Understanding the Differences Between Remote Disbursement and Controlled Disbursement

D

Remote disbursement and controlled disbursement are two distinct disbursement procedures used in treasury management.

Remote disbursement refers to the practice of making payments electronically from a remote location, often using online banking services, to disburse funds to vendors, employees, or other payees. In remote disbursement, the bank sends an electronic file of the payment instructions to the payees' banks, and the payees' banks credit their accounts. Remote disbursement is a time-efficient and cost-effective way of making payments.

On the other hand, controlled disbursement is a process of verifying the availability of funds in the account before making disbursements. Under controlled disbursement, the bank provides the account holder with information on the checks presented for payment each day, typically early in the day. This allows the account holder to concentrate their cash balances in a single account, thus maximizing the use of available funds and reducing borrowing costs. Controlled disbursement is an effective cash management tool that helps businesses manage their cash flows and optimize their working capital.

Answer A is incorrect because remote disbursement and controlled disbursement are different processes, with distinct features and benefits. The term "working capital" is synonymous with "current assets" but does not have the same relationship as remote and controlled disbursement.

Answer B is incorrect because neither remote disbursement nor controlled disbursement is viewed as unethical disbursement procedures. In fact, both practices are widely accepted and used by businesses of all sizes to manage their cash flows effectively.

Answer C is incorrect because there is no evidence to suggest that the use of remote and controlled disbursement is in decline. Both practices are still widely used by businesses to manage their cash flows efficiently.

Therefore, the correct answer is D, remote disbursement is often viewed as an unethical disbursement procedure, whereas controlled disbursement is not viewed in such a negative light. However, it should be noted that the perception of remote disbursement as unethical is based on the risk of fraud and unauthorized transactions associated with the process, not because the process itself is unethical. This risk can be mitigated through the use of secure and reliable technology, internal controls, and strong risk management policies.