RateCity investigates the benefits of business credit cards with special features included.
May 18, 2010
Business credit cards work in much the same way as a personal card, though you will need to provide an Australian Business Number (ABN) as part of your application.
As with consumer cards, the interest rates applied to any outstanding card balance can be prohibitive, in some cases topping 20 percent. So to get the most from a business credit card, it's worth aiming to pay the balance off in full each month - cash flow permitting.
Here are some features available by many business credit cards to help your business expenses with cash management and streamline reporting.
One of the key pluses of using a separate business card is the clear distinction made between personal and business expenses. Many business cards provide itemised month-end statements, which is a real plus for management accounting.
It reduces bookkeeping time and replaces the traditional trail of cheque butts and cash vouchers with a single consolidated statement. This is particularly helpful in larger organisations where key staff may be issued with subsidiary credit cards linked to a single account.
Benefits for tax reporting
There are also pluses at tax time. Many business cards provide GST itemisation on monthly statements for easy calculation of input tax credits. Indeed, in some cases the Australian Tax Office will accept credit card statement entries as proof of a transaction. Conditions do apply, so it's worth speaking to your accountant to see how this could benefit your enterprise.
Interest-free days boost cash flow
Cash flow management is vital for any business, and it's an area where a dedicated credit card can be useful. Debtors can take in excess of 30 days to settle accounts, while on the flipside suppliers typically offer valuable discounts for early payment.
The interest-free days offered by a credit card can help bridge this gap, letting a business take advantage of a supplier's best terms without having to rely on expensive overdraft facilities. Many cards offer between 40 and 50 interest-free days but others, like Bankwest's Large Rewards Business MasterCard, provides 55 interest-free days.
Like personal cards, a business credit card can provide additional features including complementary travel or purchase insurance. These can be worthwhile though look for extras that are relevant to your particular business as the add-ons can come at the expense of a higher rate or a more costly annual fee.
Before settling on a particular card it's worth checking with key suppliers to determine which cards, if any, will be hit with an additional surcharge. It's a small cost that can add up.