How does a ZBA differ from a sweep structure?

A Zero Balance Account (ZBA) is operated so that its balance is maintained at zero at the end of each day. This is achieved through the automatic transfer of funds, which adjusts the account balance to zero by either moving money from a master account to the ZBA or transferring excess funds back to the master account at the end of the day. This structure is specifically designed to minimize idle cash in operational accounts and streamline cash management.

In contrast, a sweep structure is a mechanism that automatically transfers excess funds from a company’s operational accounts into higher-interest accounts or investments at specified intervals, which does not require the final balance of the operational account to be zero each day. Therefore, the distinction lies in the operational goal of maintaining a zero balance in a ZBA versus managing excess cash through sweeping in a more flexible manner.

This understanding clarifies the functionality of a ZBA and its intent, contrasting it with other cash management tools, thereby supporting effective treasury and cash management practices.