5 MinsDec 09, 2022
Prashant Mohanti used to work for an event management firm. Unfortunately, his employer’s business was severely hit by Covid-induced restrictions. While Prashant stayed in his job during the pandemic despite salary cuts, now that the economy
is back to its pre-pandemic level, he plans to quit and branch out on his own.
When he spoke to friends and well-wishers, they advised him on various aspects of setting up and running a business. His chartered accountant (CA) understood the nature of the business from Prashant and then educated him about the importance of
opening a current account most suited for his new business. Here is what he said:
Important Features of Current Account
24X7 Accessibility and availability of suitable product:
The CA pointed out that the nature of Prashant’s business is likely to involve a fair amount of travel, given the popularity of destination weddings.
Many of his events will likely end late in the night, and this is when he will need access to his business’ bank account to make or receive payments. It is, therefore, critical that the bank where he opens his current account will have
a very robust core banking system that will support the nature of his business. Considering his business is new, he must have an option for opening the current account with Zero / minimum balance to ensure that he can fully utilise his funds
for business purpose.
This is another crucial criterion he should use while choosing his bank. Ideally, he should opt for an institution with the widest network of branches and ATMs, as these would be central to his business needs.
Cash transaction limits:
Prashant’s CA pointed out that the nature of the event management business is such that many transactions tend to be in cash. Vendors have to be paid immediately upon completion of an event, and since a lot of them are from the unorganised
sector, such payments have to be in cash. Similarly, often, reimbursements from clients for out-of-pocket expenses also happen in cash. While current accounts come without a limit on transactions, some banks tend to charge a fee when the number
crosses a preset limit. Keeping this in mind, Prashant should choose a bank with higher presets and lower cash transaction fees.
Overdraft and Loan facilities:
Given the fact that Prashant may often have to make advance payments to his vendors, even as he waits for his clients to pay him, it is pretty likely that he would occasionally face short-term cash flow issues. Under such circumstances, an
overdraft facility could come in handy. Prashant should therefore opt for a bank that is more likely to give him an overdraft facility at the earliest. Prashant also needs to ensure that bank will be able to provide quick start up loan
/ term loan and business loans.
[Also Read: Open a Current Account to shift your business into the next gear]
Cash management services:
Considering the management of large number of payments and collection, Prashant must ensure that the bank he chooses should have the best CMS solutions for payments and collections for optimal fund management & MIS as per the business requirement.
Image of the bank:
As a part of his business, Prashant is likely to deal either with corporates or High Net-worth Individuals (HNIs). In such circles, image plays a crucial role when appointing vendors. If Prashant chooses to bank with a large bank, it will help
in giving his firm a more “serious” look than if he banked with some small cooperative bank.
Considering these factors, the CA said that, in his opinion, the ideal bank for Prashant’s new firm would be Axis Bank. It has a specially designed current account for sole proprietors and would be ideal for him as he grows his business.
Moreover, since the entire account opening process is digital, he would get an account number allocated to him instantly. This would help him hit the ground running.
Click here to learn more about Axis Bank’s Digital Current Account for sole proprietors.
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