For everyday purchases, a business credit card can be a strong option to consider. You can purchase supplies and materials on a credit card, pay the balance at the end of your statement cycle and worry less about the day-to-day expenses of keeping your business running than if you were paying cash each time. A business credit card can help you manage cash flow and the financing issues that come with running a high-overhead business. Read on to learn how to better leverage your business credit card.
Understanding Payment Cycle in the Construction Industry
Construction companies face unique financial considerations: if you use the draw system, you’re likely invoicing after your work hits certain milestones. This might mean you aren’t paid in full until several months’ worth of work is completed, which can take a toll on your liquidity. Project delays and slow payments from clients can make it even harder to have a steady amount of cash in your checking account.
You need access to liquid capital to buy materials, fuel your fleet, rent equipment and pay for other common costs. Good financial planning starts with a variety of payment options, like a credit card, and contingency plans for when projects don’t get paid for as planned. A business credit card is one of the most important tools to put in your payment arsenal, as it gives you more flexibility to buy what you need without worrying as much about daily cash flow.
How Your Business Credit Score Factors into Winning Bids
Your construction company’s reputation isn’t solely based on the work you’ve done. To win contracts for larger projects, you may also need to ensure your business credit is in good shape. Developers may want to check your credit to make sure you’re solvent and able to pay bills on time, reassuring them that you’ll be financially able to complete the job.
If you haven’t taken out loans or opened a credit card account for your business yet, you may not have as strong a credit score as possible. Credit rating agencies pull from a variety of data points to assign your score. If you don’t have much of a credit history, your score might be lower. This is another great reason to get and use a business credit card, even if you are not spending significantly.
Business Card Options for Construction Companies in Canada
Credit cards can help you manage cash flow: you can use your card to pay for lumber, tools, and the other materials you need on the job site. You can pay off some or all your balance every month, depending on your liquidity, and keep operations running smoothly.
Relying too much on cash or debit to pay for the expenses that come with doing business, also known as the cost of goods, sold (COGS), can imbalance your cash flow. Credit cards do a better job of displaying your balance as you make transactions, giving you a better sense of how much money is moving in and out of the business.
Many business credit cards also come with benefits, such as points you can redeem for cash or discounts on commonly used vendors. American Express offers several business credits cards that may fit your needs as a business owner.
Tips for Maximizing Business Card Benefits for Construction Companies
Not all credit cards are the same; fees, credit limits and perks may vary. It’s important to pick the right card to get the benefits you need. If a card offers perks at a store you frequent for work, it may be a good option to explore. Cards that offer a zero-APR introductory period may help you pay for larger purchases over time without incurring interest, so long as you follow the conditions of the card.
Having a credit card for business expenses also makes it easier for you to see how much activity is happening on your account. Let’s say you want to keep track of overhead: a credit card makes it easy to see exactly where and how much you’re spending. If you give employees additional cards, you’ll be able to track their expenses as well.
Ultimately, for construction companies in Canada, leveraging business credit cards can significantly improve cash flow management and financing options. Cards help construction companies pay for materials and daily expenses, maintain liquidity, and track expenses effectively. They can also help establish a strong business credit score, which is essential for winning bids on larger projects. Choosing the right business credit card with suitable benefits and maximizing those benefits further enhances the financial advantages for construction companies.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.
