From XU Magazine, 
Issue 34

The Business Case for Credit Cards

When Staying Cash Positive is King

All business owners, regardless of their size and niche, know this: effective cash flow management is the cornerstone for the healthy growth of one’s company.
This article originated from the Xero blog. The XU Hub is an independent news and media platform - for Xero users, by Xero users. Any content, imagery and associated links below are directly from Xero and not produced by the XU Hub.
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Starting a business is not for the faint-hearted. Let’s face it - the odds are unfavourably stacked against start-ups.

Unsurprisingly, the most cited reasons by business owners for seeing red on the balance sheet is the never-ending race to reduce the time between cash payables and receivables.

Without the resources and readily available working capital of larger corporations, small business owners are often left unmoored and isolated, with crushing debts and a mounting pile of unpaid bills.

The business case for credit cards

This is precisely where the use of corporate credit cards can provide an easy and elegant solution to help businesses improve their working capital and overcome liquidity shortages.

It essentially allows you to extend your payment time by syncing your bill payment dates with your card’s billing cycle.

Improving cash flow

A major rule of thumb for effective cash flow management is to preserve funds for as long as possible.

Thankfully, most major credit card issuers offer up to 55 days of interest-free payment period. This means that you can hold on to your cash longer without having to pay out of pocket to cover costs while waiting to get paid by your customers.

Paying by credit card is especially useful for unexpected expenses or larger tax bills. It is a convenient and readily available means to spread the cost of your financial strain over a longer period.

Plus, paying suppliers on time or even earlier with business credit cards can place you in their good graces. This can position you to negotiate more favourable payment terms.

Low card acceptance rates

Using credit cards to postpone payment dates seems like the natural solution to many companies’ liquidity flow predicament. So why aren’t more businesses paying their suppliers with credit cards?

As it stands, there is £100 trillion worth of untapped cash within the B2B market for the sole reason that most vendors do not accept card payments.

Though unfortunate, it is easy to see where these vendors are coming from. Accepting credit cards comes with high processing fees and involves countless moving parts in order to fully integrate the system into their accounts receivable process.

According to a survey conducted by First Annapolis Consulting, 67% of suppliers cited high credit card processing fees as the largest deterrent to offering credit cards as a payment method.

Chances are that your B2B supplier may be reluctant to invest in a system that accepts credit card payments.

Billhop: Disrupting the traditional B2B payments landscape

While credit cards have been a staple payment method in the B2C market for decades now, the concept of businesses paying one another by credit card is still relatively new.

That is why Billhop has been making waves in the B2B payment sphere. By combining existing credit card rails with proprietary technology, Billhop aims to address the low card acceptance rates within the B2B sector by allowing businesses to pay their bills with credit cards.

Traditionally, SMEs across Europe have mitigated the gap left by the time between paying suppliers and receiving payments from customers by taking out overdrafts, applying for loans and even resorting to invoice factoring.

Needless to say, these solutions are far from ideal and do not address the long-term, underlying problem that most small businesses are faced with - how to stop playing catch-up with their cash flow.

By using Billhop, you can make use of your existing credit-line without taking any additional steps to secure loans or funding. Simply put, there isn’t a solution as decidedly practical as Billhop when it comes to managing cash flow. No one else is offering what Billhop is doing in Europe.

Enhance your Accounts Payable

It might be hard to fathom that in this digitised work-from-home age, companies still process their Accounts Payable and Accounts Receivable manually. Yet, this is the case for businesses worldwide as they struggle to transition from their legacy systems and manual processes.

As a matter of fact, almost 1 in 5 organisations in the UK rely solely on manual data reconciliation.

Popular payment methods like cash, cheque and even bank transfer require a lot of time and manpower to monitor, record and track. The potential for human error is significantly increased and may even lead to huge fines when data is inaccurately reported.

Again, we see that by paying suppliers with credit card, businesses can streamline their inefficient processes and centralise their payments.

The data provided by credit card transactions can also be incorporated into enterprise resource planning (ERP) and accounting systems to further aid reconciliation.

Keep on top of your bills with Billhop and Xero

Billhop has teamed up with Xero to help simplify payments for small business owners, sole traders and accountants.

Our automatic data sync means you do not need to input information into separate accounts or match bills to payments. Once a bill is paid on Billhop, its status will be updated in Xero so you can track your payments in real time.

Do better business with Billhop

With Billhop, you can pay any supplier invoice with your preferred credit card thus allowing the opportunity to get paid from customers before your card bill is due. Your bottom line remains intact without having to apply for loans with high interest rates. It truly is the easiest solution for small and medium-sized business owners to optimise their working capital and do better business.

Why leave it there?

To find out more about how your business might benefit from Billhhop's payment service

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