Final answer:
Best practice for concentrating funds from Bank B to a zero balance account at Bank A includes managing the transfers carefully, staying informed about bank fees, using electronic transfers, maintaining a cash buffer, and considering FDIC protections.
Step-by-step explanation:
When dealing with funds to be concentrated from Bank B to fund a controlled disbursement account set up as a zero balance account (ZBA) at Bank A, it is considered best practice to oversee and manage the transfer process carefully to minimize risk. You should ensure that the funds are moved securely and efficiently, taking into account the timing and the cash flow needs of the business. This includes understanding the terms and fee structures of both the sending and receiving banks and utilizing electronic funds transfer systems when possible to ensure funds are available when needed. Additionally, maintaining a buffer can protect against unforeseen shortfalls.
Having a concentration account is a common treasury management practice that allows a company to maintain optimal levels of liquidity. The funds typically move from subsidiary accounts into the concentration account, often automatically. Adequate safeguards including fraud protection measures, should be in place to ensure the secure transfer of funds between accounts and any external transactions. Businesses must also consider the protections offered by the Federal Deposit Insurance Corporation (FDIC), which insures deposits up to $250,000, adding a layer of security to funds held within the banking system.