A zero-balance account reduces the cost of cash management because it reduces the time that managers need to spend transferring funds from one account to another to cover checks written. The bank does charge for the service, but the bank’s fee is lower than the cost to the company would be to make the calculations and then to make the transfers manually. A zero-balance account reduces excess bank balances, because the company needs to monitor the balance in only one account. The other accounts are maintained at zero balances, so the company does not have to leave excess funds in those accounts to make sure they do not get overdrawn. Management time is also reduced, for the same reason as the cost of cash management is reduced. However, a zero-balance account does not reduce disbursement float. Disbursement float is the total time between when a company that owes money mails a payment and when the payment clears the payor's account and the funds are deducted from the payor's account. A zero-balance account would have no effect on disbursement float.
A zero-balance account reduces management time because it reduces the time that managers need to spend transferring funds from one account to another to cover checks written.
A zero-balance account reduces the cost of cash management because it reduces the time that managers need to spend transferring funds from one account to another to cover checks written. The bank does charge for the service, but the bank’s fee is lower than the cost to the company would be to make the calculations and then to make the transfers manually. So this is not the correct answer.
A zero-balance account reduces excess bank balances, because the company needs to monitor the balance in only one account. The other accounts are maintained at zero balances, so the company does not have to leave excess funds in those accounts to make sure they do not get overdrawn. So this is not the correct answer.
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