What is Net Float

The term float is used in finance to represent short-term inaccuracy of a bank balance in the ledger of the company and the bank account. Net float can be defined as the difference between the payment float and availability float.

While payment float can be defined as the difference between the balance in the ledger of the company and bank account of the company. In payment float company ledger will show less amount, than the bank account of the company. It can be better understood through an example, suppose a company issue a check of $10000 for payment to supplier then company ledger will show an outflow of money, but the bank balance will not show the deduction until the check is presented for payment by the supplier.

Availability float is reverse of payment float, in availability float company ledger will show more balance than the bank account. For example if a company receives a check of $10000 from its creditors company will immediately credit it in the ledger, but bank will credit it only when it is deposited in the bank by the company.

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