While nearly 70% of small business owners own a business credit card, below 25% use them as an efficient method of business spending. However, when used wisely, credit cards can work wonders for your organization – from building your credit score to giving you immediate access to the funds needed to keep your business afloat.
Here’s how to get the most out of your business credit card.
Especially for small business owners, self-employed individuals, and consultants, it is often too easy to mix personal and business expenses. However, this isn’t a neglectable mistake to make!
Mixing up your expenses can cause you to misjudge your business’s financial health and cause severe problems when filing your taxes. Be sure to keep your business credit card separate from your personal one, and only use it for business-related expenses to avoid confusion and costly mistakes.
The best practices of personal credit card use also apply to your business credit card. Ideally, you should repay your balance in full each month and avoid late-payment fees by paying on time.
However, when it comes down to repaying your business credit card balance, your chosen payment method matters. Since your business card should only be used for business-related expenses, you’ll only get a truthful reflection of your business cash flow and performance by repaying the balance using your business account.
According to a survey conducted by the Federal Reserve, around 53% of businesses use credit cards as a source of external financing. And, there is more than one reason why this is the strategy of choice for many business owners.
Using your credit card allows you to access quick cash without having to qualify for a loan, and you can complete the entire application process online. What’s more is that using a credit card to finance major business expenses, especially during the introductory period, can help you build credit and earn rewards.
However, this strategy doesn’t come without pitfalls. Credit cards are more expensive than credit lines and small business loans, and come with security issues and personal legal liability. Choose wisely between using a loan or your credit card to afford major investments.
Making virtual credit card Philippines available to some of all of your employees can be an excellent way to streamline productivity, build client relationships, and improve the overall workplace culture. And, if your employees travel often for work, you will also make the most of substantial travel rewards.
However, employee credit card use should be highly regulated, and your company should have clear policies to manage dollar amounts, spending limits, eligible expenses, and authorized spenders. Make sure that every employee receiving a business credit card is well-informed about your organization’s policy and the consequences for violating the rules.
If you have decided to add one or more employees to your business credit card account, you have done so because you trust a staff member to make spending decisions in the interest of your business.
This might mean impressing a prospective client, traveling to close a sale, or making impromptu investment decisions. However, giving your employees an expired credit card can be incredibly damaging, especially if your sales representative isn’t able to close a deal or a client gets disappointed.
Stay on top of expiry dates and replace your credit cards promptly to ensure uninterrupted business operations.
Using your credit card for your business expenses can help you record outgoings, track your business’s performance, and get a clear picture of your organization’s financial health. That is why you should use your statement as an unmissable piece of intelligence that can help you understand how to keep your accounts in the green.
Pro tip: as a small business owner, you might be eligible for a wide range of tax deductions. Use your credit card statement as a reference for those transactions that can be subtracted from your taxable income.