Zero Balance Account (ZBA)
Candlefocus EditorThe main advantage of a ZBA system is to manage spending by mitigating risk. When cash is held in contra-accounts, it is difficult to monitor and predict where exactly funds will go, both by employees within the organization, and from outside entities. By consolidating funds in one account, a company has greater visibility and control over where money is sent and received. As a result, it is easier for a business to identify unauthorized spending, or track spending by department or project to control budgeting.
Apart from risk management, the use of ZBAs is ideal for companies seeking to streamline the banking processes. ZBAs are usually heavily automated through software such as those from banks or third-party vendors. This lends to greater accuracy when accounting for money movement. Companies rarely have to manually transfer funds from one subsidiary account to another, making the process more efficient since there are fewer clerical errors.
All that said, while a ZBA system can be beneficial, companies must still keep in mind the importance of reconciliation. Proper reconciliation of a ZBA system is essential to ensure accuracy of bookkeeping and to identify any unauthorized spending. Businesses should closely monitor their bank statements and take the time to match transactions where necessary.
Overall, a zero balance account system is an ideal solution for businesses and organizations of a certain size to manage their banking transactions. ZBAs are quite advantageous in terms of risk mitigation, operational efficiency, and automation, but companies must still vigilantly review and reconcile payments for best results.