AN APPLICATION OF INVENTORY THEORETICAL MODELS TO CASH COLLECTION

Abstract

A problem common to all companies operating widely dispersed revenue‐generating outlets is that of transferring these revenues to central accounts. Company funds held in local banks represent an unusable asset that, in view of the high opportunity cost of money, may substantially increase operating costs. A wide variety of systems can be devised to effect this transfer process. As an example of such systems, this paper examines a transfer procedure that uses depository transfer checks. It is shown that a simple ( s, S ) policy characterizes the optimal transfer policy.