Bank balance is an important element of financial management for both private individuals and businesses. As banking services are widely used today, the term "bank balance" is familiar to most people, as it indicates how much money they have in the bank.
In a business context, however, the bank balance is more than that. It gives an indication of the financial health of a company. This article explains what a bank balance is, what its functions are and what types of bank balances there are.
What is a bank balance?
A bank balance is the amount of money available in a savings account for an individual or business.
In public, the term ‘bank balance’ is often simply referred to as just ‘balance’ and stands for the amount of money in the bank account. However, in the field of corporate finance, the term "balance" may have different meanings depending on the context and is not limited to the amount in the bank account.
Below you will find definitions of the term ‘balance’ from various perspectives:
Definition of the balance in the Indonesian Dictionary (KBBI)
According to KBBI, a balance is the difference or remaining amount between incoming and outgoing funds. In the context of banking, a bank balance is defined as the balance of a current account with a bank.
Definition of balance in banking
In banking, a balance refers to the amount of money held in a savings account. According to the Indonesian Financial Services Authority (Otoritas Jasa Keuangan or OJK), a bank balance also includes checks and drafts that have not yet been deposited or are still in the process of being collected.
This balance is also known as the account balance, which is the money remaining in a savings account after all fees have been deducted.
Definition of balance in credit card
In the context of credit cards, the term balance refers to the credit limit and the remaining credit available to the cardholder. The remaining balance is calculated by subtracting the total transactions from the total credit limit.
Definition of the balance in accounting
In accounting, a balance is the difference between debit and credit in a given period. If the total debits exceed the total credits, the account has a debit balance. Conversely, the account has a credit balance if the total amount of credits exceeds the total amount of debits.
Functions of bank balances in corporate financing
Bank balances play a crucial role in recording and managing a company’s finances. Here are some important functions:
1. Facilitating financial transactions
Bank balances make it easier for businesses to carry out financial transactions, such as purchasing raw materials and paying bills. Businesses can easily transfer money from their bank account to suppliers using mobile or internet banking.
2. Reflecting financial health
Account balances can provide a snapshot of a company’s financial health, as they are part of the company’s cash assets. By looking at account balances, businesses can determine whether their finances are in order.
However, to fully understand financial health, companies should also consider other cash components, such as physical cash and other assets.
3. Supporting financial accounting
One of the most important functions of bank balances is to support financial accounting. Businesses can use these balances along with other cash components to keep accurate financial records. These records help in monitoring cash flow and assessing the overall financial position of the business.
Types of bank balances
When discussing bank balances, many assume it’s simply the amount displayed in a savings account. However, there are three types of bank balances you should be familiar with:
1. Debit and credit balances in savings accounts
The first type of bank balances are the debit and credit balances of savings accounts. However, the debit and credit side of a savings account differs from the entry in the accounts.
In accounting, the debit side represents incoming funds, while the credit side represents outgoing funds. In a savings account, on the other hand, the debit side reflects the funds withdrawn from the account, while the credit side shows the deposits.
This difference results from the fact that the debit and credit entries on a savings account are based on the bank’s records.
- Credits: Deposits or cash receipts are recorded by the bank as liabilities because the bank owes the account holder this amount.
- Debits: Withdrawals reduce the bank’s liabilities and are therefore recorded on the debit side.
Essentially, the debit and credit balances on savings accounts reflect the bank’s liabilities to its customers.
2. Minimum balance
The minimum balance, also known as the dormant or required balance, is the minimum amount in an account that cannot be withdrawn or used for transactions.
The minimum required balance varies depending on the bank’s policies and the type of account. This balance often serves as a fee for closing the account when it is no longer in use.
3. Daily average balance
The average daily balance is the average balance calculated at the end of each day, usually during the bank’s batch process. This method is usually used to calculate interest on savings accounts.
To calculate the average daily balance, you can add up the daily closing balances of the account for a month. Then divide the total by the number of days in the month.
Efficiently manage your company's cash with Aspire
Managing your company’s bank balances is an important part of your business. Proper management ensures the availability of funds for daily operations, especially for urgent business needs.
However, managing company funds in traditional bank accounts often incurs monthly fees and limits the flexibility of international transfers — a significant disadvantage for businesses working with partners, customers or suppliers abroad.
Aspire’s Business Accounts offer an effective alternative for managing company funds, as they offer the following advantages.
- Receivable management: With Aspire, you can create, issue and send invoices with just a few clicks. You can also activate automatic reminders to ensure timely payments from business partners and avoid delays in receivables.
- Simplify the outgoing cash flow: With Aspire’s bill management, you can settle all your obligations to suppliers or partners on time and at the same time - all from one platform.
- Multi-currency accounts: With Aspire, you can open foreign currency accounts for free, simplifying international transfers and the storage of funds in different currencies.
- Integration with accounting: Aspire integrates seamlessly with accounting software, making it easier to keep financial records and create accurate financial reports.
Aspire offers numerous tools to optimize your company’s financial management. Want to find out more? Contact our team today!
Frequently Asked Questions
How can Aspire support the unique financial needs and challenges of mid-sized businesses?
Aspire offers a comprehensive suite of expense management solutions tailored for mid-market companies. This includes sophisticated corporate cards, advanced budget controls, and streamlined claims and approval policies, all designed to enhance financial efficiency.
How quickly can a mid-market company integrate Aspire's solutions into existing systems and workflows?
Integration with Aspire's expense management solutions is swift and seamless. Mid-market companies can swiftly implement corporate cards with tailored features, set up nuanced budgets, and establish streamlined claims and approval processes, ensuring minimal disruption to existing workflows.
How does Aspire compare to competitors for international money transfers?
Aspire excels in international expense management with FX fees up to 2x cheaper than traditional banks.
Global payments are offered by various providers through business accounts. Read our article to know more about types of business accounts and how to choose the best one for your business. There are many banks and fintech companies offering business accounts to businesses in Singapore. We have covered them all in our blog, you can click the links to view accounts offered by various banks such as DBS, OCBC, Maybank etc.
However, if you are a start-up or a growing business, chances are you may not meet the eligibility criteria for most of these banks or find their charges to be expensive for your liking. You can consider opting for Aspire multi-currency account for global payments which offers you all the benefits, with eligibility criteria which are less stringent. Read our article on bank charges in Singapore for a quick and easy comparison.
What level of customization does Aspire offer to meet the specific financial requirements of mid-market clients?
Aspire understands the diverse financial needs of mid-market clients and provides a high level of customization to tailor solutions accordingly. This includes the ability to customize corporate cards with specific spending limits, rewards, and benefits that align with the unique requirements of each client.
Additionally, Aspire's budgeting features are adaptable to accommodate the distinct financial structures of mid-market enterprises. The platform also allows for fine-tuning approval policies, ensuring they align with the specific workflows and compliance standards of individual mid-market businesses. This commitment to customization empowers mid-market clients to optimize their expense management in a way that best suits their financial goals and operational preferences.
Is there a minimum balance required for Aspire Business Accounts?
No minimum balance is required to keep your SGD, USD, EUR, GBP and IDR Accounts activated.
Can Aspire's corporate cards be customized to cater to the specific needs of consulting teams on the go?
Yes, Aspire's corporate cards are highly customizable. Consulting teams can benefit from tailored spending limits, travel-centric perks, and real-time transaction tracking, ensuring that the cards meet the unique requirements of professionals on the move.
How does Aspire support budget management for consulting projects and travel expenses?
Aspire's platform offers sophisticated budget controls that consulting companies can adapt to project-specific needs. This includes setting project budgets, tracking expenditures, and receiving real-time insights to ensure that expenses align with project goals.
What are Aspire Corporate Card FX rates?
At Aspire, we want you to pay the lowest rates in the market.
- Zero card activation fees
- Zero card transaction fees
- Best FX rates, up to 2x cheaper than banks
How does Aspire help consulting companies enforce expense policies and approvals for travel expenses?
Aspire streamlines the claims and approval process, allowing consulting companies to establish and enforce expense policies seamlessly. Customizable approval workflows ensure compliance with company policies and industry regulations.
Is Aspire's platform scalable for consulting companies of varying sizes?
Yes, Aspire's platform is scalable and caters to consulting companies of all sizes. Whether you're a boutique consultancy or a larger firm, the platform's features can be adapted to meet your specific travel and expense management needs.
How can I open a business account in Singapore?
For a business account in Singapore, Aspire is an excellent choice. With a focus on startup and SME needs, Aspire offers a seamless and transparent banking experience.
Benefit from their user-friendly online platform, no minimum balance or account opening fees, and dedicated support for businesses of all sizes.
Aspire is designed to streamline your financial management, making it an ideal partner for entrepreneurs in Singapore.
How long does it take to open an Aspire business account?
Registration with Aspire takes less than 10 minutes which you can do via our website or mobile app.
Once registered, we will get back to you within 5 business days on whether your account has been activated or if we need further documents from you.
Our account verification process varies according to the nature of your business. In exceptional cases, it can take up to 7 days to process your documents.
How can Aspire's corporate cards benefit my startup?
Aspire's corporate cards offer a range of benefits for your startup. Earn 1% unlimited cashback on qualified spends, simplify expense management, enjoy streamlined transactions, and gain real-time insights into spending. With customizable limits, integration with accounting software, and enhanced security features, Aspire's corporate cards are designed to empower your startup's financial efficiency and provide added convenience for your team.
Is Aspire suitable for both early-stage and established startups?
Absolutely, Aspire caters to the needs of both early-stage and established startups. Whether you're just beginning your entrepreneurial journey or have an established business, Aspire offers tailored financial solutions to help streamline your operations.
From managing expenses and optimizing workflows to providing valuable financial insights, Aspire's platform is designed to adapt and scale with your business as it grows. The flexibility and scalability of Aspire make it a suitable choice for startups at various stages of development.
Is there a minimum balance required for Aspire Business Accounts?
No minimum balance is required to keep your SGD, USD and IDR* Accounts activated.
However, we recommend keeping your subscription plan amount available on your balance to ensure you're up to date with your payment every month.*
To create a recipient or make any transaction on your IDR Account, you'll need to have a minimum balance of IDR 10,000 on your account.
