Helping small and micro owners decide which cash flow tools are right for them, Business Advice took a look at the options available from UK credit card provider Barclaycard for business.
To discover some common cash flow mistakes made frequently by small company owners, and to learn some simple tips to make managing cash flow easier, we spoke to commercial business card director at Barclaycard, Ian Reid.
Barclaycard for business
Credit card provider Barclaycard – the first ever company to issue a credit card in the UK, in 1977 – offers a “basket” of options when it comes to credit and charge cards for business.
It’s business cards offer a range of borrowing options, with varying degrees of flexibility, based on contracts with a range of fee and annual percentage rate (APR) structures.
Whereas credit cards can offer greater flexibility to business owners whose income may not be consistent month-to-month, charge cards can provide an important injection of funds, at lower costs, to owners who prefer to pay off monthly debts in full.
The Barclaycard for business online card calculator is a tool that allows owners to identify the right card for their small business, given their buying habits.
Another tool, Barclaycard Anywhere, created especially for small and micro business owners, is a mobile point-of-sale device. By investing a small up-front fee for the device, micro company owners and startups can quickly begin taking card payments and increase their cash flow.
What Barclaycard says: Commercial’s business card director, Ian Reid
(1) What are the main challenges facing small businesses when managing cash flow?
When you’re a small business owner, most of the challenges involved in managing cash flow also involve managing your time.
Having good cash flow is about putting time and effort into your accounting and bookkeeping, and that’s something new business owners rarely have enough time for.
Credit and charge cards can be a good way to manage a company’s cash flow, as it can help to measure and control spending, both by a business’s directors and their employees.
The best way owners can manage company cash flow with credit and charge cards is to know the full extent of what’s available, because the best solution for one business may not be right for another.
(2) Which basic cash flow errors do you see small business owners make frequently?
The biggest mistake I see small business owners make is not fully understanding all the cash flow management options available to them.
Many owners don’t view credit cards as an alternative way to boost cash flow. But, they can be a good way of generating cash flow and creating more time to grow a business.
Small business owners often spend hours chasing payments and going through invoices, but if they were able to offer customers different payment options, they’d be better able to manage cash flow.
For example, if a window cleaner was able to accept card payments going door-to-door, they’d by-pass having to chase up many invoices, since almost every one of their customers will have a card with them to pay.
Mobile payment technology is now easily accessed via smartphones, and there’s relatively few costs involved.
Making sure cash can be gotten as quickly and as conveniently as possible is the best way small business owners can avoid cash flow errors. Having as many options as possible to get cash for the business is important, and owners shouldn’t have to rely on overdrafts.
(3) What are some easy cash flow management tips startups can introduce right away?
There’s nothing more annoying for customers than a business not being able to accept the payment method you want. So, for startups, it’s a good idea to begin accepting card payments straight away.
From then on, it’s all about marketing. Small companies don’t know how to market themselves effectively, so make it clear to customers they can pay you the way they want to.
(4) How can credit cards and charge cards be used differently to manage cash flow?
Charge cards and credit cards both allow company owners to pay off the full balance on a card in one go. On a charge card, however, you must pay at the end of the month whereas for credit cards, you also have the option of paying off a portion of the balance. This will help extend your working capital as needed.
(5) How can discounts and rewards schemes be used to manage cash flow?
Offering discounts and rewards can help reach your customers in different ways. At Barclaycard, we decided early on not to offer business customers a generic rewards scheme.
Our customers made it clear that they’d rather have a discount or rewards scheme that offered benefits to their business, rather than themselves personally, so now we work with them to build up a tailored rewards programme that looks at specific areas of their business.
For example, our customers get discounted rates at big marketing firms to help build up their marketing lists and strategies, which gives them a new way of reaching customers.
(6) What more could be done to fix the late payment problem for small firms?
Rather than letting late payments build up, there are measures small businesses can take so that they don’t become a problem – credit and charge cards being one of them.
Cards can help a small business owners with an immediate payment, and can by an owner time as he/she chases up a client. They’re not the be all and end all of the late payment problem, but credit and charge cards can be used as a way to guarantee funds are received. There’s a cost to that guarantee, but it’s for individual owners to weigh up whether it’s a cost their business can bare.
More broadly, there should be a better understanding amongst businesses of the cash flow options that are available. In the majority of cases, late payments could have been avoided if suppliers had a greater knowledge of the cash flow management tools out there.
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