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Here's why a Current Account is important for a Startup
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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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The success and failure of any business significantly depend on its financials. But financial stability becomes more crucial for Startups as they are in their initial stage and must manage all orders and operations without delays. It is also imperative for Startups to manage their finances efficiently to avoid last-minute money shortages. A Current Account can be helpful in managing your business finance. A Current Account helps you access funds anytime securely.
What is a Current Account?
A Current Account is a bank account suitable for businesses and entrepreneurs. You can facilitate all business transactions smoothly without unnecessary charges through a Current Account. You can also access short-term credit at any time.
Here is why a Current Account is important for a Startup:
Unlimited transactions: When you run a business, you have to manage multiple transactions, such as withdrawing and depositing funds several times in a day, and these transactions can be high in value. In a Savings Account, there are limits on the frequency and value of transactions since Savings Accounts are only meant for an individual’s banking needs. A Current Account, on the other hand, is designed to meet the bulk transaction needs of a business. Hence, Current Accounts come with higher transaction limits and other helpful features. However, unlike in a Savings Account, you do not earn any interest on the Current Account balance.
You could need to make payments during your day-to-day business, irrespective of whether you have received money from your customer. If you do not have enough funds in your bank account, it could hamper your orders and sales. But this is something you can handle easily with a Current Account. You can opt for an overdraft facility (Subject to the T&C of the bank) where you can withdraw more funds than you have in your account. You can pay your suppliers to facilitate the next order while your buyer’s money is yet to be received. You can also use the overdraft facility to meet other operational expenses when you do not have sufficient Working Capital.
Additional Read: Top 5 Benefits of Current Account for Start-Ups
With a Current Account, you get higher cash deposit limits, NEFT, RTGS, auto-sweep deposit facility, IMPS, Net banking, Mobile banking, etc. The best Current Accounts for Startups will also provide premium features such as home-banking services. You can also avail a Debit and ATM card through which you can do online transactions and facilitate your business operations within seconds.
Having a business account is crucial because, other than all its helpful features, it will also help you separate your business transactions from your personal spending. With a Startup Current Account, you can easily track all your payments and receipts and keep a check on your business spending. You can periodically check your transaction history to determine if you’re sticking to your budget and determine where you can reduce costs.
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