how zero balance accounts zbas work
the master account provides a centralized place to manage an organization s funds whenever funds are required in the zba checking account to cover a charge or transaction money is transferred from the master account in the exact amount required there is no need for an employee to do this manually as the process is fully automated the zba s activity is limited to the processing of payments and is not used to maintain a running balance using a zba to fund debit cards issued by the organization helps ensure that all of the activity on the cards is pre approved since idle funds are not present within the zba it is not possible to run a debit card transaction until funds are supplied to the account the use of a zba as a spending control mechanism is especially helpful when managing incidental charges across a large organization by limiting quick access to funds via debit cards it is more likely that proper approval procedures will be followed prior to the completion of a purchase this permits easy tracking of transfers and reconciliation across accounts advantages and disadvantages of zbastransactions from zbas are self managed often saving the account holder time for having to manually rebalance or fund transactions zbas may also be easier to reconcile audit or receive department level reporting on spending because so much of zbas is automated many companies find there are less clerical errors or transaction failures due to human error this saves on overdraft fees zbas are also great control mechanisms to monitor spending if a company has one main account instead of many accounts with bank balances a company can mitigate the chance of their bank account being compromised by unapproved or fraudulent transactions by concentrating funds in the master account more money is available for investments rather than having small dollar amounts idle within a variety of subaccounts the master account often has additional benefits such as a higher interest rate on balances thus zbas maximize funds available for investment and minimize the risk of overdraft fees there are some downsides to zbas though sweeping and transfers are automatic the business must still reconcile bank statements and monitor for failed transactions should a transaction fail to process or be canceled money moved into that account may automatically swept back resulting in multiple unnecessary transactions last though intended to relieve administrative burdens zbas proliferate the number of bank accounts a company owns and may result in higher admin demands requirements to open zbasnot everyone can qualify for a zba banks will often not offer this product to general consumers and will only offer this solution to companies in addition banks may not provide zbas to small unestablished businesses by its nature zbas must have a linked master account and the bank offering the zba will likely require the master account be held at their institution the bank may require transaction history evidence historical average bank balances estimated spend projections and applicable credit history information prior to opening the account although zbas don t often have cash balances those balances are often insured up to certain limits by both the fdic and ncua special considerationsan organization may have multiple zero balance accounts to improve budget management and make the process of allocating funds more efficient this can include creating a separate zba for each department or function as a way to monitor daily monthly or yearly charges other reasons for creating separate zbas might involve the financial management of particular short term projects or those at particular risk for unexpected overages the use of zero balance accounts helps to prevent excess charges without proper notification and approval 