This is a very broad definition as you will see, float has different meanings for different industries. Book Balance Types of Float Disbursement Float is generated when a firm writes a check, causing a decrease in the firm s book balance but to change in its available balance. Collection Float is created when a firm receives a check, causing an increase in the firm s book balance but no change in its available balance.
Items affecting float include mailing time, processing delay and availability delay.
The size of the float is a function of both the amount of dollars and length of delay involved. The cost of collection float is simply the opportunity cost of not having that money in cash. At the very least, the firm could earn interest on that cash if it were available for investing. With the growing popularity and growth of electronic banking, transfers, payments, etc comes the prospect that float soon will be a thing of the past. If the business world continues to move toward electronic data interchange, there will be no delay time and thus float will be non-existent.