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Small business credit cards are perhaps the most convenient way to finance your business. They provide a helpful line of revolving credit, are often easier to get than a traditional small business loan, feature variable interest rates, and come with money-saving incentives and rewards programs. However, improper use of them can land your small business in hot water.
Without a good system in place, it’s easy to lose track of your corporate credit card spending. Mismanagement can leave your small business barely hanging on when before, it was doing very well and gaining legitimacy and creditworthiness in the industry. To keep that from happening to you, follow these simple strategies for responsible small business credit card ownership:
1. Monitor and Track Accountability With Business Credit Cards
One of the most important steps any small business can take is to ensure the credit cards they use are set up with a bomb-proof accountability system. This could mean any number of things, such as pre-approval of all spending, rigorous tracking of receipts, or strict utilization requirements such as timely reporting. Having a workable accountability system in place can protect your bottom line in several ways.
Furthermore, you should set up said system before activating the small business credit cards in question, not after a problem arises. Implementing a “zero tolerance” policy for credit card misuse or unpunctual reporting can raise awareness and keep everyone in line. When you take company stewardship seriously, so too will those who are authorized to use your cards.
2. Select Authorized Users For Your Business Credit Cards
There are many challenges to allowing employees to use your corporate credit cards, especially if the spending limit is set high or you have several workers with cards. Businesses notoriously lose control of things when card activities are left unmonitored or when they hand cards to the wrong people. As such, it’s important that you decide carefully who becomes an authorized user.
Contrary to popular belief, not everyone on your payroll needs a company credit card. Although having one is certainly convenient for the company’s vital officers and travelers, it’s important to choose wisely to avoid a dysfunctional expense system. Losing control of accountability can wreak havoc on your small business and leave you hanging by a financial thread. Pick a few good men (or women) and have a few alternatives in mind.
Another option is to reimburse company spending on personal credit cards to prevent having to hand out cards to everyone employed by your business. This also requires some tracking of receipts, but it doesn’t leave your company susceptible to malpractice. To avoid confusion and mitigate ill feelings about who gets a company credit card and who doesn’t, set clear rules about eligibility: seniority, position, achievements, etc.
3. Set Clear Limits For How Business Credit Cards Can Be Utilized With Authorized Users Of The Corporate Credit Card Accounts.
Every small business owner with a corporate credit card account should set very clear limits on spending. Those limits should include what type of expenses can be charged to the card, how much employees can spend, and how often they can use their credit cards. Be sure to put such policies in writing so there is no question or confusion about what you expect. Give copies to each cardholder and if there is ever an issue, you have a basis for administrative action when needed.
Moreover, try to be as specific as possible when writing up your cardholder policy. If you’d prefer company meals to be void of alcohol purchases, state that clearly. If you have a dollar amount on meals, flights, or other expenses, be sure to mention your limits. Once the policy is clearly stated, employee purchases and reporting will become more routine and easier to track.
Depending on the small business credit cards you use, it may be possible to go online and set customized spending limits based on the employee or job they’re doing. With some cards, you can regulate employee purchases individually - $50 a day on meals for one cardholder, $100 a week on gas for another, and so on. You may even be able to set limits based on your company’s operational hours. This is one of the most obvious reasons why choosing the best small business credit cards is so important.
4. Watch The Business Credit Card Accounts Closely With Online Banking Features.
Keeping a close eye on the activity on your small business credit card accounts is the best way to prevent an expensive or credit-damaging mishap. Many credit cards for small businesses use allow administrators to set up activity alerts via email or text message. Those alerts will immediately notify you when a card is used or when one is used in an unapproved way. You can take advantage of online and/or mobile banking this way as well.
Viewing up-to-the-minute account activity can help you put a stop to user fraud, not to mention assist you with timely misuse reporting. It goes without saying that you or someone in your accounting department should review each statement regardless of your use of online account monitoring and/or email and text notifications just to be sure nothing has slipped through the cracks.
5. Spend Business Credit Card Funds Wisely
Although small business credit cards are very convenient to use, they’re not always the best option for large expenditures. Because the balance must be paid on time and in full when the statement comes in, using your corporate credit cards to make big purchases can damage your credit when something unexpected happens. Big spending is also a concern if you think you’ll be unable to pay the balance in full when you swipe the card.
It’s important to consider the interest rate tradeoff when you use this kind of corporate financing. Quicker payments not only prevent you from spending unnecessary money on high interest rates, but it can also help build your corporate credit and lower your APRs in the future. While it may require more of an effort to secure a traditional line of credit, it may be a better option if you have a big-ticket item on your list. Larger purchases can max out your card and leave you without a financial cushion, so always use your small business credit card limits wisely.
This article was written for Grand Teton Professionals for Fast Unsecured. For Credit Repair Solutions and Support, please contact us at 203-518-4923 or email us at Support@FastUnsecured.com. For Media Relations, please contact Misty.Burrell@GrandTetonProfessionals.com.