Most small business owners have a hard time grasping the idea of "business" finances. Their office supplies get charged to the same accounts as their daughter's mobile phone accessories and their dog's vet bills. It doesn't matter if you have 50 employees or 5 – you need a business credit card for your company's transactions. Even sole proprietors (the guys who work for themselves, by themselves, and with themselves) can benefit from having a business credit card on hand. Here are a few reasons why even small businesses need business credit cards.
Building business credit
Did you know your business has a credit score, just like you do? This shows future lenders how likely you are to pay back a loan through the use of company funds. If you have no business credit, the bank will look at your personal credit and income for reference. This may or may not work in your favour. If you have a business credit card that you pay on a regular basis, you can build positive credit for your organisation, which will make life much easier for you down the line when you need a new office space or a new company vehicle.
Managing business expenses
If you're still looking for an accountant to sort through your shoe box of receipts from last year, it's time you updated your money management system. With a business credit card on hand, you can easily keep track of every pound you spend on computer equipment, hotel rooms, fuel, meals, and more. Then when tax season hits, all you have to do is print off your credit card statements for the year and let an accountant handle the rest. You'll find the tax return process to be a lot more bearable at that point.
Using a card like this will also help you see where you may want to cut back if you ever need to save money. For instance, you may discover that you're wasting a lot of money on paper that you could save by emailing your customers instead. You might also notice charges you were unaware of, like employees using the company card to finance their daily trips to Subway. All of this insight is laid out in black and white on your card statements.
Gaining business rewards
Why not get something back out of the money you are already spending? That's where rewards programmes can come into play. Every pound that you spend on your business credit card could result in one, two, three, or sometimes even five "rewards points," which can be exchanged for plane tickets, hotel rooms, or pure cash in your pocket. Some rewards programmes focus more on fuel and travel, while others offer rewards for overall purchases. You can assess your options to figure out which card will offer the most rewards for you.
Keep in mind that some rewards cards carry annual fees, which may significantly cut into your bonus money. Think about how much money you will logically spend on the card for a year and the rewards that this will equate to as a monetary sum. Then subtract the annual fee and see if the card is still going to be useful for you.
Distributing business money
If your employees need access to your business account, a credit card will give them just that. You can get cards issued in the names of specific employees that you trust in your company, and then you can see what those employees are spending money on. If you are working in a partnership, this will allow both you and your partner to have access to the same funds. With this setup, there is no confusion about who is in control.
Final thoughts about business credit cards...
You don't have to use an explicit "business credit card" for your business expenses. You can use a personal credit card if you want, as long as you only put company charges on it. Just note that you may not be able to receive quite the same rewards if you go this route, and you may have a smaller spending limit to deal with. If that works for your company though, go for it!
Business credit cards shouldn't be scary to you. They should be seen as exciting new opportunities to expand your legacy in the future. As long as you manage your money wisely, you should get a lot out of these plastic pocket companions.