Business credit cards provide essential resources for small business owners. Yet, not all businesses have a dedicated credit card that they use for business expenses. Many business owners view business credit cards as being useful only for large corporations or companies that have a massive cash flow. However, the opposite is true; every business, no matter its size or industry, needs a dedicated credit card. Here’s why.
Separation of Personal and Business Expenses
One of the most common mistakes that small business owners make is that they mix business and personal expenses. This mixing of business and non-business expenses can create confusion come tax time and add unnecessary hours to bookkeeping. A dedicated credit card creates a clear separation between business and personal expenses, which ensures that you don’t accidentally claim a personal expense as a business expense.
Improved Cash Flow Management
Having a dedicated credit card for business expenses helps cash flow management by allowing expenses to accumulate on the card. This allows two advantages: first, it creates a clear picture of your business’s expenditures, and second, you can take advantage of promotions and discounts that come with using a credit card. Some credit cards even offer cash back or rewards points for every dollar spent, which can be reinvested into the business.
Building Business Credit Score
Business credit is vital to expanding operations and acquiring funds. A business credit score is determined through payment history, available credit, length of credit history, outstanding debts, applications for credit, and public records. A robust business credit score can help secure loans, vendor relationships, and leases. Using a credit card responsibly and paying it off on time can help build business credit.
Protection Against Fraud and Theft
Dedicated credit cards have additional safeguards against fraudulent activities that protect both your business and your employees. Fraudulent activities such as identity theft, skimming, and phishing scams target small businesses. With a dedicated credit card for business use, business owners and employees can avoid sharing their personal credit card information, reaffirming the importance of complete separation between personal and business expenses.
Final Thoughts
In conclusion, every business, regardless of size or industry, needs a dedicated credit card. A dedicated credit card can positively impact the separation of business and personal expenses, cash flow management, help build business credit, and protect against fraud and theft. Keeping your business finances separate and using a dedicated credit card will not only help run operations efficiently now but prepare the business for more significant growth in the future.