How did you pay for the last thing you bought? Chances are, you whipped out a card from your wallet and walked off with the item you purchased without touching actual cash. It is easy and convenient. Small business cards are the same – they give access to a line of credit for purchases. Business owners have the option to get these cards to make their daily operations easier. But when is it time to get one? Read on to see if any of these situations apply to you when getting business credit card.
Does your company need to establish its business credit?
Businesses almost never run on a cash basis. They use credit or loans in order to expand or manage their cash flow. If your business will be applying for a loan, creditors will look at the credit history of the company to see how you handle your financial obligations. A business credit card can be proof of good management if the bills are paid on time.
If you foresee your business expanding soon or making big purchases such as real estate, having a business credit card can be a tool to get better interest rates. Get a card and manage it well to establish a good credit history.
Are you using your personal credit card for business expenses?
Mixing your personal and business expenses is not inherently bad. But it can make things unnecessarily confusing, especially when its time to pay taxes. Business expenses may be tax-deductible, but you can only get credit for those used wholly for the business. It then makes sense to have a separate card to make documentation during filing your assessments much easier.
Do you have people working for you who need to purchase items for the business?
If you need something for the office, you can simply use your credit card. But what happens when you have an employee who needs to buy something for work? Or what about two or three people running errands for the business?
Business credit cards are an efficient way to allow office personnel to handle transactions. Issuing a card can be more efficient than reimbursing your staff or giving them cash when they need it. You can also easily keep track of how the credit card is used, making records-keeping more straightforward.
Abuse is also less likely with business credit cards. These cards have a cap or a limit to how much can be charged on it. Some credit cards are restricted to only certain types of transactions. A common example is that business credit cards typically cannot be used to withdraw cash. Some credit card companies even allow you to specify the times the card may be used
Is your business paying for expensive things?
If your business transactions are hitting significant numbers, credit cards are a good option. First, it is safer in that cash does not have to be on hand. You reduce the risk of theft or mismanagement. Another good reason to look into getting a business credit card is that these cards often have loyalty or reward programs. You can maximize your resources by using the credit card and getting perks in return.
A business credit card is like a street that goes both ways. It can be a great benefit for your business but can also be a pain if it is not used properly. If you decide to get a business credit card, make sure that you put up clear rules to avoid financial pitfalls.
One way to manage your finances is through the professional services of an accounting firm. Annette Ferguson – Chartered Accountant and Certified Profit First Professional – can help you unlock financial strategies to improve the profitability of your business amidst an economic crisis. Book a call with us. You can also follow us on any of our social media channels and subscribe to our YouTube channel.