Many of our small business clients have a business credit card.  This can be a great thing as it allows them to take advantage of the convenience of making purchases on the go.

Other Advantages of a Business Credit Card:

* Build Your Business Credit: A business credit card provides a newly established business, or an existing business that has had some credit trouble in the past, the opportunity to build business credit. This will be useful in the future as your business grows and you need capital in the form of credit lines or loans.

* Avoid Co-mingling: Mixing your business and personal transactions creates potential tax and money management problems. By using a business credit card exclusively for business purposes, you will let the IRS and anyone else know you are serious about your business.

* Easy Itemization: Tracking your business expenditures at year-end can be a nightmare for small business owners. Many credit card companies will provide you with a year-end statement summary with your transactions itemized and categorized. Why worry about a shoebox full of receipts? Organize your bookkeeping process with a business credit card – and some accounting software and banks make it easy for you to import your credit card transactions directly into your accounting system.

* Special Rewards: The competitive credit card and business market has led to the development of reward and discount programs for business credit card users. Discounts and rewards range from office supplies and travel to software and phone services. Take advantage of using the credit card to lower your expenses.

* Manage Employee Spending: Another plus to business credit cards is the ability to provide cards for your employees with preset limits. Just make sure you monitor their spending on the separate statements you receive and make sure they understand that the card is for business purchases ONLY!  Here’s a link to a sample credit policy for company credit cards from the Society for Human Resource Management (SHRM).  It includes a sample agreement for employees receiving a company credit card.

Remember: a business credit card is like most financial instruments…

Responsible use of credit can help your business.

Misuse of your business credit makes you personally liable in most cases and has the potential to destroy your business.

Use these 6 tips to effectively manage your business credit card:

  1.  Apply with Someone You Already Know:

Always consider applying for your business credit card at your existing financial institution. Your banking relationship can aid with the approval process. In addition, when you determine the need for a line of credit or loan in the future, you will have a relationship established with your lender.  This can greatly help with credit applications for more debt which do not use automated scoring systems.

  1.  Don’t Card Hop:

Signing up for multiple cards to take advantage of deals can have a negative impact on your credit rating and make managing your cards more difficult.  Do your research up front and choose a card based on your needs and not just the first company to say “yes”.

  1.  Take Advantage of Grace Periods:

Many business credit cards offer a grace period (can be as many as 20-25 days) before you have to make payment on your purchases. Improve your cash flow using a credit card instead of checks since the Check 21 Act creates quicker clearing of checks (less float time).

  1.  Pay Online:

Save time and extra costs by paying your business credit card online versus paying by teller at your local branch or mailing in your payment.

  1.  Avoid Taking Cash Advances:

Reduce credit card fees and interest costs by not using the cash advance feature on your card. Cash advances incur more fees and costs.

  1.  Don’t Pay Late:

Late fees and high interest rates quickly erode the merits of using your business credit card. Be responsible by paying off your business credit each month (within the grace period).

If you need help assessing your business credit options or implementing better credit management practices in your business, contact us at Barba CFO.

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