While it may appear easier to use a personal loan or credit card to cover business expenses, especially during the start-up phase, this course of action can blur the lines between personal and business finances, and create tax reporting issues for business owners.
That is where the business charge or credit card comes in; a way for businesses of any size to access funds, pay for business expenses and make an unambiguous distinction between liabilities and expenses incurred by the business as opposed to the individual. While the big end of town has long recognised the benefits of corporate cards, many small businesses are now grasping the distinct advantages of business cards and abandoning the use of personal credit cards or loans in the business environment.
What makes a business card different?
Business credit cards are not secured against personal assets. This means that any personal assets are therefore free to be used if a business owner does require other secured forms of finance. Furthermore, when it comes to tax reporting there is a clear distinction between business and personal expenditure; something that remains on the radar of the Australian Tax Office.
As businesses grow, many find their employees are also required to make business purchases. The clever thing about a business card is that the business can have multiple cards on the same account and can track business expenditure across all cards on the account.
Another benefit of a business card over a personal card is that they can have restrictions placed on their use, such as no cash withdrawals. Many business owners with multiple cards on their account find this added security comforting.
Additionally, some business cards now offer business travel insurance and cover in the event that the business is temporarily unable to operate. Add to this the fact that as a business card, the annual fee is tax deductible, and the benefits become overwhelming.