How to Do Business Credit Right

When you, as a lowly employee, gained access to your first company credit card, you likely celebrated with a couple less-than-respectable purchases. Now that you own your own small business, you can be sure your employees will behave the exact same way.

However, business credit cards are tricky. With the wrong behavior, you could doom your business for good. If you want to properly manage your business credit accounts, read on for a handful of best practices that should keep you (and your employees) on the straight and narrow.

Segregate, Separate, Split

How to Do Business Credit Right
How to Do Business Credit Right

If you are a small business — especially a small business that is just getting started — it may not feel possible to keep your personal and business accounts appropriately separated. After all, you have likely sunk quite a bit of your own savings into your venture. However, that intermingling of initial funds makes it all the more important for you to keep your accounts separate.

Any late payments, overcharges, or inappropriate purchases on your business card could kill your personal credit score, so you absolutely must avoid charging personal expenses to your business account. Your responsibility with your business card will also likely result in higher lines of credit and better ratings down the road.

Wait and Watch

You might not be diligent with your personal credit statements, but you must read each and every statement for your business card, line by line. Unfortunately, the CARD Act of 2009 — which provides consumers such valuable rights as fixed rates, fee restrictions, more reliable payment timelines, and more — does not apply whatsoever to business credit cards. That means that your business card’s rates, fees, and even usage policies could change month to month.

Creditors have been more inconsistent in recent times due to the unpredictable economy, and your business card statement could fluctuate wildly. Thus, it is worth your while to know exactly what your balance means, and where your money is going, when you pay your balance at the end of the month.

Treat Yourself

Usually, small-business credit cards offer outstanding rewards systems aimed to indulge businesses and business owners alike. Though rewards cards typically have higher rates than non-rewards cards, if you expect to pay off your balance in full each month — like you should — you might as well take advantage of the rewards that are offered.

You can perform research online to find business rewards cards that give you want you want and need. Some cards are incredibly industry-specific.

For example, Capital One Spark Miles Select for Business helps frequent business travelers earn more travel points to make their trips faster, easier, and cheaper. Alternatively, the Chase Ink Cash Business Credit Card gives bonus points for business-related purchases, such as those at office supply stores, Internet service providers, and dining establishments, and the points are redeemable in cash, plain and simple. Rewards are worthwhile, especially if you apply for the right card for your business.

Spend Money to Make Money

Debt is dangerous, which means accruing debt is usually flirting with disaster. However, there will be times when it is favorable to take on debt using your business credit cards: namely, when the debt will actually increase your revenue. It costs money to hire new staff, move locations, buy equipment, and attract clients, and if you are sending your business into the red to do these things, you could very well make it back into the black in a matter of weeks. Still, a company card isn’t an excuse for rampant spending; if your business is currently strong, you should try to avoid debt for as long as possible.

Preach Accountability

Businesses that are large enough to lend out company cards to trustworthy directors and managers must be extra careful about their company spending policies. Some common spending regulations include:

  • No travel upgrades
  • No pay-per-view
  • No big staff meals
  • No exorbitant tipping

These rules are designed to prevent employees from taking advantage of the company coffers. However, perhaps the most valuable policy to put in place is one of accountability. Those who take on the responsibility of a company card should understand that the bills will be reviewed and inappropriate expenditures called into question. Accountable employees are less likely to misbehave with company cards.

( Photo by JeepersMedia )

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