Running your own small business brings with it a lot of questions, such as whether to apply for and use a business credit card or use cash. There is no right or wrong answer; it's really a matter of what is best for you and your business. However, you should always make informed decisions when it comes to your business. That includes understanding the benefits of paying with a business credit card versus paying with cash.
Advantages of Paying with Cash
When you choose to run your small business on a cash basis, there are some advantages. For instance, you can't overspend your budget because when the money is gone, it's gone. This is a good method for those that struggle with self discipline. Operating with cash gives the incentive to put away a portion of earnings for emergencies as well.
Disadvantages of Paying with Cash
One of the advantages of operating on a cash only basis is also a disadvantage. If you don't have the cash available because of over spending or a slow month, it can be very difficult if an emergent need comes up. Another disadvantage of using cash only is that you must track your spending very carefully. That often means saving every receipt and recording what the expense it is related to. It may be more difficult to make certain purchases when cash is your only payment option, particularly when you want to purchase supplies on the Internet.
Advantages of Paying with a Business Credit Card
Applying for and using a business credit card will help you to build business credit and credibility. Using a credit card to make business purchases sends a message to your clients and creditors that you take your business seriously. Using a business credit card will help to keep your cash available for other things. Using a business credit card is convenient for making the everyday purchases, such as dining out for business purposes, gas for business driving, office supplies and any business travel expenses. Using a business credit card is an excellent way to track your spending and to organize the spending into business categories. This makes bookkeeping and taxes much easier for the small business owner. A business credit card also assists in keeping personal spending separate from business spending. Most business credit cards also come with a rewards program, a nice incentive.
Disadvantages of Paying with a Business Credit Card
It's vital to read any fine print when it comes to applying for a business credit card. If you find the wrong type of business credit card, you could end up paying dearly in finance charges, monthly fees and over limit or late charges. Another disadvantage to business credit cards is getting hooked into offers for cash advances. It's important to be self disciplined and still adhere to a budget for your business to succeed.
When you have done the proper research and made the best decision for you and your small business, it's important to adhere to your spending plan. If you decide to go with the business credit card, be sure to thoroughly review your monthly statement.