Business credit cards are an attractive option. This particularly true with small business owners. These cards offer a variety of perks attractive to businesses. The main feature is the availability of funds. Another significant benefit is the ability to track expenses through monthly statements.
Business credit cards are an attractive option. This particularly true with small business owners. These cards offer a variety of perks attractive to businesses. The main feature is the availability of funds. Another significant benefit is the ability to track expenses through monthly statements.
Appealing as this sounds, there is a downside. Mismanagement of credit funds has been the source of business’s failure rather than growth. However, there are steps a new business owner can take to ensure that business credit cards will be advantageous in operation of their venture.
Discretion
Discretion is the single most important virtue a credit card holder can practice. Too many business owners rely too heavily upon credit cards for payment of expenses. This has lead to a debt load that the company is unable to satisfy. Not only does the company have insurmountable debt, it will also have earned a poor credit rating which has far reaching consequences.
When a business is in the early stages and not realizing a steady or reliable income, business credit cards usage needs to be monitored closely. The credit card should not be relied upon as the company’s principal capital source. Rather, the credit card should be used only in emergency situations. If the credit card is to be used for expenses, purchase limits should be enforced and strictly followed. Otherwise, the business runs the risk of repayment and interest charges it is unable to meet by due dates.
Prompt Payment
It is essential that the business owner pay monthly invoices by no later than the due date. This ensures higher interest and penalties will not be assessed against the company by the credit card lender. If the company misses payments or is late in payment, the company may soon find itself in a position of being unable to catch up on those delinquent payments and declared in arrears. Obviously, this will result in the company’s failure. Even if the business is able to make up payments missed, it will have spent money it cannot afford for increased interest assessments.
Preventative Measures
There are several preventative measures that can be undertaken to guard a business’s funds from misuse or depletion.
A business can take advantage of the credit card lender’s regular statements to examine purchase and expense payments. If cash flow improvement is needed, these statements can show where alterations to the company’s budget can be made.
If employees of the company require use of the business’s credit cards for business purposes, placement of credit limits on employee cards will help alleviate misuse for employee personal charges. This will prevent large personal charges by employees placing the company in the position of being unable to repay the credit card lender.
Small business owners benefit from the many attributes of a business credit card. The cards provide instant funds, purchase and expense monitoring through monthly statements and create a credit reputation. There are other benefits available besides these major features.
A business credit card can contribute a valuable component to a business’s success. By the use of discretion, prompt payment and preventative measures, a company can minimize the dangers of credit cards.