Getting started in business is not easy and requires careful management of cash flow and credit. A new business needs to advertise, buy insurance, supplies, materials, office equipment, everything that goes with starting up a business.

Credit cards can be a lifesaver or a self made noose to hang yourself with. The most important thing to remember is this: Credit Card companies are in the business of making money.

They don't care a whit about you or your company, regardless of what they advertise. It is up to you as the business owner to manage your credit responsibly and insure you don't get into trouble.

When starting your business, you should have enough capital to buy the equipment and supplies you need up front. You should not be putting these things on credit cards. If your business fails, you will be stuck with the bills and no way to pay them.

Credit cards are most useful for filling in the gaps in cash flow. For example, you have just billed a client for work you finished and expect a payment within ten days. In the meantime, you need to start a new project for the next client and need supplies to do so. Buy the supplies on your credit card and when the check comes in from the first client, immediately send a payment to cover the charges. Do not wait for the bill. If you need to operate this way for an extended period, plan on a two-week payment cycle.

Credit cards are useful for other business expenses. Airline tickets, rental cars, meals and entertainment expenses are just a few uses for your business credit card. By choosing the right card for these expenses, you can accumulate airline miles and other rewards.

Each type of business has a different model for cash flow. Construction companies need to make high dollar material purchases at the beginning of a job and pay workers at the same time. As they receive payments from the customer, they pay off credit debt incurred at the beginning of the job. Your business may have a different cash flow model.

There are ways to make money off credit cards, but you have to stay on the ball and manage it very carefully. You have to know exactly when your credit card company cuts off the grace period and exactly how your bank accounts work and how they pay interest. Careful planning is required to do this properly and not end up paying more than you make.

You have the cash to make a required purchase. Take the cash and put it in an interest bearing account like a money market account. Make the purchase on your credit card. The day before the grace period ends, pay off the purchase by transferring from the money market account to the credit card. In this way, you earn interest on the money instead of paying interest or tying up your cash. Typically, this is only worth the bother on high dollar purchases. If you have a good cash flow, you can make this work on an ongoing basis.

What not to do. Don't carry a zero balance, instead keep a balance of five to ten percent of your credit limit. Don't continuously transfer balances and close card accounts. Don't open a card just to get a teaser rate. Except in real emergencies, don't take cash advances.

Manage your credit carefully. Don't have more available credit than you can comfortably make payments on. Having more credit than you should makes card issuers nervous and they will increase your interest rate at the very first opportunity.

Carefully managing your credit cards and wisely choosing which ones to have will make them an asset to your business.

Learn more about this author, MJ Logan.
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