In a perfect world, you could count on a steady stream of business income that makes it easy to stay ahead of your expenses. But the revenue flowing in doesn’t always align with the money going out.
Coming out of the pandemic, the challenge of managing cash flow has weighed on the minds of business owners. In one poll, 26% of small-business owners cited revenue as their top concern. This was closely followed by expense-related issues like inflation and supply chain problems. These concerns are understandable. Together, they’re a recipe for cash flow challenges.
A good strategy and the right tools can help you stabilize your cash flow. Your credit card can be especially handy.
A Smart Tool for Cash Flow Management
Credit cards are more than a simple way to pay. They can also be a valuable way to manage cash flow by offering a reliable source of low-cost working capital financing to help you manage short-term expenses when you’re low on cash.
Of course, you don’t want to rack up charges you won’t be able to repay. But if you need to delay expenditures for a brief time – and can afford to pay off your card in full each month – your card can provide some extra breathing room.
A small-business credit card combines the benefits of other payment options – access to credit, streamlined expense management, valuable incentives – into one convenient tool.
Here’s how it can support your cash flow.
1. Credit When You Need It
For businesses that invoice their customers, late payments are a major cause of cash flow issues. If you need to pay for inventory or other resources, you don’t want to put off these purchases while awaiting payments. With a business credit card, you don’t have to.
For short-term borrowing, credit cards can be a money-saving alternative to other financing options, since they typically provide an interest-free grace period of up to 21 days to pay the bill before interest begins to accrue. So, if you charge a purchase on day one of your credit card’s statement period, you’d have a full 51 days to pay it back with no interest.
With extra time to pay and the freedom to make purchases before you receive more funds, you have greater control over how and when you spend money. You can ensure your suppliers and vendors are paid while having more cash available to cover other bills or invest in your business.
2. Card Management & Reporting
Predicting expenses isn’t always easy, especially for newer businesses and seasonal industries. Your credit card can help you get a better picture of your spending. Here’s how:
- Employee Cards - If you provide a company card for authorized employees, you and your team can simplify payments for expenses like travel, entertaining clients and supplies. With online account access, you can monitor all cardholder activity and get a sense of company spending trends.
- Easier Oversight - The more purchases you make with your card, the easier it is to evaluate your overall spending. By going online to view your balance and transactions, you can figure out the best time to make purchases, so you can get the most benefit from your credit card’s interest-free period.
- Informed Spending Decisions - Some online card management platforms offer analytics and reporting tools. You may also be able to export spending data to support cash flow forecasting.
3. Cash Back or Rewards
Here’s another great perk: You can earn business credit card rewards or cash that you can put back into your business. This could be a helpful way to reduce your credit card bill or defray the cost of common expenses.
Depending on the card, you may be able to earn extra rewards for business-related categories like office supplies, phone and internet services and travel. If you currently pay for recurring expenses (like utility bills) by check or direct debit from your checking account, switch these payments over to your credit card to maximize your rewards.
Use Your Card Wisely
To get the most benefit for your business and cash flow:
- Don’t max out your card. High credit utilization can harm your credit.
- Be mindful of how much you borrow. Business owners are usually personally liable for their business’s credit card debt. If you’re concerned about your ability to pay off what you charge, look for ways to postpone or forgo purchases.
- Watch your receivables. Knowing when to expect customer payments helps you find the best time to pay your credit card bill.
- Pay your full card balance each month. Also, don’t wait until the last day of your grace period to pay your bill.
Remember that credit cards are meant for short- or medium-term expenses. If you’re planning a significant investment to help grow your business, such as buying equipment or adding a large amount of inventory, consider a term loan or line of credit.
Control Your Cash Flow
One of Amegy Bank’s business credit cards could become your go-to payment tool by giving you a convenient way to make purchases, plus 24/7 online tools and exceptional perks like cash back or rewards.