Net float definition
/What is Net Float?
Net float is the combination of the mail float, processing float, and availability float, and so represents the full duration of all types of check payment float. In more detail, these float concepts are as follows:
Mail float. The time delay between when a check is mailed by the payer and when it is received by the payee.
Processing float. The time taken by the payee to process the received payment and deposit it into the bank.
Availability float. The time between when a payment is deposited and when the funds become available for use in the payee's account.
The net float is important when a business makes payments and receives payments primarily with checks. It is not an issue when electronic payments are used.
How to Calculate Net Float
The aggregate amount of net float in a bank account related to both outgoing and incoming cash flows can be calculated by subtracting paid funds not yet deducted from the account from funds deposited but not yet cleared. You can calculate the net float on a daily basis, if you are completing a bank reconciliation every day.