Zero balancing

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Zero balancing or leveling out process is a concept of cash management and is part of the financial management . It describes a process in which the balances on a company's bank accounts are automatically balanced with one another. This supports an optimal cash disposition on a central bank account, since through the money trading of a company the freely available liquidity can be optimally invested or a liquidity shortfall can be taken up through corresponding day and forward transactions .

The manual process

If the accounts of a company are manually allocated to a central account, one or more cash managers determine the respective expected balance of the bank account on the basis of payment advices and the data from the payment transactions and transfer the final daily balance of a bank account and initiate the transfer of the balance on the same day. This procedure is labor-intensive and its quality depends on the dispatcher being informed of all information about incoming and outgoing payments on the respective bank account. This procedure is therefore prone to errors, but has the advantage that it works across banks. Most of the larger companies have therefore automated these procedures.

The automatic process

In the automatic procedure, the bank determines the balance on the respective account shortly before the respective posting deadline and balances the liquidity against a central account. If branch A has received incoming payments of 100,000 euros, for example, so that the balance on the bank account is 100,000 euros, the bank automatically transfers this amount to the company's central bank account, so that the bank account of the branch is dispensed with zero and the money market at the head office can optimally invest this liquidity. If, on the other hand, the branch makes payments of 50,000 euros, so that the account shows a negative balance, the account is automatically balanced by the central account, so that no overdraft interest is due.