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5 Things To Consider Before Using Credit Cards To Finance Your Business

5 Things To Consider Before Using Credit Cards To Finance Your Business

Credit cards are convenient and can be valuable for a business which needs a temporary infusion of cash. The Federal Reserve observes that in 2009, 83% of small businesses used credit cards, with 41% using personal cards. Despite this massive use of credit cards, small business credit cards only account for a small portion of small business debt, as most business owners have the sense to pay back their credit card every month.

However, there is more to using a credit card for your business beyond “pay the credit card back at the end of the month.” Here are 5 tips which any business should know about credit cards before you just decide to use your MasterCard to buy office supplies.

1. Know the difference between personal and business credit cards

There is nothing wrong with using a personal credit card to handle business expenses, but you may want to get a business credit card instead.

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Business credit cards have some key advantages if you are a small but expanding business. You can have copies of the same business credit card, which will let you and your subordinates make purchases on their own. Paying off business credit cards also improves your business credit, which will make it easier to get loans on better terms. On the other hand, business credit cards lack the consumer protections of personal credit cards.

If you want a more detailed list of the differences between a business and personal credit card, NerdWallet has an excellent article on the subject and which one may be right for you. At minimum, do your research on which one your business should go with.

2. Look for the best rewards plan

Don’t just go with the first credit card plan that looks alright. Many business and personal credit cards offer unique rewards which will be well-suited for your particular business. For example, if you or your workers have to travel a lot, then a card which offers airline or hotel perks would be ideal. If you drive a lot, then gas rewards would be great.

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Also compare monthly fees, interest rates, and what the payment plans are. If you are worried about credit card fraud, you should also see what protection plans are offered.

3. Never mix up personal and business expenses

Even if you decide to stick with a personal credit card, you should never use the same credit card to buy office supplies and groceries.

The big reason is for bookkeeping purposes. When it is time to pay back your credit card at the end of the month, it can be tricky to figure out what goes under business expenses and what does not (if you mix them up on the same card). By keeping separate cards, you can know exactly how much your business spent without needing to go over every single item.

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Furthermore, if you go with a business credit card, using the business credit card for personal finance shows a lack of seriousness about your business. Keep business to business, and your personal expenses personal.

4. Be careful with who has your business credit card

As noted above, one of the advantages of a business credit card is that you can make multiple copies and hand them to your employees. If you have an employee who makes large purchases, giving him a company credit card means that he can pay for business expenses without having to front his own money and wait for a reimbursement.

Obviously, you should not just hand those credit cards out. Business credit cards should only go to employees who regularly make big or important purchases for the company, or for those who are away from the office.

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It’s important to trust and verify. If an employee uses his business credit card for personal expenses, your business will be held liable. While you can obviously fire him, abusing a company credit card is not a criminal offense.

5. Use your credit card as little as possible

Credit cards can be useful as an emergency cash resource, and can help track your expenses. However, there are risks to becoming dependent on them.

A small business will always have funding options. Talk to investors, ask your friends and family for funds, and tap into personal accounts. Even a bank loan’s interest rates will normally be lower compared to a business credit card.

Conclusion

Credit cards have value for some of the reasons noted above. Plus, spending a certain amount and paying it back every month can improve your business credit rating. Remember, if you use it too heavily, or if your business suddenly hits a downturn, then you can find yourself facing mounting high-interest debt, which will destroy your business. Try to avoid using it for big purchases unless you have no other option.

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Last Updated on March 29, 2021

5 Types of Horrible Bosses and How to Beat Them All

5 Types of Horrible Bosses and How to Beat Them All

When I left university I took a job immediately, I had been lucky as I had spent a year earning almost nothing as an intern so I was offered a role. On my first day I found that I had not been allocated a desk, there was no one to greet me so I was left for some hours ignored. I happened to snipe about this to another employee at the coffee machine two things happened. The first was that the person I had complained to was my new manager’s wife, and the second was, in his own words, ‘that he would come down on me like a ton of bricks if I crossed him…’

What a great start to a job! I had moved to a new city, and had been at work for less than a morning when I had my first run in with the first style of bad manager. I didn’t stay long enough to find out what Mr Agressive would do next. Bad managers are a major issue. Research from Approved Index shows that more than four in ten employees (42%) state that they have previously quit a job because of a bad manager.

The Dream Type Of Manager

My best manager was a total opposite. A man who had been the head of the UK tax system and was working his retirement running a company I was a very junior and green employee for. I made a stupid mistake, one which cost a lot of time and money and I felt I was going to be sacked without doubt.

I was nervous, beating myself up about what I had done, what would happen. At the end of the day I was called to his office, he had made me wait and I had spent that day talking to other employees, trying to understand where I had gone wrong. It had been a simple mistyped line of code which sent a massive print job out totally wrong. I learn how I should have done it and I fretted.

My boss asked me to step into his office, he asked me to sit down. “Do you know what you did?” I babbled, yes, I had been stupid, I had not double-checked or asked for advice when I was doing something I had not really understood. It was totally my fault. He paused. “Will you do that again?” Of course I told him I would not, I would always double check, ask for help and not try to be so clever when I was not!

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“Okay…”

That was it. I paused and asked, should I clear my desk. He smiled. “You have learnt a valuable lesson, I can be sure that you will never make a mistake like that again. Why would I want to get rid of an employee who knows that?”

I stayed with that company for many years, the way I was treated was a real object lesson in good management. Sadly, far too many poor managers exist out there.

The Complete Catalogue of Bad Managers

The Bully

My first boss fitted into the classic bully class. This is so often the ‘old school’ management by power style. I encountered this style again in the retail sector where one manager felt the only way to get the best from staff was to bawl and yell.

However, like so many bullies you will often find that this can be someone who either knows no better or is under stress and they are themselves running scared of the situation they have found themselves in.

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The Invisible Boss

This can either present itself as management from afar (usually the golf course or ‘important meetings) or just a boss who is too busy being important to deal with their staff.

It can feel refreshing as you will often have almost total freedom with your manager taking little or no interest in your activities, however you will soon find that you also lack the support that a good manager will provide. Without direction you may feel you are doing well just to find that you are not delivering against expectations you were not told about and suddenly it is all your fault.

The Micro Manager

The frustration of having a manager who feels the need to be involved in everything you do. The polar opposite to the Invisible Boss you will feel that there is no trust in your work as they will want to meddle in everything you do.

Dealing with the micro-manager can be difficult. Often their management style comes from their own insecurity. You can try confronting them, tell them that you can do your job however in many cases this will not succeed and can in fact make things worse.

The Over Promoted Boss

The Over promoted boss categorises someone who has no idea. They have found themselves in a management position through service, family or some corporate mystery. They are people who are not only highly unqualified to be managers they will generally be unable to do even your job.

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You can find yourself persistently frustrated by the situation you are in, however it can seem impossible to get out without handing over your resignation.

The Credit Stealer

The credit stealer is the boss who will never publically acknowledge the work you do. You will put in the extra hours working on a project and you know that, in the ‘big meeting’ it will be your credit stealing boss who will take all of the credit!

Again it is demoralising, you see all of the credit for your labour being stolen and this can often lead to good employees looking for new careers.

3 Essential Ways to Work (Cope) with Bad Managers

Whatever type of bad boss you have there are certain things that you can do to ensure that you get the recognition and protection you require to not only remain sane but to also build your career.

1. Keep evidence

Whether it is incidents with the bully or examples of projects you have completed with the credit stealer you will always be well served to keep notes and supporting evidence for projects you are working on.

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Buy your own notebook and ensure that you are always making notes, it becomes a habit and a very useful one as you have a constant reminder as well as somewhere to explore ideas.

Importantly, if you do have to go to HR or stand-up for yourself you will have clear records! Also, don’t always trust that corporate servers or emails will always be available or not tampered with. Keep your own content.

2. Hold regular meetings

Ensure that you make time for regular meetings with your boss. This is especially useful for the over-promoted or the invisible boss to allow you to ‘manage upwards’. Take charge where you can to set your objectives and use these meetings to set clear objectives and document the status of your work.

3. Stand your ground, but be ready to jump…

Remember that you don’t have to put up with poor management. If you have issues you should face them with your boss, maybe they do not know that they are coming across in a bad way.

However, be ready to recognise if the situation is not going to change. If that is the case, keep your head down and get working on polishing your CV! If it isn’t working, there will be something better out there for you!

Good luck!

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