Every company needs resources to meet its short-term obligations, like weekly and monthly payments to creditors and vendors. This is commonly referred to as Working Capital. While it's always nice to have the cash to make those payments, there are advantages to putting them on a charge card aka a business credit card.

As a simple financial product, charge cards allow you to purchase something before spending any cash. By delaying payment by days and weeks, you're allowing your business to grow a little more before spending your money.

Extending payments by 15 - 20 days may not appear helpful if you're cash-rich. However, your peers who used to struggle to make payroll can tell you that stretching every dollar by a few days can have a meaningful impact on your finances. Review your business, and analyze how much revenue your business receives in a 15 - 20 day period to see how much better of a situation your business could be in to make that purchase. Remember, there's no cost to extending your cash if you pay off the balance at the due date. This is free Working Capital for your business – with added financial efficiencies. 

FRAUD PREVENTION

Charge cards can also protect your cash from fraud or other surprises that come up. Using a financial product that doesn't directly draw on the money in your bank account can prevent unfortunate and unfair loss of cash. For example, fraud in your bank account can deplete your money and require a full-time effort to reverse. In the event of fraud on your charge card, you can freeze or even close the account while you're working with your card company to reverse the charges – without any disruption to the cash.

The best way to implement fraud prevention is to create specific credit cards for particular vendors. For example, if you're doing a lot of digital ad spending on Google and LinkedIn, you could create one card dedicated to Google and another card for LinkedIn. This protects disruption to your entire financial processes in the event of fraud. If you have fraud on the card paying for Google, the LinkedIn card wouldn't be impacted or need to be changed. Having dedicated cards can save you time and frustration. 

Thanks to virtual cards, creating specific and/or new cards is much easier. Still part of your charge card program, a virtual card is simply a card number that isn't associated with any physical card. By not having a physical card, you avoid the hassle of tracking all of your physical cards (and potentially lost cards) but still have a card number to make payments.

FINANCIAL AUTOMATION

Charge cards save time. They can put some of your financial accounting and reporting on autopilot. By using virtual cards for specific payments, you can tag all transactions on that card to specific line items in your accounting systems. It takes some setup, but once it's done, it'll save you time spent reconciling payments each month. Or, even better, keep you the cost of hiring a bookkeeper to do it. In addition, automating tedious reporting allows you to focus on more higher-value items. 

Cards can help you manage your budgets and team. But, again, going back to our digital ad spend example, having dedicated cards allows you to control how much can be spent on a given vendor. For example, you could limit the card to a certain amount for Google ads and reinforce the budget for your company's person managing the ads. The limit assigned to the card will prevent overspending. No more micromanaging – that's the card's job.

REWARD POINTS

Of course, charge cards still offer the real reason we all use credit cards in the first place: rewards. You're provided points or cash-back for spending money. All card companies have a different rewards system, but motivating you to spend on their card is the point. Remember — they only make money when you spend money.

While points can be a nice perk, this is the least valuable benefit of using a card. Optimizing the rewards system takes a concerted effort, and your business is better off focusing on optimizing revenue than reward points.

Many of us know the dangers of high credit card interest rates. Some of us may have experienced the financial burden they can bring into our personal lives. The best part of using a charge card is that it requires full payment each month and prevents unnecessary debt. Using cards as a cash management tool and not a primary financing tool can unlock stable financial habits for your business and bring automation to your financial processes.

All for the low price of free.