Small Business Credit Card Strategies

Today I wanted to share an excerpt from my book Credit Card Advantage.  It's easily the least-popular of my books but it holds a lot of real value for those of you who own small businesses.

The section I'm sharing today is the strategy section, just a couple of pages out of the whole book. 

These strategies and the contents of the book could have a huge impact on your small business. Get your copy of Credit Card Advantage here: http://gumroad.com/l/jgfa

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Principal strategies for using 

charge cards in business

Excerpt from Credit Card Advantage (c) 2014 David C. Barnett

Maximize owner’s lifestyle perks

This is the easiest strategy to see and it was probably suggested to you by your banker at some point.  If you put business expenses on a credit card and collect points that you use for vacation travel you’re doing this now.  Let me ask you some questions though: do you know what your return on spend is?  What are points worth to you? What is the potential opportunity for you if you were to strategically maximize your card usage?  We will explore this in further sections.

Most nations require their citizens to report the value of any point usage when they redeem for something of value on their personal tax return.  Most business owners, however, forget to do this.

You may want to use this strategy if your company:

·         Is very mature with little growth opportunity
·         You are getting older and want to accumulate points for travel in retirement

Reduce expenses

If you want to increase company profits you can use credit card points to reduce expenses.  I’ve heard of companies using points to fly sales staff or pay for hotel rooms.  I know of companies using points to get gift cards for employee bonuses.  This is certainly one strategy which won’t get you into trouble with the taxman since it will increase your net-income and increase your tax burden.  One factor that will enhance any of your goals is that using credit cards instead of cheques will reduce cheque printing costs, bank fees, postage expense and stationery spending.  Not to mention the cost of handling all that paper.

You may want to use this strategy if your company:

·         Is in a highly competitive market where there is constant pressure on prices
·         You don’t see the opportunity for much growth
·         You are trying to service and pay down long-term debts in the business

Expand operating capital

If you can delay paying suppliers and hang on to your cash longer, you can create a one-time change in operating capital.  I once ran a company with long payables and short receivables.  I actually had none of my own money tied up in operating capital.  Charge card products are a strategic way to extend days payable outstanding.  DPO is the average length of time you hold onto your suppliers money before you give it to them.

You can also expand operating capital by accepting credit cards.  This shortens the days sales outstanding or DSO.

I’m going to teach you all about how to calculate the cost of money on a daily basis so you can see if certain strategies make sense for you or not.

You may want to use this strategy if your company:

·         Is growing quickly and is always looking for money to finance operations
·         Has the opportunity to grow but customers demand long payment terms
·         You have all your net-worth tied up in the business and you’re looking for ways to extract capital in order to diversify your own investment portfolio.

Grow your business

“Enter to win an iPad with every purchase” screams the banner over the store doorway.  If you could constantly offer promotions like this would it help your business?  What about a free vacation for every distributor who shows a 20% growth in orders this year?  Do you think these companies pay for these incentives?  Many of these incentives and giveaways are purchased with points at no cost to the company and help to boost sales.  Would this work for you?

You may want to use this strategy if your company:

·         Has an opportunity for growth
·         Is in a highly competitive industry or market
·         You are trying to prepare a business for sale and want to make it look as good as possible for potential buyers
·         You’re just starting out

Enhance the company’s public image

If you wouldn’t benefit from offering incentive prizes to customers, how about offering great raffle prizes to community groups? Imagine the local boys & girls club selling raffle tickets on a fancy $1000 home espresso machine… sponsored by your company.  You can help groups in your community turn desirable items that you got for free into hard cash for their group all while enhancing public opinion about your firm.

You may want to use this strategy if your company:

·         Is in a highly competitive industry or market
·         You are involved in activities that may create ill-will in the community such as clear cutting or you create a lot of air pollution
·         You suspect a larger and stronger competitor may be on its way to your market

Read Credit Card Advantage for More great insights into taking advantage of credit cards in your small business.  [CLICK]