8 tips to take control of your finances with a business credit card

If your business uses cash, checks or personal credit cards for everyday business expenses, it may be time to find a better way to pay. Using a business credit card is a smart alternative that can improve your business operations in a number of ways.

Your business wouldn’t be the only one making the switch. Between 1998 and 2009, the percentage of small firms using business cards increased substantially, from 37 percent of firms to 64 percent, according to a 2010 Federal Reserve System report. The report also found that small firms use credit cards primarily for transaction purposes — rather than borrowing — with nearly 80 percent of card users in 2009 paying off their balances every month.

A boon to your business

A business credit card can help you achieve the following objectives for your business:

1. Separate business from personal finances. If you co-mingle personal and business finances, it can make separating the two difficult at tax time. Plus, using a personal credit card can jeopardize your personal finances unnecessarily if your business is ever sued. Using a business credit card helps to establish a clear line between business and personal finances and can prevent business debts from appearing on your personal credit reports.

2. Build a positive credit history. Good use of credit will create a favorable credit profile for your business, which can help in securing loans in the future.

3. Ease cash flow. When you purchase a big-ticket item using your business credit card, you can spread out the payments to fit your cash flow. Is business slow one month? Make a smaller credit card payment. Going gangbusters the next? Pay up to the full balance.

4. Simplify purchase transactions. A business credit card makes it easy for multiple people in your company to make business purchases. It makes them easy to track, too, reducing paperwork and helping to promote transparency in your business.

5. Minimize paperwork. Take advantage of convenient features, like detailed monthly and quarterly expense tracking and annual spending reports you can download into your accounting software.

6. Make budgeting easy. Having expense information easy to access through a business credit card account can make it simple to categorize and add up your spending. This kind of tracking can also be useful for spotting tax deductions.

7. Combat fraud. In addition to detailed reporting that lets you spot suspicious items quickly, services like mobile card fraud alerts offer an additional, immediate layer of security to your card transactions. Sign up to receive a text alert whenever a questionable transaction appears on your account, and the processor waits for your response – a simple yes or no return text – before proceeding with (or blocking) the transaction. What’s more, most business card issuers offer a zero-liability policy so that you aren’t responsible for any unauthorized charges that do get through.

8. Earn rewards. Some business credit cards offer points or cash back every time you use them. The benefits of a dedicated business card are numerous – and so are the options available to business owners. Your business banker may be able to suggest the optimal card for you based on your business and industry, as well as provide additional tips for prudent management.

Before applying for a business credit card it’s always a good idea to have a conversation with your business banker to discuss terms, credit limit, interest rate, grace period and rewards to find the right product for your particular business. While credit cards have many useful features, they should always be considered as part of your larger cash management strategy and business financial picture.