Nothing quite matches the convenience of business credit cards. When you are looking for a good alternative to cash, checks, and personal credit cards, it is probably a business credit card you want. With credit-when-you-need-it convenience, savings and discounts on purchases, and extremely helpful reporting facilities, business credit cards can be a good tool in your financial management tool kit.

You will find it easier to get a business credit card than to open a business line of credit. For this reason, business credit cards can do a lot to help you ease your cash requirements even as you are still gearing up with office supplies and equipment. It can never be repeated too often: use business credit cards with caution and afford it the same respect you would afford any other business line of credit!

The ability to borrow money, whether from a business line of credit or from business credit cards, is something that you need for your business. Like business credit cards, the line of credit is a revolving credit, and both charge interest only on the balances that are left outstanding. The credit limit on business credit cards may be lower than on lines of credit, but both do have a predetermined ceiling. There are however a few differences between these two forms of business credit:

Cost
Business credit cards generally have higher annual percentage rates and lower credit limits, than lines of credit. When it comes to cost-effectiveness therefore, the commercial lines of credit will beat business credit cards anytime.

However, if you manage business credit cards wisely, you can maximize the 21 to 25 days grace period or float on purchases. When the statement comes and you pay off the entire balance, you will actually avoid paying any interest. The crux of the matter is that you get a 25-day interest free loan! Not bad…and only from business credit cards.

Convenience
Business credit cards may lose on cost, but they are miles ahead when it comes to convenience. If your checking account is running low and you need to buy some supplies, you no longer have to call the bank to transfer funds from your credit line. You could easily charge the whole transaction to your business credit card, get out of the store and back to running your business. Business credit cards also offer you the convenience of easy bookkeeping and quick cost analysis.

What’s more, business credit cards are heavily loaded with perks like frequent flyer miles, purchase protection and warranty extensions, discounts and cash backs on hotel stays, car rentals, gas purchases, and more. These business credit card incentives can be valuable to a business, not only for the sake of convenience but also for the cost savings that you get.

Business credit cards and lines of credit are two financial tools that you can use together. Business credit cards are perfect for very short-term borrowings – we’re talking 30 days at the most. You should pay off the bulk of the balance when it falls due, to save on interest. You may want to carry 20% of the balance forward to the next month to make your business credit card issuer happy, otherwise they’re never going to earn any interest income from your business credit card account.

Lines of credit are perfect for larger purchases, particularly those that would exceed your business credit card limit, as well as for reserve funds when cash flow becomes irregular over a period. Lines of credit help you to shore up your working capital, such as payroll, paying off merchant credit and payables, or settling the quarterly taxes.

How can you decide how much you have for bills and expenses when your paycheck varies from one payday to the next? That’s a question a lot of people struggle with.

A few of the occupations that I can think of off hand that could fall into this category are waitresses or waiters working for salary and tips, truck drivers that are paid by the mile and never know how many miles they are going to get, the self-employed that their business income varies from season to season, and the list could go on.

Trying to manage your finances with a steady income is hard enough but when you never know what your paycheck will be seems almost impossible, but it’s not. It is, however, going to be a little more tricky.

In my Budget and Bill Organizer I talk about averaging your expenses like your phone and electric bills that vary from month to month. The same principle can be used to average your income.

The first step you need to take is to find records of your pay for as far back as you can. It would be best if you had records going back for at least 6 months.

Take these records and total the amounts you were paid for the entire period. Then divide that by the number of months you have records for. This will give you your average monthly income.

If you don’t have any record of your previous pay you may need to go to your employer to get the information. If there is no way to get this information you should start a log of how much you get paid and use this to develop your budget.

Once you have determined your average monthly income you will need to develop your budget just as if this was your regular pay.

Here’s where it gets tricky. You aren’t always going make the amount you have budgeted. The only way to handle this is to save when you make more than what you have budgeted.

Here’s an example:

You have determined that your monthly budget is $2000 per month;

In January you earn $2500. You will need to put away $500 of that money so that you can make up for any month that your income falls below $2000.

This sounds like a simple solution to a complex problem but it may not be as easy as it sounds unless you accustomed to saving money. It will take some discipline to make sure that money is there when you need it.

There could be a bright side to this method. If you are able to put the extra money away and you have several months that you make more than your budget you could end up with a sizable savings account.

When setting up your budget make sure that you don’t underestimate your bills and expenses. This is one of the major reasons many budgets fail.

By averaging your income it will prevent the “Feast to Famine” approach to your spending. It only makes sense to spread your income out so that you can cover all of your bills and expenses every month.