One way to improve your business finances is to responsibly use credit cards to manage your expenses. Unlike personal credit cards, business credit cards provide detailed summaries of expenditures and allow you to give some payment responsibilities to trusted staff members such as clerical staff and sales people who may need to spend money on the companies behalf through the use of employee credit cards.
However, I believe the most important feature of business cards is the ability to cut expenses by taking advantage of cash rebate offers or low to zero percent financing. You can only find what best fits your business situtation by shopping around.
For example, for a business that does not have any cash flow issues, you could follow this scenario:
- Pay all of your monthly business expenses such as office supplies and so on that usually cost you $1,000 per month on a business credit card that offers a rebate of 5% on all purchases.
- You pay off the credit card at the end of the billing period so not to incur any interest charges.
- You receive a 5% credit on your billing statement at the end of the month resulting in your office supplies only costing you $950 vs $1,000 thus saving you $50 on office supplies.
Just think, the more you charge the more you save. If you charge $10,000 a month then its $500/month in savings.
In order for this to be most advantageous, you must pay the balance off each month to avoid interest charges.
Other tips for credit card usage include:
Only consider credit cards with low interest rates and fees just in case you need to carry a balance. Websites such as bankrate.com and creditcards.com show comparison rates and features of different cards.
- Your small business credit card usage and payment history effect your personal credit score and vice versa. Most small business owners are required to use their personal credit history and provide a personal guarantee when applying for a business credit card. A bad credit score can increase your credit costs.
- Periodically check around to make sure you are getting the best card that fits your situation. Two things could happen. (1) Your situation changes where a rebate card is no longer advantageous and you need something that lets you keep a balance for 60 days rather than 30 days cheaply or (2) a better card offer comes along.
By using these tips you can effectively lower the cost of running your business with little effort. To learn more about how Loftis Consulting can help you effectively manage cash in your business, contact us today at (312) 772-6105 or visit our CFO Services page.
