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Here’s why business owners must open a Current Account for themselves
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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As a business owner, your bank account is the foundation and facilitator of all necessary financial transactions. Hence, opening a Current Account for your business is something you should do without any delay. If you are unsure of the need to open a Current Account, here’s what you need to know.
Maintains separate records:
Current Accounts are specifically for your business transactions. So, instead of using your savings account for both personal and business transactions, you can separate your business banking and financial activity by opening a Current Account. This will also be helpful when you create your business’s financial statements, file taxes, and claim tax benefits.
Today, a few things are considered a must for any business, no matter its size or type. One is a website, and the second is a business bank account. While conducting business, when you give the bank details of a Savings Account, it not only looks unprofessional but may also impact the confidence of your customers.
Delays in accounts receivable and too much money being tied up in inventory are common working capital challenges. This being part and parcel of running a business means having a line of credit is crucial. When you open a Current Account for your business, you may get an overdraft facility. This gives you instant access to short-term funds up to a certain limit. This Current Account benefit is the most important for entrepreneurs
As an entrepreneur, you have to deal with various stakeholders regularly, and you may need to establish your creditworthiness before suppliers and lenders begin working with you. In such a case, you can ask your bank to issue a credibility statement when you hold a Current Account for your business. You will find this all the more helpful when you do business with foreign parties.
Additional Read - Top 5 Benefits of Current Account for Start-Ups
When running a business, bulk transactions daily are common. This is why Current Accounts have higher limits on banking transactions such as NEFT, RTGS, withdrawals, deposits, etc. Demand drafts up to a certain limit are free as well. Some banks also provide home banking services where cheques and demand drafts are picked up/dropped off daily or on-demand from your home or office. You can also opt for the feature that automatically converts the idle funds in your Current Account into term deposits allowing you to earn returns.
The bottom line
A Current Account is to the business what assets are to a balance sheet – valuable and necessary. When choosing a Current Account for your business, you must thoroughly check all its features, benefits, and charges and see if they align with your business’s banking needs. For instance, accounts with higher Average Quarterly Balance (AQB) requirements will have more features. However, if you do not require all those features, then it does not serve you to tie up your working capital unnecessarily.
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