How To Maximize The Value Of Your Small Business Credit Card
Nearly one-third of American small businesses include credit cards in their arsenal of financial tools. It's easy to see why: They are convenient, they offer quick access to money during cash flow crunches, and they often come with irresistible travel, shopping or cash-back rewards. Additionally, responsible use of a business credit card — one separate from personal finances — helps build a solid business credit rating, which will help smooth the way for future financing.
Getting the most out of your business credit card requires shopping around for a card that suits your business buying habits and needs. Carefully managing how you and your employees use credit cards will ensure they strengthen, not harm, your financial position.
Analyze Reward Programs
The credit card market is competitive, and issuers offer a variety of incentives. Cards that accumulate air miles or shopping points may be a great fit for your enterprise. Others offer cash back on purchases in select categories. The best way to select a card based on reward programs is to calculate the cash value of rewards that you can use. Keep in mind that some reward programs set expiration dates. Will you be able to use your benefits before they disappear?
While many cards may not charge an annual fee, don't discount those that do. Add any fees into the equation. The additional cost may be worth the services and reward programs offered.
Manage Employee Spending
This is where business credit cards really shine. You can issue cards to employees, set spending limits and keep a close watch (via your online account) on how these cards are being used. When shopping for a card, look for one that allows you to create specialized reports so that you may drill down into the data to better inform business decisions. Some issuers offer expense management services. With these, your employees can complete online expense reports and email them to the appropriate departments within your company.
Streamline Record-Keeping
Like most 21st Century businesses, shoeboxes spilling over with receipts are probably not part of your bookkeeping system, but you may still be dedicating too much time to data entry when it comes to tracking transactions. With online access to your business credit card account, you can download records to an Excel spreadsheet or directly into your accounting software. This not only cuts administrative costs, but it also ensures accuracy.
Utilize Fees And Interest Deductions At Tax Time
Credit card interest and fees on personal purchases are generally not deductible; interest and fees on business purchases are. If you use a personal credit card for business, unless you audit your statements line-by-line to tease out business purchases and associated expenses, you are missing out on the valuable fees and interest deduction.
Unless otherwise stated, opinions expressed are those of the respective authors and not necessarily those of the sponsoring party, City National Bank (CNB). The information is provided without warranty and no recommendation or endorsement by CNB is intended or should be inferred unless specifically stated.
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