Old man puzzling over chess boardNo matter what sized business you are, cash flow is a major consideration. In fact, I’d say that cash flow is the King Kong issue of any business.

Whether you are just starting out, or you’ve been running a business for several years, you’ll find that ensuring ongoing cash flow is hard and requires vigilance.

Having access and carefully managing a line of credit can be the answer to short term problems (and there are always problems!).

There are many options, but the rewards available on credit card purchases make it an attractive way to manage expenses. You just need to be careful not to get into debt. Do your due diligence as an employer and know what to do for your business.

Things You Must Consider

1. It is easy to get into debt on a credit card.

Sure, a credit card means that your company will have additional funds available when you need them. But it also makes it tempting to take on debt through spending.

Debt can be a good thing if you leverage it for a return on investment. So, for example, if you buy advertising on your credit card for $500 and it returns a measurable result of $1000, then the debt was worthwhile.

Pay off the card before it incurs interest and repeat.

But if you are buying nicer throw pillows for your office, ask yourself whether that is worth paying interest on or tying up your credit cushion (no pun intended). Everyone likes a nice office, and maybe those throw pillows will make you money somehow. But if they do not have a measurable ROI, then wait to buy them until you have surplus cash.

The key is, don’t use a credit card to “consume” goods and services. Use it to keep your business in growth. If you can keep to that discipline, a credit card is an excellent tool.

2. Consider the cost of the card versus the benefit.

Here’s a simple example:

My husband immigrated to the United States when we got married. When he got here, he had no credit. In order to establish credit, we wanted to get a credit card for him. After that, we got an offer for a 1% cash back rewards card.

The card had an annual fee of $99. In order to break even on the fee after the 1% cash back was applied, we would have to use the card over the year for a total of $9,900 in purchases, or $825 per month.

And since he had no established credit, they only offered a line of $500 to start.

Doing the math, we would be losing money on the card unless we maxed it out and paid it off twice per month.

Needless to say, the card was not worthwhile. So we chose a card without an annual fee that was also without rewards, until his credit could get established.

As you can see, evaluating a credit card goes much deeper than just comparing interest rates and policies. You need to know your business, your spending habits, and what type of rewards program would be the best fit for you.


  • Annual Fees
  • Grace Periods
  • Late Payments
  • Interest Rates
  • Reward Types and Restrictions
  • Insurance and Charge-back Policies

3. Whether you should give your employees access.

There are two ways to handle expenses with your employees. Way one is to give them permissions to use the company card. Way two is to make the advance expenses and turn in an expense report.

Personally, I do both, depending on the employee. For purchasers or key managers, having a company card makes more sense. I can’t ask them to order $1000 worth of office supplies on their own cards and expense it.

But for employees who have expenses related to sales or travel, a separate card is a good idea. It makes expense accounting must easier. But, just so you know, the employee gets to keep perks such as mileage or points.

To schedule a consultation about a business law issue, contact our attorneys at (800) 449-8992 or contact us online.

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