What are the benefits of using a credit card to manage small business payments?

Summary

You can use your business credit card to help you stretch your money further through the month and pay the balance when it’s due.

• A business credit card offers added protection if you ever experience fraudulent activity on your account.
• Business credit cards offer the ability to earn rewards points and cash back for your everyday business expenses, like cell phone bills, travel, and gas.
• You can seamlessly separate your business and personal finances when you use a credit card dedicated for your business expenses.

While growing your small business , you constantly have money coming in and going out. And while you may have streamlined the systems to seamlessly accept client payments, the money flowing from your business may be less structured. Many small business owners typically pay in the way each vendor prefers, whether that’s setting up an ACH transaction, paying by check, or using an online payment platform.

Choosing a small business credit card for your business payments could make your life and business much easier than paying a different way for each vendor. Here are five benefits to consider.

 1. Manage cash flow more efficiently

Using a credit card for payments could help you to hold onto your money longer. The credit card can act as short-term financing, giving you a few weeks between when you make a purchase and when the credit card payment is due. This may make it easier to manage your books and determine when your client payments must come in to cover the card balance due.

Shifting expenses to a business credit card also enables your business to keep a larger security blanket of cash in your checking account until the payment is due. This could allow you to purchase inventory and make up the amount from sales before the credit card payment is due, which could further expand the potential for your business to grow.

 

2. Protect against fraudulent transactions

A credit card offers fraud protection that isn’t available when you pay vendors using checks, cash, or a checking account transfer. Let's say a vendor charges you but fails to deliver the product or service as promised. You may be able to dispute the transaction with your credit card company to potentially be reimbursed for some or all of that vendor payment. If you paid with cash or check, you cannot get back what you paid.

 

3. Earn rewards

You can earn rewards like cash back or points with every purchase you make on a small business credit card. For example, the U.S. Bank Triple Cash Rewards VisaÒ Business Card allows you to earn cash back on gas, office supplies, and cell phone service. You could also earn travel rewards points on airfare, hotels, and car rentals when you use a card like the U.S. Bank Business AltitudeÒ Connect Visa SignatureÒ Card. This is money you could put back into your business to keep up with rising shipping costs, cover payroll or buy new equipment to grow your company. It could also be used as excess money to reward employees or yourself with travel, merchandise or gift cards.

You can maximize credit card rewards by using your card for smaller purchases, like electricity, internet, and water, in addition to your company’s larger expenses. You could also check in with vendors that offer software and other subscription services to see how many are willing and able to accept credit card payments.

 

4. Keep business and personal finances separate

When a business is young and doesn’t have many expenses, it can be tempting to make business and personal payments with the same credit card. However, this can make things complicated, especially at tax time. Instead, leveraging a small business credit card can simplify your expense management and create less paperwork and headaches down the road.

 

5. Build business credit

As your business grows, you might also consider getting a loan or line of credit in the future. If you aren’t using a business credit card, you may not have established a business credit history or business credit score , which is something lenders may consider during the loan approval process. Look for a credit card that isn’t tied to your personal credit but instead reports only to the business credit bureaus.

Even though you may understand the benefits of using credit cards, it can be tempting to move away from old processes until your business has reached a point of change, such as when you’re bringing in new leadership or planning to sell. While updating your business payments across vendors may take some time, in the long run, the efficiencies of leaving manual processes behind can more than make up for the time you put in.

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