For small business owners, a business credit card is important as it helps them with their financial needs. What is also important is to actively manage it in the best way, so you don’t face trouble with the bank, and get the chance to avail the best out of your business credit card. Managing your card helps you in a number of ways and builds your credit score, which helps in obtaining credit on most suitable terms for business growth in future. Here are some tips to manage your credit card effectively:
You must keep updated with any changing credit card terms, and for this you need to check your mail regularly. It may seem petty, but business owners usually tend to ignore their mails in the face of work pressure. You may miss out on some important details, like a change of policy or interest rate terms which may later negatively affect your business operations.
Make sure you pay your bills on time as this is one important factor which builds your credit score. Lagging behind on payments will cost you the penalty fee and downgrade your business credit rating which can reflect badly on your financial statement.
If you need to hire more employees, renovate the office or shift it, be absolutely sure about the reasons and do it only if completely necessary. It is best to carry out a cost versus benefit analysis to evaluate if the change will help in generating more revenue or will become a dead baggage pulling cash from your finances.
There are many business credit cards available, which offer good rates and rewards for business. These cards are established solely with the intent to facilitate business operations and the rewards are business specific. So, with the wide variety available, you need to establish which kind of card will benefit your business most. For example, if you have travel needs you can opt for a card which gives rewards for travel.
Don’t just rely on year end statements but go through and analyze your monthly financial reports. Many companies make the mistake of forgoing monthly reports. You need to establish how your business is doing each month, and be aware of the monthly financials in order to make credit decision for future. Analyzing your monthly standing will help in establishing a plan to make timely payments.
Small businesses can be profitable if they manage their cash flow. Knowing your monthly budget and aligning it with the business plan will help in determining the starting to end budget. You will understand the pattern of days which require more cash than others and negotiate your credit terms accordingly so the due date may coincide with cash flow projections. It will also help in meeting payroll demands and reduce the dependency on quick cash.
With care and discipline a lot of skeptics believe that a credit card is the best source of finance for an entrepreneur hurting for cash. The following is a list of things that would help prevent you from over using your credit.
For multiple card users a sweet habit would be to avoid using the card which is closer to the billing date. With more credit period it would be good for your finances.
A lot of small business proprietors use their business credit cards when they travel abroad. The problem starts with the exchange rate fluctuations because credit card companies’ bill the amount in foreign currency at the time of issuing the bill. A prepaid currency card will help out in this situation.
New and small business owners tend to concentrate on reward points when making purchases via a business credit card. What they are blinded to is that accumulating reward points do not erase the huge credit card bills that will need to be paid especially on things that were bought unnecessarily.
One of the ways to not go overdue on your credit card bill is by cutting down on expenses or putting them off for the next month, if the business has comparatively low cash inflows. Business credit card companies charge a higher percentage of interest rates than companies that issue personal credit cards.
Another thing that small business owners seldom realize that the reason they got a credit card was to inject some startup capital into the business, for the day to day basic running of operations. What usually happens is that they end up using that same card for emergencies as well. Basically it just piles up on the bill at the end of the month. Credit card users should look for some other source of finance instead of straining on this particular means.
In instances when you do not want to subject your business to too heavy a credit bill, there are plenty of other uncommon ways to avoid this. For example, you could narrow down your advertising. Since you have a small business, it would not be surprising if you just add your advertisements in other mailing like invoices, instead of posting them individually. Another way would be to join forces with businesses that sell complementary goods and services.
Another attractive idea for business owners who are currently undergoing growth is to hire temporary labor to handle the surges in business. This would eventually pay off and probably lead to lesser usage of credit cards in the future due to a higher number of consumers. If you are in the U.S. you can use the Portal Service to clean up your mailing list and let you be qualified for bar code discounts.
Credit card limits, when crossed can hurt your credit points which in turn would become an ugly spot on a fine credit history. A good credit score ensures your chances of receiving finance from lending institutions. Moreover, it a very healthy long term habit to keep your credit expenditure in check.