Today's Technology for Tomorrow's Firm.
Issue link: https://cpapracticeadvisor.epubxp.com/i/200952
FEATURE important for two main reasons. First, if you're going to get a credit card for business, it's only logical to gravitate toward business-branded products. Second, 31 percent of small businesses use a credit card or line of credit as their primary fnancing source, according to the Federal Reserve Bank of New York. In other words, a large segment of the small business community carries debt on a business credit card, unaware of the fact that card issuers are still able to jack up interest rates on their revolving balances whenever the mood strikes them. You don't need to be an accountant to recognize the importance of debt stability, but since most of you are likely CPAs, you're acutely aware of the impossibility of allocating funds and effectively managing risk without a clear idea of how much your monthly debt payments will be in the future. Luckily, much like there is no liability disadvantage to using a personal credit card for business funding, you won't be forced to sufer any tradeofs in terms of fnancial accounting functionality by doing so either. W hether you leverage a balance transfer ofer to shif existing debt to a personal card or you open a card ofering 0 percent on new purchases to handle future fnancing needs, all that you'll have to account for in the name of sound debt management will be your interest rate, monthly payment, and amount owed. That would be the case even if you continued funding your operations with a business credit card, only you'll have more security. Credit Cards as Accounting Tools Te above, however, doesn't mean you should disregard business credit cards altogether, as they far outperform their general-consumer counterparts when it comes to everyday expense management. Not only do business credit cards tend to ofer heightened rewards in key purchase categories such as office supplies and telecommunications services, but they also provide unique expense tracking features. More specifically, they enable you to give employees their own cards with customized spending limits and make company accounting far easier by providing quarterly and year-end expense reports segmented by purchase category, thereby supporting budgeting eforts and enabling quicker tax preparation. Bottom Line: The Perks of a Two-Card System Ultimately, it should be clear that leveraging a two-card system (i.e. a 0 percent general-consumer card for funding and a business rewards card for everyday expense management) is the most strategic way to approach small business spending. Not only does it enable you to garner debt stability and prevent overspending, but it also gives you the opportunity to amass a far more atractive collection of account terms than would be atainable with any single credit card. So, whether you're looking for a way to improve your own practice's proft margins or a client tip that will make your life easier come tax preparation time, consider the potential benefts of a credit card strategy adjustment. Like accounting, credit cards aren't a sexy topic, but they can certainly prove valuable when used right. Odysseas Papadimitriou is is the CEO of the personal finance websites CardHub.com and WalletHub.com, and was formerly a senior director at Capital One. For more information, please visit CPAPracticeAdvisor.com/10028044 November 2013 • www.CPAPracticeAdvisor.com 31