Why is a Current Account a must for any business?
June 24, 2021
When running a business, there are a number of things that must be considered, including but not limited to, running daily operations, providing salaries to employees on a monthly basis and taking into account debt and expenses, when considering expansion and growth. Bearing these things in mind, a Current Account for a business of any kind, is a must. This write-up seeks to explain what a Current Account is and why is it beneficial to businesses.
What is a Current Account?
Business Bank Accounts allow business owners to document and track their expenses, organise their cash flow and allow for easier calculations of tax liabilities. A current account for business, therefore, allows for deposits, withdrawals and contra transactions. Almost all commercial banks in India allow the opening of a Current Account for business purposes. These accounts are taken advantage of by businessmen and entrepreneurs who incur a number of transactions, on a regular basis. Owing to the fact that this number is often high, and the fact that the amount per transaction can be significant, no interest is ordinarily generated on the balance.
Advantages of a Current Account
After understanding the definition of a Current Account for business, it is important to consider the benefits associated with owning and operating such an account.
- Unlimited transactions – Providing account owners with high upper limit transactions; eliminating the reason to fret over the movement of money. Account owners can perform any number of transactions, at whatever frequency they may deem appropriate. As a result, businesses can be assured of a high level of fluidity within their operations
- Separation of funds – By availing a Current Account for business, it is possible for business owners to keep their personal assets disjoined from their business assets. Cash inflows can be tracked with ease and it allows for enhanced planning and budgeting. Financial records are then easier to interpret, which helps tremendously when it is time to pay taxes and consider deductions
- Smart insights - Financial data pertaining to the business is provided in an easy-to-read format, which allows for smart insights. Statements highlight exactly where and with whom the transactions have transpired. Most banks provide their clients with instant access to their financial reports, which also provides a summary of their contacts. Information pertaining to real-time transactions is also provided and helps make superior decisions pertaining to the business
- Fluidity of operations – With a Current Account meant specifically for business, it is possible to ensure that all transactions are carried out with efficiency and on time. Without any delays on these transactions, it is possible to maintain positive relations with both suppliers and customers
- Helps Establish Legitimacy – When businesses have their own Current Accounts, it helps add to their legitimacy. Operating businesses without the aid of a Current Account can come across as unprofessional and can lead to customers questioning the legitimacy of the business.
- Additional Benefits – Current Accounts allow for businesses to avail benefits that are akin to those made available to Savings Accounts. Almost all banks allow for their business clients with Current Accounts to avail Demand Drafts, NEFT and RTGS transactions and Pay Orders, free of cost, in addition to providing them with unlimited withdrawals and deposits.
The importance of a Current Account for a business is multifaceted. Business owners can be assured of efficiency in the way their transactions are carried out and need not worry about a limit pertaining to the number of transactions they can incur, in a given period of time. If readers are curious as to whether or not a current account is mandatory for a business in India; it isn’t. That said, business owners are encouraged to avail of it such that they can operate their business, with ease. They can create a Current Account with any commercial bank in India. Business owners must consider offers provided by different banks prior to creating a current account. They must always read the fine print such that they aren’t caught unaware in the future. Such accounts allow for business owners to keep their personal assets disjointed from their business assets, which is a must.
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