When used correctly, a business credit card has the potential to do more than fund your company's activities.
With a few tricks, you can stay on top of day-to-day spending, and build a business that doesn't have confusing financial records. Here's how.
1. Separate business from pleasure.
Chicago-based InoPrints.com founder Jovim Ventura initially put company purchases on three forms of plastic. The result? A mess of personal and business expenses. Three years later, Ventura's company puts most business expenses on one business card. “This makes it easy for our accountant to pull all the data from the Internet and categorize our spending habits,” Ventura says.
Also: “If you put all your business expenses onto a single credit card, this helps streamline expense recording for tax time,” notes Nellie Akalp, CEO of CorpNet.com, an online legal document filing service. “By looking at your monthly statement, you can instantly see how much you spent that month.”
Those monthly expense figures can, in turn, be used to help calculate your monthly and quarterly profits.
With this information on hand, you'll be able to make an accurate estimated tax payment each quarter, explains Akalp.
2. Streamline finances.
“If you use Quicken or Quickbooks, look for a credit card that allows you to download your credit card activity into the program, making record keeping easier,” suggests Stacey Agin Murray, professional organizer and founder of Organized Artistry, LLC, in Fair Lawn, New Jersey.
You can also check if the card issuer provides an app. Chase, for instance, offers Ink to help manage business expenses. The app sends instant alerts on your spending, and also notifies you when employees make purchases. It allows you to snap and save a photo of your receipts, and also to tag purchases into categories.
Capital One offers an app that lets you view account details, pay your bill and even redeem rewards.
There is also Shoeboxed, which lets you capture paper receipts. “It's always smart to have copies of the original merchant receipts in addition to your credit card statement,” notes Akalp.
And the app Slice pulls information from e-receipts together. This can help you avoid overlooking any minor online purchases you may have made without your business credit card. For instance, perhaps you occasionally purchase items through a PayPal account that is connected to your checking account. By gathering e-receipts, the app can help you make sure no expenses are overlooked.
3. Build a smart budget.
Many business credit cards come with detailed transaction summaries that you can find online in monthly, quarterly and annual formats.
The purchases are placed into categories such as office supplies, meals and entertainment, and travel. Since all of the information in these summaries shows your company's past spending, you can apply the data as a foundation for the upcoming months.
“Track spending trends and build them into future budgeting plans,” suggests Denise O'Berry, author of “Small Business Cash Flow: Strategies for Making Your Business a Financial Success.” If, at the end of the year, you see the total amount spent on travel was $5,000, you can use that as a starting point for the coming year's budget.
4. Oversee employee spending.
If you have employees who regularly make purchases for the company, you may decide to distribute credit cards to them. Assign business credit cards to different users on the same company credit line.
“The combined credit card statement can be used to track each person's transaction history, spending limit issues and general usage,” notes Tiffany C. Wright, founder of TheResourcefulCEO and author of “The Funding is Out There! Access the Cash you Need to Impact your Business.”
5. Manage cash flow.
“Using a business credit card allows me to check for charges anywhere at any time using the Internet,” says Ventura of InoPrints.com. In addition, the company set up an automated payment every month to pay the entire balance. Paying in full is key to successful card ownership. You don't want to incur high balances — and high interest costs.
However, there may be times when you need to carry a balance to manage cash flow.
Perhaps you have a card with a $10,000 limit. If you have a month in which two of your customers are slow to pay, and you have a $2,000 credit card bill, you can carry over the balance to the next month, paying only the minimum.
6. Trim costs.
The information provided in the transaction history of a card can help a company identify areas of concern, pricing differences between vendors and other opportunities for cost savings, notes Wright.
Perhaps your company regularly purchases supplies from two drywall providers. If you look at the transaction history on your card for the last six months, you may spot that one company consistently charges less than the other. You can use that information to negotiate with the pricier provider, or you may decide to continue with the less expensive provider, and keep the other on file as a backup.
Once you start using your business credit card as an organizational tool, it can help propel your company forward. “The more organized our accountant is, the better our financial reports,” says Ventura. “The better our financial reports, the better I can make educated decisions for the company.”