As India’s economy continues to grow, more and more entrepreneurs are starting small businesses. However, many new business owners overlook the importance of having a current account for their business. In this article, we will discuss six reasons why small businesses should have a current account in India.
Separate Business and Personal Finances
One of the most important reasons for having a current account is to separate your business finances from your personal finances. When you have a current account, you will be able to keep your business transactions separate from your personal transactions. This will help you keep track of your business expenses and income, and it will make it easier to file your taxes at the end of the year.
Having a current account for your small business will increase your credibility with customers, suppliers, and lenders. When you have a current account, you will be able to accept payments through cheques, demand drafts, and online banking. This will make it easier for your customers to pay you, and it will make your business look more professional.
Better Cash Management
A current account will give you better control over your cash flow. You can deposit all your business income into your current account and pay your bills and expenses from the same account. You will also be able to track your expenses easily, and you will be able to set up automatic payments for regular bills.
Access to Credit Facilities
Most banks in India offer credit facilities to businesses that have current accounts. These credit facilities can include overdrafts, lines of credit, and business loans. Having a current account will make it easier for you to apply for these credit facilities, and it will increase your chances of being approved.
Having a current account will give you access to online banking. With online banking, you can check your account balance, view your transactions, and transfer money between accounts from anywhere at any time. Online banking is also secure and convenient, and it can save you time and money.
Reduced Risk of Fraud
When you have a current account, you will be able to issue cheques and demand drafts for payments. This will reduce the risk of fraud because these payment methods are more secure than cash. In addition, banks in India offer various security features for current accounts, such as SMS alerts for transactions and online banking password protection.
Easy Accounting and Tax Compliance
Having a current account will make it easy for you to manage your accounting and comply with tax regulations. You will have a record of all your business transactions in one place, which will make it easier to reconcile your accounts and prepare financial statements. Additionally, when it comes time to file your taxes, you will have a clear record of your income and expenses, which will make the process smoother and more accurate.
Seamless Cash Management
With a current account, you can manage your cash flow seamlessly. You can schedule automatic payments for regular bills, such as rent, utilities, and salaries. You can also make bulk payments, such as payments to suppliers or vendors, without having to issue multiple cheques. This will save you time and money and ensure that your bills are paid on time.
Improved Credit Score
Having a current account and maintaining a good relationship with your bank can improve your credit score. Banks consider a range of factors when assessing creditworthiness, including the length of your banking relationship, the size of your deposits, and your payment history. By maintaining a current account and using credit facilities responsibly, you can demonstrate to banks that you are a reliable borrower, which can improve your chances of getting approved for loans or credit in the future.
Better Financial Planning
When you have a current account, you can monitor your business finances and plan for the future more effectively. You can track your cash flow and make informed decisions about investments, expansion, or hiring. You can also set financial goals and track your progress towards them. This will help you stay focused on your business objectives and achieve long-term success.
In conclusion, having a current account is essential for small businesses in India. It will help you manage your finances better, increase your credibility, and give you access to credit facilities. In addition, it will reduce the risk of fraud and give you access to online banking. Therefore, if you are starting a small business in India, make sure you open a current account as soon as possible.