A zero balance current account for small businesses enables the business to utilize the funds towards more productive roots by using the same towards working capital. Read Below!
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- 4 minute read
For business transactions, a current bank account is opened. It is recommended for individuals or businesses who do frequent bank transactions. Withdrawals, deposits, and business activities are all taken care of under this type of bank account. Almost any bank facilitates opening a current account or zero balance current account. Funds can be placed and withdrawn at any moment without notification in a current account. It’s also possible to use it to write cheques to creditors. Customers’ checks can be deposited and collected from this account later.
Current account holders do not receive interest on their balances in the bank’s current account. The prerequisites for establishing and operating a business current account differ from one institution to the next.
What Is a Zero Balance Current Account?
Zero Balance current account entails that current account holders can perform transactions without keeping an Average Monthly Balance (or quarterly in some cases). A zero balance current account for business is ideal for small businesses. Additional bonuses come with current accounts.
This account increases a company’s liquidity and can be used to suit a variety of commercial needs, such as working capital or delayed payment of dues.
The average Monthly Balance is the minimum balance that an account needs to maintain, to operate the bank account without attracting any non-maintenance charges. A Zero Balance current for Startups can be a valuable tool to exploit the resources at optimal efficiency.
A current account with zero balance for small businesses enables the business to utilize the funds towards more productive roots by using the same towards working capital or any other manner with a relatively favourable opportunity cost.
The same fund lying in the banks, without fetching any interest, does not add value to the businesses. An MSME that has a focused approach towards achieving a reasonable return from its activity should opt for a Zero Balance current account for MSME.
The Logic of Zero Balance Current Accounts
These times are tough – small businesses have been tested to their extreme; even a little support from maintaining a Zero Balance account and not worrying about non-maintenance charges can go a long way. Setting aside the minimum balance amount is unproductive when the funds that lie ideal in the bank do not even earn a reasonable interest.
There are logics in favour of the maintenance of minimum balance, as through maintaining a minimum balance account, a business gets a full-fledged account with a variety of services.
We live in the digital world and accessibility to various service providers ranging from Digital Wallets to full-scale payment services. An additional cost of banking does not make sense.
For a business that operates on narrow margins and more often than not finds itself in need of an extra influx of funds, maintaining a balance with a bank may seem quite far-fetched.
A Zero balanced current account for business is an answer for the guys who are just starting; they need to be given as much support as possible. When these Businesses become full-scale enterprises, then as required, they will switch to a current account with more features, and if required, they will be able to maintain a hefty minimum balance.
Current Account Eligibility And Documentation Requirements
You need to furnish the below details to open a current account:
- Resident Individual/Proprietor/Partnership/Company/Trust/HUF
- Documents such as business identity proof, business address proof, authorised personnel photograph and a duly filled account opening form.
The Benefits of Zero Balance Current Account
- Availability of Funds: With no Minimum average balance maintenance pressure, Businesses enjoy greater flexibility in utilising funds at their disposal. As the Minimum balance requirement may be small when considered for a large-scale business to a small business, the same can account for a substantial amount.
- No Non-Maintenance charges: Holding a current account that requires maintenance of Minimum balance comes with a clause of penalty charges when the required balance is not maintained.This resolves the issue of these charges when the fund falls short to maintain balance due to some business urgency.
- You can use the services of specialised payment solutions like PayU India to provide your consumers with a seamless transaction experience on your online marketplace.
Want to learn more ways to increase your business’s financial efficiency. Here we are.
Conclusion
Current accounts are liquid deposits, and they provide a variety of personalized alternatives to help with financial transactions. Thanks to the bank’s check capability, payments to creditors are also possible with current accounts.
Current accounts typically do not pay interest and have a more significant minimum amount than savings accounts. However, the most significant benefit of a current bank account is that account holders can obtain an overdraft up to a certain amount.
FAQs
What is the benefit of a zero-balance account?
The following are the benefits of a zero balance account
– No ATM/debit card charges.
– Free net banking.
– When opening the account, a complimentary passbook and cheque book are issued as part of the welcome kit.
– Special privileges and offers for salary account holders based on the category of company/institution.
What is a Zero Balance Current Account?
Current account holders with a zero balance can conduct transactions without maintaining an Average Monthly Balance (or quarterly in some cases). A company’s current account with no balance is suitable for small firms. Current accounts come with additional incentives. A zero balance bank account boosts a company’s liquidity and can be utilized for various business purposes, including working capital and deferred payment of bills.
What is the purpose of a zero balance account?
A zero balance account (ZBA) is a type of corporate checking account to keep the balance at zero at all times. It’s frequently linked to a primary account that moves money in and out of the ZBA when transactions occur.
