One aspect of running a small business many new entrepreneurs underestimate is the many different schedules both accounts receivable and accounts payable have.
You've just landed a large client. Congratulations. The contract is the most lucrative your new business has ever received, so you're devoting all resources to making this client happy. That's terrific, but what if they're not going to pay you anything for 30 to 60 days? Can you afford to stay in business that long?
Your electric and gas bills are due every month. So is the rent on your office space. You need supplies. Your employees want to be paid every week or two. They have bills to pay at home.
Credit cards for businesses come with several other advantages, besides enabling you to pay bills while you journey toward the pot of gold at the end of the rainbow. They enable you to track expenses. And with rewards cards you earn extras.
However, credit cards are not free. As with all expenses, you need to compare cards to determine which one is right for your business. The Simple Dollar, a website that helps people make smarter decisions with their finances, recently dug into the industry to find the best business credit cards of 2016.
Chase Ink Plus was their top pick as the Best Overall Business Credit Card
* $95 annual fee
* No foreign transaction fees
* If you charge at least $5,000 in the first three months, you get 60,000 bonus points
* No charge for extra cards for employees
* Every $5 you spend at office supply stores and for cellphone, landline, Internet and cable TV services, you earn 5 bonus points
* For every $2 you charge at gas stations or hotels, you get 2 bonus points
* You get 1 bonus point for every $1 of other goods you buy for your business
Who are Small Business Credit Cards Good For?
Generally, they are best for small businesses, especially freelancers. However, they are also good for people who are in similar positions of having uncertain, irregular cash flow. This includes consultants, outside salespeople and financial advisors. Small business owners who need to buy a lot of office equipment and supplies can make good use of such cards. So can doctors and dentists with their own practices.
The Chase Ink Plus card is especially good for those who need to travel a lot because so many of the perks come from travel-related expenses. Besides, airlines, hotels, car rental agencies, gas stations and restaurants are all businesses that want payment upfront or immediately following your use of their services. Just like your landlord and your local supermarket, they don't want to hear about how much money you're going to get next week or next month.
Many employees travel to conduct business on behalf of their companies. They can use this credit card to pay their expenses, knowing the company will reimburse them. Their credit card bill is excellent proof of the expenses they incurred. And yet they get to keep and take advantage of the bonus points they accrue.
How to Use Credit Cards
The business credit card owner must still be careful to make certain they do not incur more expenses than they can afford.
However, sometimes important expenses come due before is received.
For example, you're a freelance graphic designer for a large company that regularly pays for freelance work at the end of the month. However, your Internet bill comes due on the 20th of the month. Without an Internet connection you cannot market your services to earn next month's money or you can't deliver the project you're now working on. Therefore, it makes sense to pay that bill when it comes due.
Maximize Total Returns
For cards such as Chase Ink that pay you bonus points that are redeemable for rewards, it can make sense to use the card even when you have the cash. Save that money to pay the bill when it comes due.
When you have a business credit card and personal card on the same platform, it can make sense to use whichever one will pay the highest rewards or cash back. But that does require greater record-keeping.