Both a business charge card and a business credit card could be beneficial to you, depending on your unique business needs. While these resources are very similar, they have a few things that make them different. Here are a few things to consider about charge cards vs credit cards.
Balances
One of the biggest differences between these two types of cards is in the way that balances are handled. Both of them will give you a specific credit limit to work with. With a charge card, you can charge up to your credit limit and then you will have to pay off the balance by the next month.
With a credit card, you will be able to make purchases up to your credit limit as well. The key difference with this type of card is that you can allow your balance to stay on your account for an extended period of time.
Leaving Balances
If you leave a balance on your credit card, you will simply start to accrue interest charges on the account. You will then have to make a minimum monthly payment the next month. With the charge card, if you do not pay off your balance, they are going to charge you late fees.
Showing posts with label Credit Card. Show all posts
Showing posts with label Credit Card. Show all posts
Tuesday, November 9, 2010
Tracking Your Business Credit Card Expenses
Since business expenses and the interest on your business credit card are tax deductible, it is important to keep track of these expenses during the year. Keeping track means more than following your balance online. If you ever receive an audit, you must be able to prove the purchases were made for business purposes and were properly recorded. Therefore, you must keep written copies of all your expenses throughout the year.
Save Receipts
The most important step to tracking your business credit card expenses is saving receipts. This includes everything from minor trips to the coffee shop for business meetings to airline tickets. Whenever you are using your business card, you must ask for a copy of your receipt. It is advantageous to use your business card for all business-related expenses. That way, you have your expenses all in one place, and you do not have to dig through any individual or personal cards in order to track any charges in question. Get business cards for any individual in your company who will be using the account and require receipts for every purchase. Put these receipts immediately into an expense file.
Record Expenses on Reports
At the end of each day, week or month, depending on your personal preference, you should enter the expenses into a ledger for your financial report. Today, this is most commonly done through programs like QuickBooks or other accounting services. If you have a software program, much of your expense report can be automated. Remember: interest on the charges is also deductible. Therefore, you must track interest payments you make to your business credit card in addition to the regular payments you make toward principal debt.
Make Extra Copies
Business owners who fail to make copies of receipts and reports run the risk of losing everything in the case of theft, computer virus or natural disaster. Even files saved on a computer are not safe. You should make hard copies and duplicates of receipts for storage in a fireproof and waterproof safe. In addition, it is wise to back up all computer files on an external hard drive. These are available for purchase for a few hundred dollars, which is tax deductible. You can also use an online data storage service if you do not have in-house servers.
Organize to Prepare for Tax Season
When it comes time to file your taxes, you will have to categorize business expenses. For example, some expenses will be deducted under "Cost of Goods Sold" while others will be capital expenses. Capitalizing expenses allows you to defer taxes until profits result from the expense. This can provide relief in the given tax year, but not all expenses can be capitalized. If you are not an accountant, it will be wise to hire one for assistance with this process. Start by dividing the receipts and expenses into categories as you see fit. Any questions should go before your accountant in order to ensure you are getting the greatest tax benefits.
Save Receipts
The most important step to tracking your business credit card expenses is saving receipts. This includes everything from minor trips to the coffee shop for business meetings to airline tickets. Whenever you are using your business card, you must ask for a copy of your receipt. It is advantageous to use your business card for all business-related expenses. That way, you have your expenses all in one place, and you do not have to dig through any individual or personal cards in order to track any charges in question. Get business cards for any individual in your company who will be using the account and require receipts for every purchase. Put these receipts immediately into an expense file.
Record Expenses on Reports
At the end of each day, week or month, depending on your personal preference, you should enter the expenses into a ledger for your financial report. Today, this is most commonly done through programs like QuickBooks or other accounting services. If you have a software program, much of your expense report can be automated. Remember: interest on the charges is also deductible. Therefore, you must track interest payments you make to your business credit card in addition to the regular payments you make toward principal debt.
Make Extra Copies
Business owners who fail to make copies of receipts and reports run the risk of losing everything in the case of theft, computer virus or natural disaster. Even files saved on a computer are not safe. You should make hard copies and duplicates of receipts for storage in a fireproof and waterproof safe. In addition, it is wise to back up all computer files on an external hard drive. These are available for purchase for a few hundred dollars, which is tax deductible. You can also use an online data storage service if you do not have in-house servers.
Organize to Prepare for Tax Season
When it comes time to file your taxes, you will have to categorize business expenses. For example, some expenses will be deducted under "Cost of Goods Sold" while others will be capital expenses. Capitalizing expenses allows you to defer taxes until profits result from the expense. This can provide relief in the given tax year, but not all expenses can be capitalized. If you are not an accountant, it will be wise to hire one for assistance with this process. Start by dividing the receipts and expenses into categories as you see fit. Any questions should go before your accountant in order to ensure you are getting the greatest tax benefits.
The Requirements for Opening a Business Credit Card
A business credit card can be issued to a small business owner in the business's name. The credit card can allow a small business owner to get loans, make payments and build credit history without putting their personal credit on the line. Another benefit of the credit card is that, should the small business fail, the business owner's personal credit history would not be affected. Applying for a business credit card can be a complicated process that does involve some risk, but business owners can avoid those problems and get the business credit card by being careful and thorough as they apply.
Since it will take a while for the business credit score to be established, business owners should wait at least a year before applying.
Business owners should also make sure they carefully check their business credit card bills and expenses. Unlike personal credit cards, business credit cards have no protections against unauthorized spending. The credit card companies also have more leeway to change the terms without warning.
Getting Started
The business owner's first step should be to establish some assets and start a business-only checking account. At first, the business owner's credit score will double as the business's credit score, but it will change as the business checking account is used more and more often. The business owner should make sure to pay all her bills and other financial obligations on time--failing to do so will hurt her chances of getting a good business credit card.Since it will take a while for the business credit score to be established, business owners should wait at least a year before applying.
Choosing a Credit Company
All major credit card companies offer business credit cards. A business owner should take a look at each company's products to try to figure out which ones work best for her business's financial needs. She should also carefully check each card's interest rates and other fees. She should try to find a balance between low fees and the right range of services. She should also make sure she has enough capital to pay the business credit card bills on time.Paperwork Requirements
Once she chooses a bank, a business owner can begin the application process. Before applying for the business credit card, she must put together certain information and documents and have them on hand as she fills out the applications. This includes the Social Security numbers of the business owner and anyone who would be authorized to use the card, the business's legal name and street address, the business's tax ID number and a copy of business gross sale and profit figures for the last fiscal year. Some lenders may request other financial documents as the application process continues.The Next Step
Once the application paperwork is submitted, the bank will look over it and judge whether or not the business is financially sound enough to get a business credit card. If an application is not accepted, the business owner can always file again, but she should wait at least a year before doing so.Potential Business Credit Card Drawbacks
First and foremost, business credit cards should be used to manage the business's existing financial assets. They should not be used to generate cash flow unless the business owner has no other choice. The reason for that is simple. Compared to personal credit cards, business credit cards have higher interest rates and other fees. That means that if the business owner falls behind on payments, the consequences will be more severe. This will also have a negative impact on the business's ability to attract clients and get more loans.Business owners should also make sure they carefully check their business credit card bills and expenses. Unlike personal credit cards, business credit cards have no protections against unauthorized spending. The credit card companies also have more leeway to change the terms without warning.
Business Credit Card Requirements for Partnerships
When you start a business, you will likely receive multiple offers for some type of business credit card. These cards would typically be offered in the name of the business. However, this partly depends on whether your business is incorporated. As a partnership, you have the option to leave your business unincorporated. Then, meeting the requirements for business credit would fall on the shoulders of each individual owner.
Basic Credit Requirements
The credit of both partners in a business will be considered when any lender extends financing to an unincorporated partnership. If one partner owns a larger percentage of equity, the credit of this owner will be weighed more heavily. However, both should have a record free of default, delinquency and other credit issues to qualify for the best credit cards.
Asset Requirements
If an unincorporated partnership fails, the partners will have to resolve outstanding debts personally. This is very risky for a lender. As a result, the lender will typical require collateral on any business credit card. This can take the form of a liquid asset, such as a business's bank account, if necessary. A further option is for one or both of the partners to use personal collateral to secure a loan.
Basic Credit Requirements
The credit of both partners in a business will be considered when any lender extends financing to an unincorporated partnership. If one partner owns a larger percentage of equity, the credit of this owner will be weighed more heavily. However, both should have a record free of default, delinquency and other credit issues to qualify for the best credit cards.
Asset Requirements
If an unincorporated partnership fails, the partners will have to resolve outstanding debts personally. This is very risky for a lender. As a result, the lender will typical require collateral on any business credit card. This can take the form of a liquid asset, such as a business's bank account, if necessary. A further option is for one or both of the partners to use personal collateral to secure a loan.
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