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How to manage your company’s finances effectively using a business credit card

A credit card can help you organize your company’s finances, plan cash flow and even prevent theft and fraud


A business credit card, used well, could mean the difference between business success and failure – for example, when it provides crucial cash flow between the time you order inventory and when you get paid. Here are nine ways you can use a business credit card to help your business succeed.

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Using a credit card in your business can be an integral part of your success strategy.

In fact, a business credit card, used well, could mean the difference between business success and failure – for example, when it provides crucial cash flow between the time you order inventory and when you get paid.

Here are nine ways you can use a business credit card to help your business succeed:

See related:  Getting a business credit card is easier than you may think

1. Easily organize business finances.

Using a credit card exclusively for business helps you keep track of deductible expenses. You won’t be scrounging for loose receipts or trying to decide if a purchase was for business or personal use if all your business expenses are on your business credit card.

Credit card accounts can also help you categorize and add up your expenditures.

“Most credit card companies will provide you with a summary of your expenses at the end of the year or at any particular time you may need it,” says Ken “Mr. Biz” Wentworth, author of “Pathway to Profits: A Mr. Biz Guide to Running Your Business Like a Boss,” and Capital One® Spark® Cash for Business user. “This gives you a great summary of where your money is going. You can monitor your spending, and the trends that go along with it.”

You can also use that summary information to compare your spending from one year to the next.

“It’s an easy way to track those types of things without having to be a spreadsheet jockey and keep track of that on your own,” Wentworth said. “How many of us have time to do that?”

Better yet, you can have your credit card transactions automatically integrated with your accounting program, such as QuickBooks accounting software.

That’s one reason Leah Hazelwood, vice president of marketing and administration at North Carolina-based Go-Forth Pest Control, can’t imagine functioning without a business credit card.

“Expenses are imported automatically from the credit card site,” she says. “You code and save and you’re done. Everything is already there when you reconcile, and for repeating expenses, the coding is remembered so all you have to do is accept it.”

2. Cash flow planning.

Keeping a business running is all about cash flow. No matter how great sales and profit margins are, most businesses still need to bridge the gap between purchasing inventory and getting paid. That’s where using a credit card can be a lifesaver. Here’s an example of how that works:

“Let’s say you have a manufacturing business and you are buying inventory to make your widgets,” says Wentworth. “You buy the inventory on day one and receive an invoice that is due in 30 days. You pay the invoice on day 29, but you don’t pay for it with a check. Instead you choose to pay with your business credit card.”

By paying with a credit card, you add another 30-45 days to the 29 days you have to pay on invoice, for a total of 60-75 days between when you buy inventory and when you pay for it.

“Depending on how long it takes you to make widgets and sell them, quite possibly you have sold your widget and received money from your customer before you even paid cash for your materials,” says Wentworth. “You’ve swung your cash flow to the positive side, where you’re getting paid for your widgets before you even have to pay for materials to make the widgets.”

3. Building a business credit history.

“One of the most underrated perks of using a business credit card responsibly is building a good credit profile for your business,” says Calloway Cook, founder of Illuminate Labs, a dietary supplement company in the greater New York City area.

This is important if you want to secure a business loan later with good terms.

“As soon as my business was officially incorporated I made sure to get a business credit card, and after six months I got approved for another one,” Cook said.

Not only is building a separate business credit history good for your business, but by keeping personal and business finances separate, you can protect your personal credit history if things go wrong.

“We always advise our clients to keep their personal and business credit cards separate to avoid conflicts in case of a business downturn or interruption,” says Matthew Meehan, CEO of Shield Advisory Group in Orlando, Florida. “By utilizing business credit cards, the business itself develops a credit profile over time and helps the business owner protect their personal rating.”

See related:  How business credit cards affect your personal credit

4. Earning cash back rewards.

Earning cash back from a business credit card can potentially be more lucrative than rewards from a personal credit card.

After all, you can only spend so much on personal expenses. When you buy inventory or supplies on a credit card, however, the rewards can be significant.

Wentworth works with a small remodeling company that spends about $400,000 a year on materials alone.

“With a 2 percent cash back reward, my client now receives $8,000 a year of free money,” he says.

Steve Oliverez of Austin, Texas-based Insanely Cheap Flights said using a cash back card for all his company’s expenses has been a “huge” benefit.

“If your business is running on 10 percent margins, but you’re suddenly able to get 2 percent back on all your expenses, you’ve actually just increased your profit by 20 percent,” says Oliverez. “There were years I was able to pay my salary on the cash back alone.”

Oliverez says he frequently uses The Plum Card® from American Express, which offers 1.5 percent cash back and has no preset spending limit.

“I’ve put more than $300,000 on it in a single month without any issues,” he said.

Be sure to shop for the card that gives you the best cash back rewards, among other terms and benefits, and watch out for any caps on rewards. Even a fraction of a percent difference adds up over time.

5. Identifying and preventing theft and fraud.

If someone steals your debit card and uses it, or takes cash from the till, you may never get it back. If they steal your business credit card, however, you have a great deal of protection.

One of the best things about credit cards is the protection it provides to the holders.

“Credit card companies are pro-consumers and make it easy to dispute and replace lost or stolen cards,” says Brian Greenberg of True Blue Life Insurance in Scottsdale, Arizona, who also uses the Capital One Spark Cash for Business. “You can dispute a charge by phone or even directly on a phone app, and the card company quickly credits back your account while the investigation ensues.“

If you regularly review credit card charges, you can spot employee misuse, too.

“Because yesterday’s expenses are available at the start of business the next day, you immediately know if an employee or third party used company money in an inappropriate way,” says Hazelwood. “Credit cards also offer 0-percent liability. You don’t get that with paper checks or cash transactions.”

6. Protection against faulty services and products.

The more you buy, the higher your chances of getting stuck with substandard goods or services, or just plain getting ripped off. If you’ve paid for a large order by cash, ACH transfer or check, you could lose everything you paid when things go wrong.

“When paying for a product or service, get the deliverables in writing or email. If those products or services are not delivered, you can dispute the charge on your credit card and recoup your losses,” says Greenberg. “Be wary of businesses that do not accept credit cards, and use a credit card whenever you have the opportunity. “

7. Greater control over spending.

You can prevent overspending before it happens by setting limits on cards you give employees and other users.

Hazelwood sets various caps on spending with the cards she uses.

“You can customize spending limits and transaction types by group – executives, management, field employees and sales staff,” she said.

See related:  7 things to know about business credit cards

8. Convenience for employees.

Employees dislike using their own money to pay for travel expenses and other bills, and then having to fill out expense reports and wait to get paid. Using a company card improves their cash flow and avoids all that hassle.

9. Better terms and perks on business cards.

If you have good personal credit, you can use that to get business credit, generally with a much higher limit than you would get on a card for personal use. “

You can leverage that to get business credit cards that come with credit limits 5-10 times larger than personal credit cards,” says Meehan.

Business credit cards also tend to offer larger sign-up bonuses than personal cards, according to Cook.

“I got a $500 bonus from Capital One and a $500 bonus from my Bank of America card,” he says. “That’s $1,000 I used to help bootstrap my business.” The Bank of America card required him to sign up for a checking account, but he was planning to do that anyway.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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