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Keep Finances Organized with Sweep and Zero Balance Accounts

11/30/2021

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If you're a small business owner juggling multiple bank accounts, then you're probably familiar with the challenges of tracking activity, increased fees, and minimum balance requirements. The time and effort it takes to manage more than one account can cause you to rethink your decision.

Fortunately, there are two robust solutions worth considering to keep your finances organized: Sweep Accounts and Zero Balance Accounts. These cash-flow management tools have become increasingly popular since they can reduce expenses, save time, and increase operational efficiency.

Let's explore how they could help you manage your business finances better than ever before.

What is a Sweep Account?

A Sweep Account is a bank account that holds funds from automatic transfers to and from another linked account. Sweep Accounts can take the form of regular business checking accounts offered by financial institutions or investment accounts available through brokerage firms.

Funds are swept into this main account from a Zero Balance Account (ZBA) at the end of each business day. Since funds are concentrated in this single account, you can optimize your cash position by paying down debt or investing excess cash.

What is a Zero Balance Account (ZBA)?

A Zero Balance Account is a checking account linked to the Sweep Account. As the name implies, it's designed to maintain a zero balance by moving funds to the Sweep Account at the end of each business day.

How Do These Accounts Work Together?

Sweep and zero balance accounts are business accounts that allow you to automatically move money to pay for goods, services, and other business expenses. These accounts have a parent-child relationship. As the parent, sweep accounts control the flow of funds into each zero balance (child) account.

The "parent" automatically transfers funds to each "child" for the exact amount needed to pay expenses.

The Sweep Account supports efforts to simplify money management by allowing you to maintain multiple bank accounts without the hassle of additional monitoring. In addition, businesses can designate separate zero balance accounts for petty cash, merchant services, payroll, departmental spending, or other special projects.

Sweep and Zero Balance Account Benefits

Businesses that use sweep and zero balance accounts typically experience short- and long-term benefits. Some include:

  • Fewer, if any, overdraft fees since multiple departments pay expenses from a master business checking account
  • Simplified tracking of departmental spending, reducing budget and financial report oversights
  • Easier account reconciliation because transaction details are listed on individual Zero Balance Account statements
  • Reduced fraud risk since all transactions are tied to the parent account
  • An ability to earn maximum interest on a single account balance

Contact Us Today

Sweep and zero balance accounts might offer the perfect solution for companies looking for a better way to manage their finances. Learn more about sweep and zero balance accounts by contacting one of our Treasury Management professionals today at 1-866-770-3100.

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