Depository Transfer Check

Depository Transfer Check

What is a deposit transfer check?

A deposit transfer check (DTC) is used by a designated collection bank to deposit a company’s daily receipts from multiple locations. Custodian transfer checks are one way of ensuring better cash management for companies that collect money from multiple sites.

Data is transferred by a third-party information service from each location, from which DTCs are created for each depot location. This information is then entered into the destination bank’s check processing system for deposit.

Understanding custodian transfer checks

Custodian transfer checks are used by businesses to collect revenue from multiple sites, which are then deposited in one go to a bank or other institution. They are also called depositary transfer drafts.

The third-party information service used to transfer data does so via a concentration bank. A concentration bank is the main financial institution of the organization where it carries out the majority of its financial transactions. The concentration bank then creates DTCs for each deposit location, which has entered the system.

Key points to remember

  • Companies use depositary transfer checks in order to have a better cash management system.
  • Deposit transfer checks (DTCs) may look like a deposit check, but they do not have a signature.
  • Automatic clearing house systems replace depositary transfer check systems, but some companies continue to use DTCs for deposits.
  • Custodian transfer checks are not the same as sight deposits.

A deposit transfer check is similar to a personal check, except that “Deposit transfer check” is written at the top center of the front of the check. These instruments are non-negotiable and do not bear a signature.

DTCs should not be confused with demand deposits. Businesses receive a key for a secure drop box. Deposits, which are placed in a bag containing deposit slips, are deposited in this deposit box after opening hours. The bank opens the deposit box in the morning and deposits the deposit overnight into the company’s current account.

DTC against automatic clearing house systems (ACH)

DTC-based systems have slowly been replaced by the Clearing House (ACH). ACH systems are electronic money transfer systems that typically process payroll, direct deposit, tax refunds, consumer invoices, and other payment systems in the United States. About 10,000 institutions across the country use ACHs, which are considered to be faster, cheaper and more efficient.

Companies that are not part of an ACH network should always use DTCs.

Special considerations

As noted above, depositary transfer checks allow businesses to better manage their entries. Corporate cash management is usually managed by a corporate treasurer, especially if the business is large enough.

For example, Goldman Sachs has a strong treasury team to ensure that its cash is managed to maintain its value and mitigate several key risks related to changes in interest rates, credit, currencies, commodities and operations. Cash management is essential to ensure the financial stability and solvency of a business or its ability to meet its long-term financial obligations.

DTCs and ACHs can help some organizations track cash inflows. These systems often help organize accounts receivable (AR), as well as collection rates.

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