Credit Card Business

Friday, June 15, 2012 at 2:39pm by Site Administrator

Managing Your Cash Flow With a Business Credit Card

A business credit card can be a quick and easy way to cover the financial gaps that can sometimes occur in business. Cash flow problems can happen any time during normal business conditions. A customer may be slow to pay an invoice, you may receive more orders than you expected, or materials costs may rise more than you predicted. Any number of situations might leave you needing a little extra cash to make it through a fiscal period. If managed properly, a credit card can provide the extra spending power you need until the regular finances smooth over again.

Track Credit Spending Carefully

It is vital to pay close attention to how the credit card is being used. Think about how much an item would cost with the interest rate tacked on to the purchase price until you are able to pay off the balance. The ideal way to manage a credit card is to pay off the balance every month. Try to arrange your credit spending so that the balances are always as low as possible so that you can avoid spending more than necessary on interest rates.

Take Advantage of Business Card Perks

Most business credit cards come with special perks that kick in when the cards are used. Investigate the incentives that you qualify for with your card and be sure to use the card in such a way that you maximize your return on those incentives. For example, some cards require that you spend a certain amount of money before they will award cash back rewards. If you are going to use the card, you should at least spend enough to earn something in return.

Keep Balances Manageable

The key to using a credit card to manage cash flow is maintaining balances you can afford. Just because your card carries a high balance doesn’t mean you have the freedom to spend up to the limit. Remember that the more months you carry a balance, the more you will pay toward interest on those balances. Interest payments do not help your business grow, so you should try to avoid them whenever possible. Use the card to cover cash flow when the regular accounts are low, but pay off the card as soon as you can when the accounts are full again.

Always Separate Personal and Business Spending

It can be tempting to use the company credit card to fill up your gas tank or buy a bag of dog food when you are shopping for office supplies. Resist the urge to mix personal and business spending on the company card. Business expenses need to be clearly separate for tax purposes as well as normal bookkeeping purposes. Whether you are a sole proprietor or a high-ranking executive for a large corporation, your company should not pay interest rates for purchases that do not pertain directly to the company’s bottom line.

Use the Card With the Most Recent Billing Cycle

Look at your credit card statements to see when their billing cycles are each month. When you need to make a purchase on credit, use the card that has the most recent billing cycle. Interest is charged on the balance the card carries at a specific time each month. Using the card right after the interest has been charged for the month gives you four or five weeks to pay down the balance before interest is charged for the next cycle. In essence, good timing can provide a month’s worth of interest-free loans if you pay the balance down quickly enough.

Reserve the Card for When you Really Need It

Think of the business credit card the same way you would think of a bank loan. The credit card is easier because you do not have to go through the application process to get the money, but it can be more expensive in the long run because of the revolving interest rates. Expenditures that are covered with the credit card should be planned out in advance so that you are prepared to pay for the interest. Ideally, a credit card is held in reserve until there is an emergency. Credit can help ends meet when clients are slow or business is unexpectedly good, but credit will bog a company down in extra expenses if it is not managed carefully.

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