5 Tips on Using Business Credit Wisely

A business credit card offers a range of advantages — from increasing cash flow to financing growth and more. Learn more about some benefits and potential risks.

One of the biggest challenges business owners face is managing finances. A business credit card can be a helpful tool if you use it wisely. Here are a few tips and risks to consider.

1. Let It Work for You

Having access to revolving credit is probably the biggest advantage of a business credit card. Once you've established your revolving credit line, you can use it to manage cash flow, pay off a short-term expense and more.

Using a business credit card can also help build your business' credit, which may be important if you decide to apply for a business loan down the line.

On the practical side of things, a business credit card keeps your business and personal expenses separate. That simplifies recordkeeping and ensures correct recordkeeping for business-only expenses.

2. Have a Plan

Being haphazard about how you use a business credit card can hurt you — and your business. So be strategic. Think about reserving it for things that increase revenue or productivity, like office equipment, supplies and travel costs.

Also, if you have staff members who regularly make business purchases, you may want to consider employee credit cards. Be clear about your company policy. Make sure employees understand what kinds of transactions are authorized and how much they can spend individually each month. You may also consider requiring employees to submit itemized receipts to help keep track of their spending.

3. Proactively Manage Your Cash Flow

Having access to flexible credit can be helpful for your business, but keep an eye on cash flow. Make sure you have the resources you need when it's time to make payments.

4. Pay on Time

Speaking of payments, pay your bill on time, in full if you can. Late payments can damage your business and even your personal credit score. Again, that's something that may impact your ability to obtain a credit line in the future.

5. Look Up Tax Benefits

Did you know that interest, annual fees and late charges on your business credit card may be tax deductible?^* Be sure to consult your accountant or tax advisor to determine if this option is right for you.

Whether you're just starting a business, or growing your business in a new direction, a business credit card can be a helpful tool. Make sure you have a plan about how you'll use it, stay aware of your spending habits and make payments on time.