You are considering implementing a lockbox system for your firm. The system is expected to reduce the collection time by 3 days. On an average day, your firm receives 680 cheques with an average value of $99 each. The daily interest rate on Treasury bills is.0125 %. The bank charge per cheque would be $.15. What is the anticipated daily savings if this system is implemented?

Question

Quizplus · Accepted Answer

The anticipated daily savings can be calculated by determining the interest earned from the reduced collection time and subtracting the bank charges. The daily interest savings is calculated as follows: 680 cheques * $99 * 3 days * 0.0125% = $25.245. The bank charge is 680 cheques * $0.15 = $102. The daily savings is $25.245 - $102 = $25.25.

You Are Considering Implementing a Lockbox System for Your Firm