When it comes to running a business, there are always expenses that are going to come up. Some of them are well planned out while others tend to be a last minute surprise. In either case, there are choices when it comes to paying for these expenses. Most people choose to use a business credit card or pay with cash. As you begin to decide which option is best for you, consider some of the pros and cons of both.
According to some, cash is king. In fact, when customers pay you, cash would be the preferred method, right? There are no fees associated with it and you can immediately take it to the bank and make a deposit. However, as a business owner, paying with cash has its ups and downs.
Paying with cash can make things easier. The moment you pay, the transaction is complete. There is no need to check a bill and pay later. There is no need to make sure that the accounting is just right. When you pay with cash, you have the product or service and there is nothing else that you need to do. The math is simple and the action is simple.
On the downside, you may get a receipt, but there is no other documentation. You can`t look back on a statement and see just how much something cost. If you need to make a return or make an adjustment to an order, there is less of a paper trail. While in most cases the lack of paper is good, when it comes to documentation you can run into a problem.
On the other hand, with a business credit card, you have plenty of paperwork. You have the receipt. Then you have the credit card statement that comes out monthly. You can look back for months or even years and track your spending. You can find out where you spent the money, what it was for and even whether or not you ended up paying interest.
When tax time comes around the business credit card statement can make things so much easier. You can make a copy, mark the deductible purchases and you have all the proof that you need. If you need to make a return you may be able to use your credit card statement in order to help the company track down the original receipt.
There are business credit cards that offer different rewards. Why not get an extra benefit for items and services that you have to purchase? You may be able to earn airline miles for future tickets, gift certificates, or even cash back. In each of these cases, you are getting an extra benefit for paying with credit.
On the downside, credit cards can get the company into trouble. It is important to remember that everything you put on the card needs to be paid for. You need to make a payment on time at the same time each and every month. If you don`t want the added expense of interest every month, you will need to pay off the entire balance each month.
Also, remember that having a business credit card affects the business (or in some cases your own) credit score. If you have a high limit and continue to maintain a high balance, you could run into problems. The best way to use a business credit card is to make sure that you have cash before you make the purchase. After making the purchase, immediately make a payment to the card. This system keeps you out of debt, saves you money and can keep you from an accounting nightmare.
If you do choose a business credit card, be sure to do a credit card comparison before settling on one. Check for the best interest rates as well as the best rewards program. Choose what works best for you and your business.