Explain how a cash concentration account operates and how such an account provides benefits to a firm.

A cash concentration account is used as the primary cash management account. All incoming funds are transferred into this account on a daily basis. Outgoing funds are transferred into the respective zero-balance accounts on an as-needed-only basis. This allows the firm to eliminate the safety stock requirements of multiple accounts thereby lowering the total cash utilized for this purpose. By concentrating all of the firm's cash, excess funds can be invested more effectively. This generally results in larger short-term investments and also a higher rate of return on those investments.