Credit Cards and Business Sense
It is important, in business, to always stay on top of your budget. At the same time, you want to be able to empower your employees with the tools they need to succeed. Balancing credit card spending, then, is crucial.
Effective credit card use is not something that is readily taught in schools or even in the home. Even in business, where credit cards often reign over cash transaction, some people have trouble understanding how to properly use credit cards as an effective tool.
Having the right business sensibility to understand how credit cards can benefit your business does not take much effort, but it depends on how easily you can understand the intricacies of intelligent credit card use. The key, though, to credit card business sense is simply "balance."
Balancing Number of Employees Using Cards
Many business credit cards allow you to have multiple cards for the same account. This lets you give separate employees access to the same money which is supposed to make it easier to delegate the purchasing of necessary goods and services. The trick, though, is to find a balance between restricting too few and allowing too many employees to use the company account. When too few employees use the account it can limit your company's ability to acquire the things you need to operate in an efficient and effective manner:
- Regulating inventory
- Purchasing necessary equipment or tools
- Handling emergencies
- Expensing client meetings
- Making travel arrangements
- Reserving a room, table, or seat (especially on the fly)
When too many employees have access, though, the opposite can happen: money can be drained from the account quickly. It could potentially discourage discretionary spending by the sheer facility.
- No supervision leads to overdrafts (and fees)
- Too many debits can be difficult to track and account for
- Too many hands in the pot makes it easier to steal (or simply lose track)
- Easy access of money lessens its esteem (and makes it easier to take advantage of it)
Balancing Employee Limits
One way to avoid the issue of too many or too few employees using the company credit card is to provide each employee with an expense account and an expense limit. While these are intended to be strict regulations, they can be altered as circumstances require.
Typically, though, management will handle the purchasing of more expensive investments, products, services, equipment, or tools, so that no employees can be held responsible. This should alleviate some of the pressure from employees who truly want what is best for the company. You can allow employees a limit on expenses:
- Mileage / car maintenance / gas
- Client meetings (lunch / dinner / drinks / entertainment)
- Company inventory / stock / maintenance
- Other travel expenses
Balancing Spending Overall
The biggest problem that seems to be facing business credit card holders, though, is exactly the same problem that consistently faces domestic credit card holders: overspending. It is very easy - and therefore very tempting - to spend more than you can afford when you have constant access to a high credit limit. In terms of business this can be even more dangerous because you might project that a new piece of equipment will produce greater profits but you can't fit into the budget for a few months.
The promise of higher profits in a short amount of time might tempt you to overextend your credit line (which is the same thing for a consumer who wants a new HDTV or living room set). Of course, financial planners and business professional will usually advise to play it safe. Here is some other advice they might give you:
- Only use your credit card to buy what is in the budget
- Use your card as the business account for everything you need so you can reap the card benefits at the end of the year
- Use your card as a way to track spending and write-offs
- Pay off your business account every month
Learning how to properly balance credit card spending in your business is fundamental for success. By understanding effective business credit card use you can maximize investment power and thus dividends without having to worry about taking too many losses, especially in regards to employee spending.
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