Zero Balance Account (ZBA): What Is It? (2024)

If the goal is to have money in the bank, then a “zero balance account” might sound like the opposite of what you need. But for business owners and corporations, a ZBA can create peace of mind and help maintain financial integrity.

If you’re a business owner, a ZBA might be just the thing to level up your business accounting.

What Is a Zero Balance Account?

A zero balance account is just that: a business checking account that maintains a zero balance at the end of each day. When the business needs money, the exact amount moves from a connected “parent” account into the ZBA.

Businesses may use the funds to cover expenses such as payroll, petty cash and different department needs. If any funds are left in the account at the end of the day, they are swept back into the main account where the money can earn interest, often at a more favorable rate.

ZBA accounts are sometimes referred to as subsidiary accounts, though not all sub accounts are ZBAs.

How Does a Zero Balance Account Work?

In many cases, zero balance accounts can help business owners better track their financials to prevent auditing disasters and avoid fraud.

ZBAs may even reduce costs by automating transfers, moving idle funds into interest-bearing accounts, and protecting against overdrafts—allowing you to focus on developing and running your business while your money works for you.

For a zero balance account system to work, you must first have a main parent account where all your money is centralized. From there, a ZBA would be a “child” or offspring account, where money flows “down” for payments and “up” for receivables or deposits. A business may have multiple ZBAs and even different tiers of the accounts.

Once checks are presented against a ZBA, the bank automatically debits the main account and moves the funds into the ZBA so you don’t have to monitor and make those transactions yourself. Conversely, when deposits are made into the ZBA, the bank automatically moves them back into the parent.

What Are the Benefits of Maintaining a Zero Balance Account?

Here are some of the pluses of using ZBAs for business accounting.

• Centralized cash with flexibility. Keeping the bulk of your funds in a primary account and maintaining several ZBAs optimizes your cash flow. Instead of keeping the cash idle, you can move the money into different child accounts when you want to invest or take advantage of other opportunities.
• Easier budget management. Depending on the size and complexity of your business, multiple accounts are often necessary and can become difficult to manage. A ZBA allows you to have an array of dedicated accounts that’s well-organized and streamlined.
• Limited errors. An automated system that moves money from the parent account into ZBAs helps eliminate clerical errors. It also reduces the amount of time spent on each transaction.
• Increased visibility and awareness. When funds are moving cleanly in and out of ZBAs, it’s often easier to internally track and audit spending—particularly overspending—and you can more easily assess your daily overall cash position.
• Reduced fraud risk. The use of ZBAs makes it simpler to protect a larger, main account against fraud and theft.
• Overdraft protection. You’ll never incur a fee for having insufficient funds to process a transaction because the bank will automatically pull the exact amount you need from the main account and direct it to the ZBA.
• Preapproved debit card transactions. When a company issues debit cards to its employees and connects the cards to a ZBA, each transaction is preapproved and creates a cleaner line of communication and flow.

What Are the Disadvantages of Zero Balance Accounts?

Although ZBAs provide many advantages, there are some drawbacks to consider.

• Limited control. ZBAs are heavily automated, and moving money in and out manually isn’t easy. In fact, it defeats the main purpose of the ZBA.
• Reconciliation is still required. Your business will still need to track and regularly reconcile every streamlined ZBA transaction.
• Potentially more work. If a transaction fails, it may create multiple additional transactions. This creates more work and monitoring on your end.
• Structure is needed. Having multiple accounts may become complicated, so you’ll need to implement a structure and an administrative process that keeps everything straight for your business.

Should You Apply for a Zero Balance Account?

Zero balance accounts are best suited for established businesses that need to streamline their operating accounts, run multiple locations or departments, have a solid cash flow and operate a large payroll.

ZBAs are not designed for consumers or for business owners with few employees, low cash flow and no distinct departments.

What’s Required To Open a Zero Balance Account?

Banks have certain minimum requirements before they’ll consider opening ZBAs attached to your main business account. Zero balance account banks may have their own unique sets of qualifications, but here are some common ones:

• Your company must be a registered business.
• You must already have a primary business account.
• Your business must be established with enough cash flow to warrant the ZBA accounts, as the bank will now be doing a lot of the work for you.

How To Apply for a Zero Balance Account

Each ZBA bank has its own application process, many of which begin online with a basic query and request for information. You can also schedule an appointment to talk with your personal banker, the bank’s business team or its treasury management department to begin a formal application process.

If your bank determines a ZBA is right for you, it can help you decide how many zero balance accounts you need, along with how many tiers.

Frequently Asked Questions (FAQs)