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The intention of my blog is to impart a lot of information, in an inspiring and educational way.  I love teaching and sharing my knowledge and experiences in a way that 'sticks.'  So, I hope that as you read my blog that you get to know me, and at the same time, the articles incentivize you to seek whatever knowledge is necessary to empower you to greatness!  It is all up to you, so READ ON!

Credit Card Use

Gayle Goldstone June 3, 2017

The classic position regarding this subject is: “Don’t use any!”  A simple statement, and actually not entirely valid. A fundamental issue about debt is the idea of matching the duration of the benefit of the purchase to the duration of the debt service.  Meaning, if the purchase has long-term benefits to the company, you can take longer to pay for it.  Suffice it to say, the duration of the benefit of a business lunch is difficult to protract over time, so when the bill comes it should be paid off immediately.  (How many of you can make jokes about that one?!)

Seriously, careful consideration should be taken when ‘whipping out the plastic’ if you know the funds are not available to pay for it. This is true personally as well, but can prove to be deadly to your business over time. When there is debt, there is a cost associated with it. Minimizing that cost is essential.  When you are building interest expense into your budgets, it sure drives that point home. The higher your costs of doing business, the less competitive your pricing can be.  That is, of course, unless you don’t intend to pass along all the costs of doing business to your customers…in which case, it comes directly out of your pocket!  How happy are you going to be about that? Definitely not a good business strategy.

Credit cards can be a great tool. They can help you track your expenses by category. They are essential in the world of online purchases. They make business transactions quick and efficient. The overall warning in terms of the use of them is to avoid the misuse of them.  I have heard from so many people how easy they are to use, to the point of being much too easy. Sometimes it is better to wait until we can afford those purchases. However, if the purchase is crucial to the future of your business, waiting is not the solution either.

One of the most important elements to consider is when to purchase, and if debt is necessary, how to purchase, which would be the other half of this discussion. Consider term loans for longer-term-benefit types of assets. Term loans have a specific interest rate, a fixed monthly payment and an ending date. Planning purchases gives you tremendous benefits and will help minimize costs. 

Categories:  Talkin' Trash, Money Talks

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