Many businesses use credit cards for short-term financing. Credit cards for businesses generally have larger credit limits, better interest rates, and more attractive payment plans that personal credit cards. When a company has a credit card, it often has a protocol in place for spending and reporting. This article will give some tips for managing your business credit cards.
- Make sure that you avoid mixing your personal and business credit cards. This can be very difficult if you have used your personal credit report to obtain a business line of credit. However, if you use a modicum of common sense, you can avoid making a crucial and critical mistake that plagues most startup companies. When you keep your business and personal credit cards separate, you are showing the IRS and lenders that you are serious about your new business.
- Even if your business is only a few employees, prepare monthly financial reports. This will help you and your company decide where to go on a monthly basis. Make sure that credit cards are figured into your company’s monthly financial report. Credit cards should be treated as a debt and not as a form of income. Making sure that your company has enough capital to pay its debt will be very easy to determine if your company has its credit cards figured into a monthly financial statement.
- Make sure that you check your email, mail, and online statements on a regular basis. Sometimes, your credit card company may include a fee that you may not be aware of. These small fees are problematic if they are allowed to build up over a period of time. Staying on top of your finances is a proactive endeavor.
- One of the most important things to do when you manage your cash resources is to control your cash flow. Credit cards are a very important way to do this. Your credit cards have the potential to suck up a lot of your cash flow if they are allowed to grow out of control.
- You should only take on debt on your credit cards if it is sure to increase your company revenue. This is a very good rule to follow. Many businesses mistakenly use their company credit cards to treat customers. This is a very bad practice and can cause debt to accumulate on the credit card to an unhealthy level. Your credit card payments should only serve to further the profitability of the company. They should not be used on ventures that are meant to pay basic company infrastructure costs. These types of costs need to be funded through other means.
- Pick who controls the credit cards with a great deal of care. One person should be authorized to make credit card purchases within a small business. There should also be some say on who gets to approve of credit card expenditures. If there is a per diem facet of your company’s travel expenses, this should not be covered on a credit card, but paid for by a company’s cash reserves.
Having a good policy in your company for managing credit cards is important for the longevity of your business. A task as simple as managing credit cards can mitigate many of the financial risks to your company by improving cash flow. Having these things in place will make it so that your company is able to pay its bills and secure new lines of affordable funding with creditors. Your new company can use credit cards for short-term purchases, but it should adhere to guidelines developed by the owners and decision makers within the company.