When running a business, a business owner may find it more beneficial to use one or many business credit cards to make purchases for the business. This tactic makes it easier to keep up with the cash that is being spent on the expenses of the business. It also helps in building credit for the business itself in case a situation occurs where the business will need financial help through obtaining a loan. The use of a business credit card can also result in rewards, like cash back, new low interest rates, higher credit limits, and even air line miles. However, just like regular credit cards, business cards can create large debts that businesses struggle to mange. In this case, it is important to know certain strategies aimed at keeping business credit cards at a manageable position. Read on for more information on strategically managing business credit cards.
Maintain Spending Accountability
When spending for a business is done on business credit cards, it is important that all users of the card are given accountability guidelines to follow. There is nothing worse than money being spent on a business with the proper consent or proper following of spending guidelines. There should be a step-by-step accountability guideline set in place and given by each member that will be involved in spending money on the business. This guideline should include information on how the money should be spent, how approves the spending of the money, and how the spending should be recorded.
Allow Limited Hands on the Card(s)
When spending for a business is done on business credit cards, it is also important to limit the amount of people who can use the card. Too many users can result in unnecessary or undocumented spending, which can put the business in jeopardy of being in credit card debt. Many companies have established a certain group of people in charge of handling the expenses of the business. Those people are the ones in charge of obtaining the card and making purchases for the business.
Set Clear Limits for Spending
When spending for a business is done on business credit cards, it is important to set clear and understandable limits for spending. There should be specific policies set in place about the spending for the business. Those policies should include what expenses to include on the card, how much can be spent at any given time, who does the spending, and what procedures should be followed when spending. Each cardholder or card user should be given these guidelines along with any other specific instructions. Depending on what type of business credit cards are being used for the business, you may be eligible to put special restrictions on the credit cards. Some of these restrictions could be the daily spending limit, what items or services can be purchased, what days and times the purchases can be made, and even which employees can sign for the purchases.
Keep an Eye on Credit Card Activity
When spending for a business is done on business credit cards, it is important to monitor the daily activities of the credit card. Make each person who is responsible for the card turn in receipts every time the card is used to make a purchase. Also, monitor the financial statements of each card. This can be done by looking at the mailed credit card statements, requiring receipts after each use of the credit card, personally monitoring the use of the cards, or even taking advantage of online or telephone banking options, which can give you immediate access to credit card transactions. If any concerns should be raised, consult each member of the spending team to get any questions answered. Constant monitoring of the card will prevent unnecessary credit card spending, will lessen your chances of being in credit card debt, and will save the company money.
Be Mindful of the Card’s Use
Just because business credit cards can be obtain with great rates and high credit limits do not mean that is it wise to use carelessly. You want to make purchases that are necessary for the business as a whole. You want to put responsible individuals to take care of the spending in the business. You do not want to reach your credit limits quickly by making large purchases that do not have to be large at all. Make sure that all spending is done properly and under the watchful eye of responsible employees.
In conclusion, business credit cards are a very resourceful tool to have when running a business. It can help businesses make needed purchases when profits are not high enough to cover costs of the business. But business owners should be mindful and careful when credit cards are being used to avoid the risk of being in credit card debt. Avoiding risks involved monitoring spending closely, putting in place a spending guideline, and making sure the cards are being used properly by the right people.