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Should you accept an early retirement offer? Additional ReadingsĬFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.How much should you contribute to your 401(k)? It can also help avoid risks related to changes in currency and interest rates. Being able to regularly deposit its cash into a concentration bank helps the company mitigate risks in insolvency.Īdditionally, it improves profitability by putting in place a more organized system to track cash inflows and organize accounts receivable. Using depository transfer checks is an important part of a company’s financial operations because it allows the business to better manage its cash flows. It is a preferred way of transferring funds because it is considered to be faster, more efficient, and more affordable compared to other methods.Īlthough most companies now prefer to use an automated clearing house, some older companies continue to use a depository transfer check for depositing their revenue. An automatic clearing house (ACH) is a system of transferring funds electronically, which is run by the National Automated Clearing House Association (NACHA).Īn automated clearinghouse provides a method for companies to manage transactions related to payroll, invoices, bill payments, direct deposits, and more. Automated Clearing HouseĪn automated clearing house is now used by many companies as a new replacement. The concentration bank will then deposit the checks into the organization’s account. Depending on the bank and the amount on the checks, funds may not be immediately available for use by the company after the check is deposited into the company’s bank account. The third-party service provider will then transfer data on the receipts to a concentration bank, which is a term that refers to the primary bank that an organization uses.īased on the financial data on the receipts, the concentration bank will create and issue depository transfer checks for each location. How Does a Depository Transfer Check Work?Ī facility manager at each location will gather information about the day’s revenue and send the receipt to a third-party service provider, who collects receipts from all the locations. Depending on the company’s geographic location and the concentration bank that is used, there may be a fee that applies. The check is also payable to the company’s bank account only.
It is a financial instrument that is non-negotiable, and it does not require a signature. The difference is that the words “depository transfer check” would be written at the front of the check. Since an organization may expand its business and operate in several locations, it is convenient to use a depository transfer check in order to ensure better cash management for all its locations.Ī depository transfer check looks similar to a personal check. Updated JanuWhat is a Depository Transfer Check (DTC)?Ī depository transfer check (DTC), also known as a depository transfer draft, is used when a third-party service provider collects daily receipts from an organization’s locations and deposits it at a concentration bank.