Avoid These 5 Traps of Business Credit Cards
As convenient as credit cards are for businesses, it is easy for business owners to fall in the trap of misusing them and lose money. This is why it is very important for businesses to utilize their credit cards in the correct manner. Credit cards are meant to be used for your business’ legitimate expenses. However, many businesses have developed a habit of misusing their credit cards. Misusing your business’ credit card is one of the ten biggest accounting mistakes perpetrated by companies. If you don’t keep a close look on your credit cards expenses it may end up draining your business’s income. In order to avoid facing bankruptcy because of inappropriate use of credit cards, we have listed for you some of the traps you should avoid.
Don’t use your credit card for personal expenses
For a start, many businesses have utilized their credit cards not only for business expenses but also for personal ones. These two aspects are completely different and should be isolated from one another. It is important to separate personal and business credit cards in order to avoid draining money from your business for things that do not add any value to the business. For instance, utilizing your business’ credit card to pay for your groceries is a personal expense; therefore it should be paid with your own credit card. You should have separate credit cards to suit personal and business needs.
Sharing is not a good idea
Another mistake often made by business’ owners is to have the same credit cards shared by different companies/branches. Using the same card for more than one company/business can be very restrictive. For a start, the card may be misused by one company and the other will suffer the loss if they have to share expenses equally. It will also be difficult for your accounting department to separate the different expenses and link them to the right business. This may lead to major mistakes in your accounting records, which will end up being costly for you and your business. This is why it is primordial for you to provide different credit cards for each of your different businesses.
Pay your debts ON TIME!
In addition, you should always ensure that your credit card debts are paid on time. Your bank will impose substantial penalties on your late payments. This will be very costly for your business. To avoid these extra charges, keep proper records of the money that you owe and make sure the payments are done on time. Staying organized and keeping track of every record will guarantee you to respect payment deadlines!
Negotiate interest rates
Because owning a credit card can be expensive, it is important that you do not make the mistake of not negotiating the interest rates. Most banks will grant reasonable interest rates for businesses which are frequent credit cards users. Before getting one, make sure you negotiate interest rates properly so that you can enjoy a low interest rate and keep your expenses to a minimum. This will certainly help your business save money on monthly charges.
Back up your receipts!
The last one of the traps is failing to keep your receipts. Indeed, every receipt that you retrieve after using your credit card should be recorded and backed up properly. You are not protected from errors and you may end up paying more money if you do not have any evidence of a transaction. Look for reliable methods to back up all your transactions’ receipt. This will help resolve any situation which may require you to pay more than what you actually owe.
It is very important for you and your business to be very careful with your credit cards and the way you use them. Even if they are a great way to keep your business afloat, it is very easy to misuse them and end up paying more than you should. Contact ABIP today for more information on business’s credit cards and the right way to use them!