Swiping your credit card is hurting your business. Know-how.

credit card can hurt your business
Things to take care of while making business transactions either by card or cash payments.

Do you swipe your credit card for your business?

Are you still doing a lot of your business expenses in cash?

If your answer to any of the questions is YES, then let me tell you that you’re making huge mistakes that will cost you a hell of a lot of money.

I am writing this blog post to help you save time and dimes, and here are a few solutions that will help you avoid confusion in your transactions and have a clear understanding of your expenses and help you to money management.

Using a credit card strictly for business purposes.

We tend to make certain online payments, like buying travel tickets or paying for a business meal, through our personal credit card for our business to earn additional points. But, how to keep track of these transactions? Are you considering these expenses for your business?

As a business owner, you must have two credit cards – one for your personal use and the other for making payments for business purposes. Keep an account of your credit card as a bank account in your business and pay the business credit card from your business bank account. The way it works is, you claim business expenses and charge those expenses from your business.

Reimburse yourself for business expenses made through the personal account

At times, the vendor’s POS doesn’t work with one card, and we tend to give our menu for the transaction. It happens with most of us. Firstly, try not to do this because there are very high chances that you will miss charging these expenses to your business. In the rare scenario that you need to make some business expense from personal accounts, transfer the money from your business account to your personal account for that expense. The way it works is, you claim business expenses and charge those expenses from your business.

Cash expenses

In the age of @paytm@phonepe@googlepay, are you still using cash to record expenses for your business? If YES, then you need to stop doing this.

There are two reasons to stop using cash payments to vendors:

1. Income tax does not allow deduction of any cash expenses made for more than INR 10,000 per day per vendor. 

2. Bank will start deducting TDS @ 2% if you withdraw cash of INR 1 Crore or more in a year. It’s introduced to limit cash withdrawal.

Hence, it is better to use alternate payment methods like UPI instead of paying cash. It ensures an audit trail that cannot be denied and can be used to record all the transactions made, and the deduction won’t be rejected even if the amount exceeds INR 10k.

Create reminders for the credit card due

Let’s discuss how to make the most of credit cards for the eligible business expense and stay on top of the due dates for your credit card. Keep a credit card for your business for all other expenses such as utility bills, conveyance, travel, Amazon, client meals, etc. Put these expenses on auto-debit to your business credit card from your business account.

Firstly, you need to understand it is a MUST to pay your credit card bills before the due dates to avoid late payment fees, interest, and decline in your credit rating.

BONUS TIP:

1. Pay your credit card in full before the due date. Use apps like SMS Organiser by @Microsoft or @Walnut to stay on top of your credit cards’ due dates.

2. I would suggest making your credit card due date align with the date you pay your other bills, like the 15th of every month for all the credit cards you own. It will help you in keeping track of due dates.

Using a credit card wisely can create a good credit score for you early on in your life. Redeem your credit card points at least once annually. Opt for a credit card according to your needs; for, e.g., take a travel card/ lifestyle card for lounge access if you are a frequent flyer.

Automate your payments:

A CEO’s job is to ensure the business has a process to follow for doing routine expenses and how the company pays the vendors. Now, the way I do for my business and which is also what I suggest my clients do, is this: Keep a bank account of your business to receive income and pay for fixed expenses such as rent, salary, professional fees, etc.

Every 15 days, block an hour to pay your vendors, pay on 20th for the bills collected from 1-15th of a month and pay on 5th of the next month for the bills collected between 15-30th of the month.

If you wanna read book, the best book which I learn so much from Rich Dad’s Cashflow Quadrant It is available on amazon. 

Leave a Reply