The risks of petty cash.
Small business owners should concentrate on minimizing risk whenever possible, especially regarding their business’ money. While it has been standard in the past to provide petty cash to employees for day-to-day business purchases, the risks that come with carrying cash have only increased over the years. While the danger of theft and fraud are the most obvious, there are many other vulnerabilities that come with relying on cash for business expenses.
Lost or stolen cash
The most obvious risk is that the cash will simply disappear. What happens if an employee misplaces the petty cash? What if someone steals it? When it comes to lost or stolen cash, there’s no easy way to recover those funds. By using business credit cards in place of petty cash, business owners add a layer of protection to their funds. Cards can be easily canceled if they disappear, and many card providers will refund fraudulent expenses when notified in a timely manner. Not only do credit cards substantially lower daily risk, a company could potentially not suffer any loss on fraudulent expenses!
Hard-to-track, error-prone expenses
With cash transactions come paper receipts. Any time paper is included in a business process, time, effort and the probability of error increase. Business owners should, at the very least, have an electronic record of their business transactions. Business credit cards can provide that feature, adding transparency into their expenses. This allows owners to view and sort their expenses with the click of a button, and rather than collecting and reconciling receipts with their bank accounts, they can spend their time doing more business-critical tasks.
Uncontrolled spending
Anyone can spend cash. There are no safeguards or limits around it. Credit cards inherently add security to company funds. For example, small business credit cards come with the capabilities to limit who can spend funds, where they can spend funds and how much they can spend (both at one time and in total for a day, week, or entire billing cycle). This gives business owners much more control over their transactions and provides electronic records that can be broken out by cardholder, time of transaction and more.
Missing rewards and paying full price
For small businesses, every penny counts. Many small business credit cards offer rewards on some or all business purchases. Small businesses can easily reap these benefits and can even apply some of these rewards, like cash back, toward future business purchases. They are effectively earning their own discounts! It’s a no-brainer for business owners to take advantage of rewards on purchases they’re already making.
Diminished cash flow forecasting
Cash flow is everything to a small business. With petty cash, business owners limit their ability to forecast their cash flow. By using a credit card in lieu of petty cash, business owners are able to adjust their payments and billing cycles to match their ever-changing needs.
What business credit card is right for you?
There are many risks involved with relying on petty cash. A business credit card is a simple way to help protect you and your business, but there are different types that you can leverage to get the best benefits. At Commerce Bank, we’ll help you figure out which small business credit card is the right one for your business. No matter which you choose, you’ll get peace of mind knowing that Commerce Bank is in your corner and will help you every step of the way.
Also See:
- 5 Ways Tech Tools Can Save Time for Your Business
- The Best Reward for Better Money Management is More Rewards
