06/ 03/ 2004
by Jeffrey Moses
Many small companies use credit cards to facilitate business purchases, especially by phone or when company employees travel. Following the basic guidelines for credit card management can provide a clear record of purchases, streamline purchasing and help strengthen credit. Misuse can result in employee fraud or mushrooming company debt, not unlike the credit card debt that affect millions of individual credit card users.
Proper management requires that you:
- Keep cards to a minimum. The company owner(s) and only a few key employees should have cards, and the cards should be in the company name. Use must be authorized for specific purchases or when carrying out purchases under established guidelines (purchasing supplies online, for instance).
- Credit card receipts should be obtained for every transaction -- and stored for tax purposes.
- Statements should be reviewed promptly when received. Reviewing transactions online through the credit card company's Web site is a good way to make sure nothing goes awry prior to the written statement. All questions about purchases should be addressed immediately.
- Stick with the cards you have. When you're active with the same card for a number of years, your credit history is strengthened. Rather than jump to new cards when you get offers in the mail, call your current card company and ask for new, improved features such as lower rates, higher limits, longer grace periods and updated reward programs.
- Pay your balance when your statement arrives. Small companies are just as likely as individuals to run up balances that can hurt credit and upset cash flow.
- Avoid taking cash advances on your cards. Interest rates are usually sky-high for cash advances, even when the interest rate for normal purchases is in the single digits. You'd be much better off securing a short-term bank loan. Not only will this lower your interest rates and payments, your credit history will be strengthened (assuming that you pay off the loan as scheduled). Paying off cash advances on your credit card will not materially help your credit history.
- Use all reward programs available on your cards, whether they're airline miles or free magazines for your waiting room. Taking advantage of reward programs is like leveraging your money.
- If you drive a lot for business and write off your mileage for tax purposes, consider having a credit card used exclusively for purchasing gas and for car servicing/repairs. This will make tax preparation easier.
- Cards with annual fees should offer incentives or reward programs that allow you to earn back more than you spend in the annual fee.
- If you suspect that one of your credit cards has been compromised (perhaps after a break-in or when a disgruntled employee leaves), simply call your card companies and request that your current card be cancelled and a new card number supplied. You'll have new cards with new numbers in about a week, and the company will be able to cancel usage of your old number on the spot. There is no charge for this service.
