Making the Most of Business Credit Cards

August 29, 2013 by Ed Becker

Business credit cards are a double-edged sword. If you’re not the type of manager who can meticulously manage spending – don’t bother with credit cards in the first place. If you’re up the challenge, they can be a great way to improve the financial flexibility of your business.

Avoiding Credit Card Traps

Although they won’t admit it outright, credit cards are designed to trap their users into a perpetual cycle of high interest payments. In order to make the most out of business credit cards, you need to avoid these traps at all costs.

The greatest trap of all comes in the form of rewards programs. By simply offering customers a 1% reward on purchases, card users are inclined to use plastic as their go-to payment option. If you’re not careful, you may find yourself unable to pay your balance in full. Believe me, the APR and annual fee on most business rewards credit cards will offset your rewards points (or miles) in no time flat. Following the rules below will help keep you safe from this trap.

A Few Rules to Follow:

1. Pay the balance in full each month
2. Never let the balance exceed 30% of your credit limit
3. Assign spending caps to employee credit cards
4. Monitor spending on regular basis
5. If you can’t afford it with cash, don’t charge it

Improve Business Credit

New businesses will find credit cards especially useful for improving credit ratings. Generally speaking, you can qualify for a business credit card by using your personal credit score to represent the account. If you maintain a responsible payment history, you will find it easier to qualify for other small business loans in the future. As your company grows, this credit card account will set a solid foundation for a healthy Paydex score. If you haven’t done so already, head over the Dun & Bradstreet website to apply for a D-U-N-S number.

Manage Employee Spending

Credit cards give your employees greater spending flexibility, without sacrificing accountability. An effective employee spending program starts with setting appropriate boundaries on card usage. It is a good idea to obtain a signed agreement from each employee regarding spending policies. American Express makes this easier by allowing the account owner to set spending caps on each individual card. As an added benefit, company credit cards eliminate the need to reimburse employees for purchases made with personal funds – something everybody will appreciate.

Sync Expenses to QuickBooks

QuickBooks users will find it beautifully simple to track expenses by syncing credit card statements to the books. Data is transmitted directly from the financial institution, so you can monitor spending in real-time. Using a single credit card account for business purchases will save hours of data entry, reduce human errors, and make your CPA’s job a breeze.

If employee spending is a concern, consider expanding on this capability by installing the ProOnGo Expense app to QuickBooks. This mobile app allows you to approve or deny employee expenses and label each charge to the appropriate expense account.

Now Enjoy the Rewards

If you’ve managed to avoid the potential credit card traps, you should have accumulated a stockpile of reward points. This is a great opportunity to treat your employees to Amazon gift cards, a new office printer, or a free dinner at the Red Lobster… the possibilities are endless.