Using credit cards responsibly in your business

Proper use of a business credit card can improve your firm's book keeping habits and reduce the amount of time spent on dull and dreary paper work that could be much better allocated to looking after the more productive aspects of your business.

If you have an ABN, a business credit card can also bring you tax deductions on your spending and provide other benefits that only a specialised card is able to deliver.

Many business people, however, still prefer to stick to their frequent flyer credit card, especially if their business demands a lot of travel, while others look more to a low interest credit card.

It all depends on the type of business you are running and what you feel most comfortable with. Here are some things you should look out for when using a corporate credit card.

Protect your credit rating at all times

All small and medium sized business operators realise that there is always a mountain of work that you have to carry out on a daily basis. This can often mean that working on protecting your credit rating is one job that gets overlooked.

The first priority is always to get the job done, and if that sometimes means overspending in order to bridge a gap while waiting for certain debtors to pay, so be it.

However, if you are going to be successful in business in the long term you must fight hard to ensure your business is run as a reputable company in all ways, to your creditors, to your vendors and to your customers as well.

The same approach is imperative if you wish to obtain and manage a credit card to help you in the running of your business.

Your personal credit card usage guides your worthiness for a business credit card

Financial researcher Tower Group recently released a report revealing that more than two thirds of small businesses now use a credit card to pay their company expenses. However, only 40 percent use their card exclusively in the running of their day to day business affairs.

This is because business advisors are divided on whether you should completely separate business and personal expenses. You will most likely have to rely on your personal credit rating before a credit card provider will approve your business for a credit card in its own right, so the two will always remain linked to some extent.

Lending to small business has hardened

Since the global financial crisis first reared its ugly head in 2008, credit approvals for business purposes have tightened up considerably around the world.

It has become more important than ever to keep a good personal credit rating if you are considering taking out a business card to help run your business.

If your business has experienced some rough times in the past its most unlikely you will be able to secure a bank loan as banks have tightened up on funding new businesses during the past few year, giving you more reason to ensure your personal credit rating remains high- particularly if you are a sole trader.

Use your business credit card responsibly

If you have managed to secure a business credit card you must treat it the same as you would your own personal credit card and always pay the due amount on time.

It is best if you completely clear your card each month when the statement is first released. Don't use it for cash advances either if you can avoid doing so.

Avoid merging personal and business expenses, such as buying a new hot water service for your home on your business credit. You should also separate all future transactions between those which are for your business and those that are your personal expenses, and the tax office will be much more impressed with you. It shows the ATO that you are serious about trying to run your business properly, and will also help you in the future if you need to increase your credit limit on either card.

By running your business finances from your business credit card you will find it much easier to track all your expenses any time you have the need to do so.

This article was written by Timothy Ng from, a comprehensive guide to all types of credit cards.

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