What is a Zero-Balance Account?
A Zero-Balance Account (ZBA) is a business banking tool commonly used in the construction industry. Essentially, it is a checking account in which a balance of zero is steadily maintained. A parent account is set up to fund the ZBA as needed. When transactions are made from the ZBA, the amount spent is automatically transferred from the parent account to cover the costs so that the ZBA balance returns back to zero. In the construction world, this can be valuable for managing multiple projects or cost areas. For instance, a construction company can set up a ZBA for each project to facilitate easier monitoring and control of expenses, enhancing their financial management system. Understanding this tool is crucial in the construction sector as it offers an efficient way to manage operational costs while ensuring necessary liquidity.