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Guide to choosing the right Current Account for your small business

Small business owners have to handle lots of responsibilities and tasks. Besides managing daily operations and keeping customers happy, they…

By folkduck , in Finance , at July 27, 2023

Small business owners have to handle lots of responsibilities and tasks. Besides managing daily operations and keeping customers happy, they also have to find strategies to optimise their finances. A Current Account is an important part of that financial optimisation as it helps businesses to make transactions in high volume, accept payments from customers, get credit facilities, and avail other useful banking features. 

However, finding the best Current Account is not as simple as opening an account with the first bank that comes to mind. Without proper research, the account can significantly affect your profit margins through fees, overdraft interest rates, and other charges. That being said, it is crucial to consider various critical factors before finalising the decision on a Current Account.

From comparing fees and transaction limits to flexibility and overdraft facilities, here are some valuable considerations to make an informed decision. 

  • Low minimum balance requirements

Select a small business Current Account with a low minimum balance condition. Such an account can benefit small businesses in various ways. It helps maintain a healthy cash flow, ensuring businesses have enough money to cover their expenses without the burden of maintaining high account balance requirements. 

Small businesses typically do not have significant cash reserves. Thus, low minimum balances can help them manage finances better and they can allocate more funds towards investments and operational needs. 

  • High limit on overdraft facility

Make sure that the Current Account you choose has a high limit on overdraft so you can manage short-term financial requirements on time. This may involve paying off bills, office rent, or your workers’ salaries. 

With higher overdraft limits, you can have sufficient funds ready for any emergencies or unexpected expenses. In fact, seasonal businesses can benefit from overdraft facilities to manage fluctuations in revenue during off seasons. 

  • Ability to earn interest

Current Accounts generally offer no interest rates. However, today, some Current Accounts offer the ActivMoney feature, an auto sweep facility where the excess funds (above a set threshold) are automatically transferred from your Current Account to a fixed deposit that earns FD-like interest. Rather than letting idle funds sit in your Current Account and lose value over time due to inflation, your small business can now earn interest on those funds.

Since not all Current Accounts offer this feature, it’s important to check with your bank to see if this facility is available. Be sure to inquire about any specific Current Account requirements or documents needed. 

  • Web and mobile banking

A 100% digital experience allows you to manage your business’s finances remotely and efficiently. You can access your account details, statements, and transaction history anywhere, anytime. You can even initiate and approve fund transfers, pay bills, make payments, and enjoy other Current Account benefits to streamline your day-to-day operations.

This level of convenience is essential for small business owners who want 24*7 online access to their accounts.

  • Value added services

Value-added services can make your banking experience more efficient and cost effective. Features like free pay orders/demand drafts, chequebook facilities, multi-location transfers, instant NEFT/RTGS facility, quick current bank account opening process and personalised services are essential to carry out transactions efficiently.

For instance, free pay orders/ demand drafts can save businesses significant costs, while multi-location transfers make it easier to manage finances across different branches. Moreover, opting for personalised services can help your small business get support specific to your requirements. 

Wrapping up

A right Current Account can simplify financial operations, save time and effort, and help you prioritise the growth of your small business. Besides the tips mentioned above, don’t forget to consider the bank’s customer service, reputation, and branch accessibility, as these factors can greatly impact your banking experience.

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