be great chances of earning significant income because if we will have a proper cash flow statement ,  than immediate actions can be taken and plans can be executed.


Secondary benefits of concentration services:

a)      It helps the customer’s to make a proper plan to use the cash resources and to reduce the line of credit.

b)      It is one of the most of cost effective and cost efficient way of increasing the cash flow by freeing up cash resources.

General description of “concentration services”:

Concentration Services can be defined as a service which is provided by the bank for payment processes for a company. The company first commands their customers to send payments at the bank in lockbox. The bank then collects the payment and deposits that amount directly into the company’s accounts. The basic advantage of concentration services what a company derives is that it reduces the time between receipts and processing of payments and the disadvantage is that there is a high possibility that exist is the fraud that can be done by the employees of the bank, who can steal the payments by doing a manipulation in the form of taking the fund but not depositing into customer’s accounts.


Specific features/characteristics analysis of “concentration services:

Zero Balance Accounts:

The specific features of concentration service are that it is associated with the core account or investment account of the company. So, there is an automatic movement of funds to maintain a Zero balance. There will also be a maximize earnings on idle funds.

Accounts to account Transfers:

In the growing era , concentration services has provided a specific way that the funds can be moved from the owners account either on a time basis or on a recurring basis.

ACH Concentration:

It also helps in facilitating funds transfer by using an Automated Clearing house which is also known as ACH. It results in efficient movement of funds from various financial Institutions to one central location. Moreover it also reduces costs and improves internal control system.

Investment Sweeps:

The other feature is that of choice of several sweep products. Any excess balance can be transfer into higher return overnight investments.


Cost feature analysis of concentration services:

Concentration service has a relatively cheaper cost when se analyze the entire features that it is providing. It depends up on the type of user you are for the bank. If a customer is having a very high transactions every day and he is paying to government significant amount of taxes, than the relative charges for the features will be less. For Example : In case a person is having a very high transactions and the volume of transactions are also very huge , than they will be provided the features of investment sweeps at a relatively low rate and sometimes even they are provided these services at free.  The feature of Zero Balance Accounts is made free for all the account holders by all the banks. All the other features are provided at commission basis. So we can conclude that these services are relatively cheaper when it comes to comparison with the features.

Benefit Analysis:

There is a huge benefit of concentration services when it comes in relation to the cost features. The cost of all the features provided by the bank in Concentration services is very minimal and also there is huge benefit because all the account holders will have a sense of security. The basic advantage that the account holders derive is in the form of financial benefits. Concentration services help us in better preparation of cash budget because it is the sole thing for doing any business.

Advantages and Disadvantages of Concentration Services:

1)      The biggest advantage is that it has made the complex system of banking into simple transactions and moreover the additional features have increased the confidence of the people in this system.

2)      It reduces operational costs and increased efficiencies.

3)      It enhances self-service options for your customers to make payments

4)      The disadvantage is that there is always a possibility of fraud if rotation of employees is not done in a proper manner.

5)      Risk associated is very high.




  Cash Concentration services, Jacob Joseph (2009), 141-176





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