by: Debbie Dragon

Small business owners who use credit cards for purchases are seemingly at a disadvantage when compared to large corporations. The reason is that managing cash flow sometimes becomes more of a challenge and being able to balance income against expenses can cause headaches.

That is why small business operators should heed a few strict rules about using credit cards in their daily business activities.

Pay Quickly and Often

Since businesses use credit cards to manage cash flow they should be willing to make payments as soon as the money is available. Managing cash flow means watching income from accounts receivable and being able to allocate that income right away. This will also help prevent interest from accumulating on the credit card balance.

Actively Manage Account Online

Small business credit card account managers should make use of online access to manage their credit card accounts. This will also help them to monitor charges that occur on a daily basis.

Pay Fees and Charges Monthly

Do not allow fees and charges such as annual fees to stay on the account past the month in which they occur. If there is a dispute, it is best to pay the charges and then start an inquiry regarding the charge with the intent of having it reversed.

Watch Your Credit Limit

Credit card companies are doing crazy things with accounts these days that are designed to help them remain profitable. One such action is the lowering of credit limits. This is ok if your balance is paid off every month, but you need to be aware of your limit before you use your card again. If your balance is not high enough to absorb the charge for your purchase, then you will be charged an over limit fee. You might also incur an interest rate charge, too.

Limit Card Holders

In small businesses, usually only one or two people have company credit cards. The challenge that having multiple cards spread among several employees causes is in the management which becomes a larger business activity. The way to minimize this is to minimize the number of cards and accounts that are in use. Close some if necessary.

Limit Card Uses

Placing strict rules on the use of credit cards for specific purposes will help keep that use from getting out of control. In fact, some credit card companies allow businesses to restrict the usage of accounts to certain categories of purchases which not only helps in managing use, but also helps from a security standpoint.

Manage Money Float

Everyone does it – using that day or so between when a payment is made and when it is late, and how long it takes to clear the banks. It’s a part of wise money management because the more your money stays in your account, the more interest you earn on it. But, running on the ragged edge like this can lead to some sleepless nights wondering if and when your money is going to be where it needs to be in the morning.

Having to pay for credit in the form of interest and other charges just to help your business manage cash flow should force you to become good at minimizing the cost of using that credit. Ideally, using credit cards in a business setting is not something that you intend to do for major purchases, but during tough economic times, you have to do what you can to remain profitable.

Using the principles above will help you stay on track and keep credit cards in their proper place – as a business management tool.

Did you find this article helpful?

Compare Credit Cards

Business Credit Cards