Business credit cards are often essential to provide capital for many companies. Properly using a credit card to build your business without creating too much debt, however, is a difficult task. Below are guidelines for how WAHMs can use credit cards wisely.
Set a Limit
Every credit card has a maximum amount that can be charged on it, but that limit is set by the credit company and not yourself as a business owner (and may be much higher than your business' needs). Review your company's financial projections to see how much money your business can spend without obtaining an overwhelming amount of debt. Every company carries debt, but how much varies on anticipated earnings. Do not spend more than you can pay off in a reasonable time.
Keeping your business credit cards separate from your personal cards and other finances is the best way to prevent unauthorized or excessive use. Do not carry the card around with you on a daily basis, or it might be too tempting to use it for non-essentials or non-business related expenses. You might want to consider hiding it in a closet or drawer so that when you go to retrieve it, you will have time to consider whether the purchase is necessary.
The need to not mingle also pertains to using the card only for business expenses. Maintaining a separate credit account and register for your business credit card will make taxes, reports and general bookkeeping much easier. Also, separating your business expenses from your personal expenses will prevent the mingling of funds which could be detrimental to both.
Keep an Eye Out
Keep close watch on how you use the credit card. Do not set up automatic payments from your business checking account to the credit card each month so that you will be able to check the activity on the card, and ensure there has been no fraud on the account. Many banks and credit companies provide notifications when a card has been used; these notifications are another way for you to keep track of the card and prevent fraud.
Identify Acceptable Expenses
Prior to using your business credit card for the very first time, make a list of those expenses that are acceptable and those that are not. Clearly identifying what can be put on the card will prevent its overuse. For example, purchasing office supplies might be identified as an acceptable expense, but lunches with clients may not.
A new business owner must acknowledge the fact that there is no guarantee that any business will be successful immediately or anytime in the future. Be realistic about how much income you can expect to earn in the first six months of operation and how much of that income you will be able to put towards credit card payments. Do not plan on paying the minimum each month or the interest rate may soon make the bill unmanageable.