Richmond Corporation

Cash Management at Richmond Corporation

How a business collects from its customers depends on the nature of the business. Cash collections may be in the form of cash, check, or credit cards for most companies. In normal situations funds are deposited into a local bank where firms will later have access to the funds. Cash collection may be in person, transferred through mail or by a carrier. However, to reduce the turnaround time some firms may have several collection locations. In today’s economy cash collection has also added the means of preauthorization of payment or automated drafts from savings or checking accounts. The benefit of this is reducing the collection time frame. When a sale is made online and such means of payment is used, money is transferred immediately from one account to the other.

When a firm decides to receive payments via mail they choose a location and use special post office boxes call lockboxes. By eliminating mail being sent to the main headquarters this speeds up the process of collection for any business. Founded over 20 years ago, Richmond Corporation originally began as a mail-order company. With rapid growth in recent years they are exploring new ideas for their cash collection. Due to added business with its Web site, the Richmond Corporation employs a lockbox system with collection centers in San Francisco, St. Louis, Atlanta, and Boston.

Steve Dennis, who is the company’s treasurer, has been examining the current cash collection and collection policies. On average, each of the firm’s lockboxes handles $235,000 in payments on a daily basis. These payments are then invested in short-term marketable securities at the collection agencies. After investment, every two weeks the investment accounts are swept, and the proceeds are wire-transferred to the Richmond headquarters in Dallas in order to meet the company’s payroll. The investment accounts each pay .068% daily and the wire transfers cost .20% of the transfer....