One way to speed up the collection of payments from customers is through concentration banking. In such a system, customers in a particular location make their payments to a local branch office rather than to company headquarters. The branch office then deposits the checks into a local bank account. The firm can then transfer surplus funds periodically to one of the firm’s principal banks, called concentration banks. This system reduces mail, processing, and collection float. However, concentration banking involves some additional costs, such as higher administrative costs, compensating balances required by the local bank for its services, and the cost associated with transferring the funds from the local bank to the concentration bank. In sum, concentration banking is the use of geographically dispersed collection centers to speed up the collection of accounts receivable.