Business owners must monitor cash flow to thrive. By staying proactive with cashflow strategies, you can drive more cash flow to your business. One way to boost cashflow is to use a business credit card when you make purchases and pay suppliers. Other than municipal payments, you can use your credit card to pay most bills without a penalty. Business card policies change from state to state so the information we provide here is based on our experience in Massachusetts. To extend payment terms you can use your business credit card’s grace period to your advantage, read below.
Credit Card Grace Period
Use your business card’s grace period to your advantage. For instance, you might be able to avoid paying for items as the purchase may not be subject to interest charges for up to 21 days after you receive your statement.
Pay Off What You Purhase
Please note that anything you buy you are responsible for the purchase. When you use your credit card responsibly it can be your friend. Abuse it, and it will be your worst enemy. Avoid penalties when you make a payment. Make sure that you keep cash in your business account to cover all your purchases. When the invoice comes up for payment, pay it off in full.
Boost Recordkeeping Efforts
Your card does not only boosts cash flow but it also keeps all your expenditures in one place. Most credit card carriers allow you to download your monthly statement into an excel spreadsheet or crv file. This comes in handy at tax time. Then at year-end you can download one long annual statement and sort it according to vendor, purchase amount in ascending or descending order, date or type of expenditure (gasoline, office supplies, insurance payments, etc.).
Monitor Credit Card Purhases
We recommend balancing your credit card statement every month. Beyond that, we suggest, as an extra security measure, that you log into your online credit card account in between statement closing periods. Review your expenditures carefully. Most people would assume that credit card fraud would involve large purchases. That is actually the opposite. Usually credit card thieves will make most purchases under $100, so as to raise any red flags. We also suggest that you put a purchase limit on your cards. This will flag any suspicious purchases and will cause the credit card company to call you to confirm anything that looks out of the norm for your purchasing pattern.
Choose a Business Credit Card That Works for You
Choosing a business credit card genuinely is a personal choice. Do your homework and read the fine print. Look for a good rate as some cards have ridiculous restrictions, while others are more business friendly. Find a credit card that allows for a grace period once the statement is published. Also, look for incentives such as cash back options versus points. Maybe you travel a lot or fly with a specific carrier, bonus miles may be what you prefer. There are also cards out there, that allows you to purchase gift cards from select suppliers that have $5 off a $25 gift card, $10 off $50 gift cards and so on.
Types of Business Cards
Certain types of business credit cards also include cash-back incentives. Did you know that you can make up to a $3000 down payment on the purchase of a vehicle
For example, incentives can include 1% cash back on all purchases, up to 5% cash back over a specific time period for purchases such as gasoline or office supplies. So if you often give gifts for referrals or to employees, this is another way to save money. Cash in your rewards and save $5 or $10 and then use that card combined with a coupon to save even more.
One of our contractors told us she has never bought a gift, birthday, wedding or holiday, in over 5 years. Well, she did, but she did it with her cash back bonuses by purchasing giftcards and e-certificates. This past holiday she bought $200 in $25 gift cards for only $160. Because she saved $5 on each $25 card she purchased. She then put those cards together to purchase a $300 gift that was on sale and in addition she had a 20% coupon. This allowed her to use the gifts cards to cover the entire gift including sales tax. She saved $100 at the end of her purchase.
Cash Flow Problems?
Call Alex Franch, BS EA, 781.849.7200 at Worthtax for additional business cash flow tax strategies! He has helped clients for over 8 years succeed through a profitable business. You will want to get a jump on this years tax season. Call our office for an appointment today, so that you can beat the rush. Worthtax has locations in Quincy, Weymouth and Dedham or book your appointment online. Remember, cash flow is king for a small business owner.