'Zero Balance Account (ZBA)' is explained in detail and with examples in the Corporate Finance edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
The zero balance account, also known by its acronym ZBA, refers to the type of checking account which maintains a permanent balance of zero. The account does this through an automatic transfer of funds out of a master account. The amount which transfers over only proves to be sufficient enough to cover any and all checks which other financial institutions present to the bank where the holder’s account resides.
Corporations utilize these zero balance accounts in order to draw down excessive balances from separate accounts. It also helps them to keep better and stricter control over amounts they disburse in the ordinary everyday course of business operations.
These accounts will therefore only have a zero balance within them. The only exception to this zero balance account status is when checks are written against them and presented to the bank in question. In this way, companies are able to keep the balances as close to zero for accounts that do not have any reason to hold excessive reserves. The activity in these ZBA’s is restricted to only processing payments. This is why they do not maintain any ongoing balances.
Because of this, a larger sum of funds will remain available for the company to deploy. They can instead put them to work in investments and company cash flow purposes rather than keeping low dollar amounts lying idly by in a number of sub-accounts. It does not present a problem when checks must be paid off from these special zero balance accounts, since the electronic clearing system recognizes that these accounts are in fact ZBA’s and they will move the necessary funds over from the master account at the financial institution in the precise dollar amount needed to clear the check.
Companies and other organizations can also rely on a zero balance account to fund purchases which employees make with their debit cards. This allows them to carefully monitor all of the financial transactions and any activities which take place on the cards, since the debits must be pre-authorized. This works well for companies and charitable not for profit organizations which are protected by not maintaining any idle funds within the ZBA’s.
The debit card transaction will not be approved by the bank which backs them until and unless the requisite funds become available to the account by a transfer from the authorized account representative at the firm or NGO. This means that debit card transactions simply can not be run without prior authorization by the appropriate superior in the organization. Businesses are able to reduce their risks of activities which are not approved of occurring.
This is critically important to especially larger organizations with many employees and numerous sub accounts and associated corporate debit cards. There is no better spending control oversight for these types of situations than the zero balance account. Incidental charges can be monitored throughout the sizeable operations.
Since incidental expenditures are variable in nature, it is harder to fund and control them without such an account. Large companies and not for profits effectively reduce rapid access to the company or charitable funds with these debit cards. In this way, they have put into place the best practices for approval procedures. It ensures that such procedures will be adhered to in advance of a purchase being made by an employee.
As budget monitoring tools, these ZBA’s are also ideal. They may be established as one account per department or business operation. This allows the accountants at the company an easy and fast means of monitoring annual, monthly, and even weekly to daily purchases. The company book keepers are also able to effectively track particular shorter term projects and their financial expenditures by utilizing such a ZBA. Projects which are in jeopardy of running significantly and rapidly over budget also benefit from such accounts. The overseers can maintain control of all purchases by requiring proper approval and notification before the charges take place.
The master account of such zero balance accounts is the critical component of this entire concept. As the central operational center for all fund management in the organization, the account will be employed to disperse funds to all ZBA subaccounts as needed. These master accounts typically include other benefits like better interest rates for balances which they hold.

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