One of the most important aspects of running a successful business is managing cash flow. It is vital that you be able to manage the day to day expenses that come with a business. Invoice factoring is a great choice when you are looking to expand your business, since it can provide you with large amounts of capital to provide for equipment purchases and help you get what you need to meet payroll. However, for smaller expenses, a credit card can be a good option on a day to day basis.
How credit cards help with cash flow
When you have a business, you may not be paid right when you send out an invoice. But, in the meantime, you continue to have daily expenses: buying office supplies, engaging in business travel, taking clients out to lunch and other costs that require your attention. But if your clients haven’t paid on their invoices (which can take 30 to 90 days), you may not have the cash. Credit cards allow you to cover these costs without having the cash immediately.
Another advantage is that the best credit cards actually let you have a 20 – 25 day grace period before you begin paying finance charges. This means that if your cash flow is arranged carefully, it is possible to avoid paying very much interest. And, if you are careful to apply for low interest credit cards, you will find that you can do quite well, covering your expenses while paying little in terms of fees. The ability to use low interest credit cards for smaller expenses also helps you better match your inflows with outflows.
Additional perks associated with credit cards
Before you apply for a credit card, you want to make sure that you are choosing from among the best credit cards. These cards are more than just low interest credit cards; they also include rewards. A business credit card with a rewards program is a great way to manage cash flow and earn a little extra. You can earn cash back, airline miles, free gas, rental cars, merchandise and hotel stays. The best credit cards are flexible in their rewards programs, allowing you to choose what you want, when you want it.
Rewards credit cards have different programs for adding up expenses. With some cards, you can get as much as 5% cash back on purchases. Other programs will give you a point for each dollar you spend (double points during certain promotions or if you use certain partners). Then you can redeem your points for different perks, depending on what you are looking for. Some rewards credit cards have networks of businesses, and you can get additional discounts and helpful merchandise connections when you use your business credit card. This can save you money down the road. If you use your business credit to make purchases, and you earn enough miles for an airline ticket, it will save your business money the next time you go out on a business trip.
It is important to be careful with rewards credit cards, though. While you can rack up quite a few points if you use your card for all business expenses, it is vital that you do not get in over your head. You need to make sure that you can pay down your business credit card when your clients pay their own invoices. If you are not careful, the interest and fees you pay on your business credit card balance can actually negate your rewards.
Finally, it is worth noting that many of the best credit cards come with travel insurance and warranty protection. You will be protected in some cases of travel, and you will get an automatic warranty on some of your purchases. You can also get your money back if a vendor does not complete his or her end. This adds an extra layer of protection for you. Another protection is fraud protection, which can shield you from liability if your business card is lost or stolen.
In the end, while you don’t want to get carried away, credit cards can be great tools for helping you more effectively manage your cash flow, while at the same time providing you with a reliable way to protect some aspects of your business and earning perks.