Here it is: credit cards absolutely rock for small businesses. Does this seem counterintuitive? After all, checks are still somehow ubiquitous and racking up debt isn’t a great strategy for sustained profitability. Yet, I wholeheartedly believe that small businesses should pay everything they possibly can on credit cards. Here are four reasons why.
The caveat: I do NOT mean that you should use credit cards as financing. Please pay off your credit cards each month and this strategy will work beautifully.
Credit cards make cash flow a breeze.
If you are frustrated with managing your cash flow, constantly checking your bank balance and trying to remember all the payments that are coming out, credit cards will make your life so much easier. Imagine having only a couple payments coming out of your operating account each month: your credit card payment, rent and payroll. (Maybe an insurance or loan payment, too.) That’s it! You know when those are going to hit and can make sure you have the cash to cover it. No more trying to figure out the myriad of payments coming out. You also do not have to track uncashed checks. Let’s be real, people often sit on checks awhile before cashing them - and when one of those 4 month old checks unexpectedly hits your account, it’s not fun.
You don’t have to issue 1099s.
That’s right, no more collecting W9s and issuing 1099s for vendors that you pay via credit card. Those payments fall under different reporting. I’m all for anything that minimizes this messy requirement!
It’s more secure.
Think about it, do you really want your bank account information floating around out there in the world more than necessary? When you send a check, the routing and account numbers are right there! Electronic systems also can be hacked. When your credit card is compromised, it’s easy to shut it down and get a new one. Not quite as easy with your bank account information.
Rewards, baby!
This one is self explanatory. Get a credit card that has great rewards and watch them roll in. You don’t get that when you pay by check, PayPal, etc.
I know a major objection is going to be that your vendors don’t accept credit cards. That’s a topic for a whole other blog post about making it easy for people to pay you (spoiler alert, it’s worth paying the fees to accept credit cards). I believe that conversation needs to start changing. But for the purposes of this article, the bottom line is it’s worth asking! I just asked a vendor whose invoice indicated payment by ACH if I could pay via credit card and she said yes. If you can switch the vast majority of your payments over to credit card, you will still see a lot of these benefits.
My advice? Get our your most recent bank statement and see how much of it you can start paying by credit card. Stop worrying about checks and W9s. Then come back and thank me when you buy your next plane ticket on points.