It’s important to periodically take stock of how fiscally responsible your company is. Although sticking to a cash system is a valid money management technique, the prudent use of credit can help prepare your company for future opportunities.
Reviewing Company Credit for Compliance
Even the most relaxed industries have to stay in compliance with some type of rules or regulations. Perhaps the most common of these is the rule against mixing business and personal accounts. Often, reviewing your company credit usage can provide an early warning sign that you’re on the road to trouble.
Mixing up business and personal accounts is easier than most people think. When you’re in a rush and have a line of people staring at you, it’s possible to pull out the wrong credit card without realizing it. In fact, if you do your personal and business banking at the same financial institution, the only difference between your cards may be the last four digits of the account number.
Of course, if you stay on top your credit statements, you’ll realize when you accidentally use business accounts for personal purchases, or vice versa.
Reviewing Company Credit for Investment Potential
As someone who uses company credit in a wise manner, you may only use the business credit cards for emergencies, letting them sit idle the rest of the time. This can be a good way to avoid accruing credit debt for your company, but it’s also the best way to cap your company’s credit rating. Credit bureaus look favorably on movement in your credit accounts, so using your company accounts can actually improve the business’s credit score.
Not using your credit accounts can also cost you potential investment earnings. You see, every dollar you spend on business expenses is a dollar that isn’t working to earn you additional money. When your company has a history of strong cash flows, you can consider using your credit accounts to pay the normal monthly expenses while your excess savings resides in the investment account of your choosing.
Reviewing Company Credit for Tax Purposes
It’s never too early or too late to start thinking about your business taxes. When you review your use of company credit over the past year, you can get an overview of how your business spends the bulk of its money. Many of your purchases may be tax deductible as business operating expenses. Whether you own or manage the company, saving money at tax time is always a positive thing.