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Your small business may be bucking the odds and thriving even in this difficult economy. You’re gaining new customers by the day,and you’re filling out orders for your merchandise and services as fast as you can write.
But there’s one little problem: cash flow. You rarely have enough cash on hand to meet your monthly debt obligations.
This is a common struggle for small businesses. Even those that are doing well often run into periods in which they simply don’t have enough quick cash on hand. This is understandable: It sometimes takes customers a long time to make their payments. Other times clients only pay when a job is finished; and that can take months.
These periods of stopped-up cash flow can prove nerve-wracking to the owners of small businesses. After all, landlords, the power company and the phone company don’t care that these entrepreneurs will be receiving fat checks next week. They want their money now.[include file=/wp-content/themes/customtheme/rec-business.php]
There is a way, though, for small business owners to make it through these difficult times without resorting to panic. They can use their business credit cards to manage their business’ cash-flow issues.
The way this works is simple: If you’re waiting on a big payment that you know will come into your hands in the next week, simply charge whatever bills you have coming up. Then make sure to immediately pay off this charge once that big payment comes in. This process works especially well when business owners are using credit cards that are in the middle of their zero-percent-interest-rate introductory offers.
By doing this, you’ll keep your landlord and other creditors off your back. And you’ll avoid having to pay interest on your business credit cards.
Of course, this tactic does require some savvy on the part of business owners. It’s easy for entrepreneurs to fall into the credit card trap: They’ll charge their upcoming bills and then when their payments come in, they’ll use that money to buy new equipment or supplies. They’ll then get stuck with paying interest on their credit card balances, which are now higher than ever.
Making this mistake is a good way for entrepreneurs to put their buisnesses into serious financial holes.
Other business owners might make the mistake of assuming a payment is coming in when that’s actually far from a certainty. Again, business owners who make this error will find themselves shelling out extra dollars on interest payments.
Cash flow is often a struggle for even established small businesses. But owners can work around this challenge by using their credit cards judiciously. These owners should make sure, though, that they don’t inadvertently stick themselves with interest costs that they can’t afford.