A current account is specifically for businesses. Banks did this bifurcation of accounts due to many reasons.
In the write-up, we will highlight the point why the Current Account is for business. You will also get to know about Zero Balance Current Account. After having the idea of a Zero Balance Current Account, we will share insights about how this account is beneficial for MSME and SME businesses.
Zero Balance Current Account is the best shot a business can take to have financial inclusivity. Just as a savings account is important to nurture the needs of an individual, current accounts are important for serving the businesses. We never heard of a business without a current account. Get to know why below.
Also Read: Best Ways To Manage Accounts And Data For Retail Shops
Why Current Account For Business?
Current Account opening in a bank is allowed for businesses where they can manage the money easily. A business will need a visible and reliable place to store all the daily transactions. A business can easily withdraw cash from a cashpoint through the current account. It can easily set up direct debits or standing orders. Smooth online banking is provided from the bank to the business as they open the current account.
Like other bank accounts, a business will get a Paying debit card and chequebook.
With the current account, it is possible to check every financial transaction. With the help of the current account following is eased up for the business:
- Making payments and receiving payments get easy. Some banks do have their banking apps that allow more feasibility.
- Budgeting gets very easy here. All the business transactions are in one place and because of that budget for the next financial year is easy to estimate and make.
- Through a Current Account, you can make a great credit score. For that, you have to pay bills on time and avoid overdraft facility and bank charges. With a great credit score, it gets very easy for banks to provide business loans to the businesses.
Also Read: Best Tips For Managing Accounts Payable & Receivable For Your Business
What is Zero Balance Current Account for Business?
This account is for a business that conducts multiple transactions daily. It is like a current account that is not restricted to a minimum balance. Zero Balance account doesn’t charge any fees even if the balance is zero. Corporate or business uses this kind of account to ensure that enough funds are available to different departments. Consumers do not use this account; businesses greatly use it. Also, to improvise the payments, a business can have multiple zero balance subaccounts.
A zero balance current account allows the business to conduct the transaction without any average monthly balance. This type of account provides facilities the same as a regular current account, except it can be opened with a NIL balance, and there is no restriction on keeping an average monthly balance.
Note: Average Monthly Balance here refers to the day-end closing balance sum divided by the number of days monthly.
How is Zero Balance Account Beneficial for MSME and SME business?
MSMEs and SMEs are businesses that involve many recurring transactions. They need an account that is cost-effective and provides an easy transaction process. Below are some of the reasons why Zero Balance Current Account is beneficial for MSMEs and SMEs:
- No Extra Cost: To open a Zero balance current account, you, as an MSME or SME, don’t need to make a great deposit. Most banks charge a high minimum balance, which is difficult for the shop owners to maintain and pay. In this kind of account, you don’t require maintaining an average monthly balance. Moreover, there are no bank charges if the account balance is nil. This sort of account is very friendly for the SME or MSME.
They are small businesses that require some cost-effective solutions. With zero balance, they can easily enjoy this benefit and carry on with their expenses.
Also Read: Types Of Accounts In Accounting
- Smooth Transactions: With the help of the Zero Balance current account, the transaction is smoothened. The business can perform the transaction from anywhere and everywhere. There are no extra charges for depositing and withdrawing the money from this current account. There is no limit to the number of transactions in a day.
Because of limitless transactions, MSME is highly benefited. The setup of the transaction system in a zero balance current account is done keeping in mind the requirements of MSME and SME. There is no chain of steps involved in performing a transaction through a Zero Balance current account.
- Separate Personal Asset: Having data that shows the difference between personal assets and corporate asset is important. It is highly recommended to not mix or match the assets. With the help of a current account, you can keep a constant track of the cash flows. With a clear division, you can plan and manage the budgets of the business easily and effectively. Also, a clear division of assets and cash flow is helpful for tax and deduction purposes.
- Company Profile: As a business, you will invite many daily transactions. Clearing the transactions and writing cheques will highlight many things, such as bank name, account type, and business name. A business without a Current Account looks unprofessional. It can be a deal-breaker if your business is not connected with a Current Account.
- MAB Requirement: MAB refers to the Monthly Average Balance. As a current account holder, a business needs to calculate it. For MSMEs and SMEs, there is no need to maintain the MAB for their zero-balance savings account.
Also Read: Best Ways To Manage Accounts And Data For Restaurants
Conclusion
SME or MSME having a current account is a must. With this, they can build up their business in a professional way. This account will allow them to conduct a variety of financial activities daily. The zero balance current account pays no interest and has no minimum account balance requirement.
The zero balance current account is the best fit for SMEs or MSMEs as these businesses may not have the capacity to deposit the amount for opening the current bank account. Through Zero Balance Current Account SME MSME can easily open their professional business account and enjoy all the perks of having a current account.
