Company Credit Cards: Small Businesses Cash-flow Aid

As any small business owner will tell you ensuring a smooth cash flow is one of the biggest challenges in keeping their enterprise running on an even keel. For, even if the business is doing extremely well on paper, unless invoices are being paid on time there can still be a real danger of the enterprise going under.

Although businesses are entitled to charge other businesses interest on outstanding invoices, many small business owners are reluctant to take that approach as it really may be a case of David v Goliath, especially if the companies refusing to pay on time are large enterprises. In addition, if the late payer accounts for a significant proportion of a small business’s sales its owner may be reluctant to risk alienating the customer by slapping a late payment fee on invoices. After all, in the majority of cases, the bigger business could simply pull the plug and place their orders elsewhere.

So, although extracting payment from customers can be a thorny issue, maximising cash flow elsewhere can be fully within the control of the small business owner. Certainly, in the short term company credit cards can help solve some of the cash flow issues, especially concerning staff expenses and purchases. Benefits for small businesses include a reduction in the administrative and accounting burden when collating expense claims, as the statement from the credit card can be used as the basis of the claim.

In addition, there is also an added cash flow benefit for the business that settles their business credit card account in full each by the statement date, as they can effectively get interest free credit on purchases ranging up to approximately 56 days from date of purchase, depending upon the issuer and type of card account. Plus, the business owner can keep track of purchases made using the cards by signing in online at anytime; meaning that accounting for future expenses is made easier.

In addition, most banks charge for cashing cheques for purchases, whereas by using business credit cards these charges can be eliminated altogether. Although there may be an annual fee applied for the use of a company credit card, if it is used for a significant number of purchases throughout the year it will work out cheaper than paying charges on individual cheques processed.

But, one superb advantage of buying through credit cards is that most, including business credit cards, afford purchase protection on items bought. So, if they are stolen, lost or accidentally damaged many issuers will reimburse the cost of the item. Not only would you keep your no-claims bonus on your company insurance, in most cases you would also have the goods replaced – although restrictions do apply and should be checked before assuming that all goods will automatically be replaced.

However, if you are running a small business and experiencing some level of cash flow difficulty, then you should certainly consider applying for a business credit card. It won’t necessarily help your late payers cough up on time, but it will help with other aspects of your cash flow.

Article Source: http://www.mycontentbuilder.com

This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.

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