Average daily float is a financial metric that measures the average amount of time it takes for checks or other payments to clear the bank after they are deposited. The float is the difference between the balance in a bank account and the balance reported by the bank, and can be caused by delays in processing checks, electronic payments, or other transactions.
To calculate the average daily float, the total float for a given period is divided by the number of days in that period. For example, if a company has an average float of $10,000 over a 30-day period, the average daily float would be $333.33 ($10,000 / 30).
Average daily float can be used to help companies manage their cash flow by providing a more accurate picture of their available funds on a daily basis. It can also be used to identify inefficiencies in payment processing systems or to measure the impact of changes in payment processing procedures.
However, it is important to note that average daily float is just one of many factors that can affect a company’s cash flow, and should be considered in conjunction with other financial metrics when evaluating a company’s overall financial health.