How to Manage Cash Flow With a Business Credit Card

Learn how you can take advantage of business credit cards to keep your company financially stable at all times.

Updated: November 30, 2023
Matt Crabtree

Written By

Matt Crabtree

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Regardless of what industry you're in, it goes without saying that having a positive cash flow statement is something you need to have in the bag each month in order to maintain any kind of long-term financial health for your business.

Though we tend to focus on aiding smaller businesses at Compare Banks, this is an issue that can affect literally any size of business, as without proper cash flow management, even some of the most profitable companies out there stand a high chance of running into some pretty serious financial problems.

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Fortunately, though, one of the best ways to manage business cash flow comes in the form of a business credit card — which, as you can see from the title, is the main focus of this article.

So, continue reading the rest of this article to find out what exactly these kinds of cards are and how they actually work in terms of keeping your business ticking along each month.

Aside from this, we'll also be taking a look at some of the main things you'd want to consider for using one effectively, so we'll cover quite a fair bit of ground here all in all.

What Is A Business Credit Card?

Put simply, a business credit card is a very widely used financial tool that, as the name implies, is designed specifically for businesses rather than for general personal use, like the other types of credit or debit cards you might have.

Generally speaking, they actually function pretty much exactly like your average credit card for personal use, but all the features they have are much more tailored to the kinds of needs you'd have when running a business.

For example, you'll find with a lot of personal credit cards that they come with everyday rewards schemes that would benefit you in areas like grocery shopping discounts.

On the other hand, all of the rewards you'd find with a business credit card are more related to company activity, whether that's discounts on travelling fees for any overseas meetings or business rewards for client entertainment.

So, aside from simply allowing business owners to make purchases and manage their expenses like your average card can, they come with a range of benefits that you wouldn't find with personal credit cards — not least the ability to effectively manage your company's cash flow and separate your personal finances from your business-related expenses.

Let's dive deeper into some of the specifics of what owning a business credit card actually entails:

Cash Flow Management

As hinted at, one of the primary benefits you can expect when you own one of these cards is the ability they have to manage cash flow. Just as a reminder, cash flow basically means money moving in and out of a business, so this kind of thing is obviously pretty crucial when it comes to things like covering business expenses and generally just planning for the future.

So, when you're using a business credit card, you're effectively able to control when and how much cash is actually leaving your company at any given moment.

Cash Flow Forecast

Having said all of this, you're going to need to sketch out a cash flow forecast before anything if you want to effectively manage your business's cash flow.

Put simply, this is essentially a projection (obviously, you can't always make guarantees, so a lot of the time, these are just rough drafts) of all of your company's cash inflows and outflows over a specific period.

Fortunately, and we'll come onto this in a bit more detail later on, business credit cards can be a massive help in terms of matching all of your expenses with the amount of revenue you're raking in each month, so this naturally entails you having a far more accurate cash flow forecast.

Interest-Free Period

Similar to how balance transfer credit cards work, the majority of business credit cards offer some form of interest-free period for a specific length of time (this usually ranges from around 20 to 56 days), meaning you're able to make all the purchases you like during this period without incurring any kind of interest charges whatsoever.

Now, although you're not getting quite the same length of 0% APR periods as balance transfer cards — since their interest-free periods can last all the way up to 12 months — this is obviously still an incredibly valuable feature for any business that's managing their cash flow since it gives you an opportunity to delay the outflow of cash for a brief period.

Borrow Money When Needed

Of course, this is something that you'd expect with all kinds of credit cards, but it's worth mentioning too that one of the main reasons business owners opt for a company credit card is so that they can have the flexibility to lend money whenever they need to.

Naturally, this can be a massive help if you end up facing an, albeit temporary, cash flow shortfall, given that you're able to use this credit card so you can cover general yet essential business expenses and maintain an overall healthy cash flow.

Avoid Paying Interest on Business Expenses

Another major way business credit cards can help manage your cash flow is the way in which you're now able to spend money on various business-related expenses without ever having to use any of your personal funds.

As such, you won't ever have to pay interest out of your own pocket for these expenses — things like employee wages or stock — which is obviously going to help you maintain some level of financial stability in your personal life outside of work.

Business Loan Alternative

For any of you small business owners who might not be able to qualify for traditional business loans yet — whether that's because you don't have a high enough annual turnover or you simply don't have a good enough credit score yet — business credit cards can be a perfect way to source some funding for your business.

We'll come onto this in a bit more detail further on, but ultimately, having a business credit card allows your company to access a revolving credit line that you can use as and when needed, so it's definitely one of the most flexible financing options out there for small businesses in particular.

Spend Money Wisely

Furthermore, and you'd generally find this very hard to do if your business and personal expenses were grouped up into the same bank account, you're able to track and categorise all of your expenses far more effectively when you're using a business credit card.

The vast majority of business credit cards out there provide you with detailed, itemised statements at the end of the month that break down all of your spending, so it's much easier to identify any areas where you might be able to cut costs or even just reallocate resources.

In addition to this, depending on which business credit card provider you choose, you should be able to use the mobile banking app, too, which also gives you a chance to categorise certain expenses — for instance, a section for wages, another for utility bills, another for taxes, and so on.

Protect Your Personal Credit Score

Like we talked about earlier, using business credit cards for any of your business transactions (rather than your everyday personal credit card) ultimately gives you a chance to separate your personal and business finances from one another.

Now, while these obviously have quite a few benefits in terms of generally staying organised and not having to dig deep through your credit card statements each month when filing your tax returns, there are other ways this can be pretty advantageous, too — the way it protects your personal credit score in case your business happens to be experiencing any cash flow problems, for instance.

So, if your company finds itself in a negative cash flow situation — you've had a slightly quiet month in terms of sales or a long-term client has decided to part ways with you, for example — it's not going to have any kind of impact on your personal credit, meaning you don't have to worry about all the general issues that come with a bad credit rating.

Using a Business Credit Card for Cash Flow Management

Now that you've got a clearer understanding of what these kinds of cards are and how they work let's explore how you can use them effectively for managing your cash flow.

Create a Cash Flow Strategy

Like we mentioned earlier, it's essential to have some kind of cash flow strategy in place before you even think about applying for a business credit card — whether that's understanding things like your company's cash flow cycles, knowing when your peak and low cash flow periods are, or just generally setting financial goals.

Match Expenses to Revenue

Always try to use your business credit card so that you can match all of your expenses to the amount of revenue you rake in.

As an example, if you know that you've got a fairly significant client payment coming in next month, but you still need to purchase all your supplies now, this would be a generally solid opportunity to use your card to help you bridge the gap without affecting your cash flow negatively.

Obviously, this is the kind of benefit that you'd only ever be able to have with the added source of finance that comes with a credit card, so this is a major benefit over a debit card, for instance.

Just make sure you know for a fact that the aforementioned client payment is nailed on.

Pay Balances in Full

Whenever you can, try to pay the full balance of your business credit card off in one go, preferably during the interest-free period.

Ultimately, this'll generally ensure that you don't end up incurring any unnecessary interest charges that could otherwise be easily avoided.

Plan for Large Expenses

Similar to what we were saying earlier about matching all of your business expenses to the revenue that you generate if you know that you're going to have quite significant expenses coming up.

Equipment purchases or even renovations, for instance — it's worth making use of your business credit card's credit limit here; you just need to do so strategically and be sure of how these charges are going to affect your overall cash flow and what your plan is to ultimately pay them off.

Emergency Cash Flow Support

Of course, it's also worth mentioning how useful these cards can be if you ever find yourself experiencing any kind of cash flow problems — just keep all the various interest charges in mind and know that you need to pay down the balance as quickly as possible.

Key Considerations for Business Credit Card Use

Still, although we've covered all the benefits of using business credit cards as part of your day-to-day operations, there are definitely still a few considerations to keep in mind first.

Interest Rates

Generally speaking, the interest rates on a business credit card affect their overall costs, so while they generally come at fairly competitive rates, keep in mind that they still tend to have higher interest rates compared to your average credit card for personal use.

Credit Utilisation

Just to provide you with a bit of clarity, your credit utilisation ratio is essentially the percentage of the credit that's available to you that you're currently using. This can actually have a massive impact on your credit score, so it's always advisable to keep your overall credit utilisation below 30% at the very least so you're ultimately able to maintain a healthy credit profile.

Annual Fees

Not every card has this, but keep in mind that most business credit cards tend to come with annual fees, so just consider whether all of the benefits of the card — rewards, perks, and general cash flow management features — are going to justify this overall cost (especially if you're a small business with already limited resources).

Financial Planning

To wrap things up, just try to bear in mind that while business credit cards are undoubtedly one of the best tools out there for managing your cash flow, they should still be just one part of a much broader financial planning strategy — including things like budgeting, forecasting, and general expense management.

Related Guides:

How to Manage Cash Flow With a Business Credit Card: FAQs

Is the Capital on Tap Business Credit Card Worth It?

Can I Use a Business Credit Card for Personal Expenses?

How Does a Business Credit Card Impact Business Loans?

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