In the world today’s world of ecommerce, businesses and credit cards often go hand in hand. In today’s financial landscape, credit cards have emerged as a crucial tool, particularly for ecommerce ventures. As a result, one of the most common questions that pops up when discussing Profit First is, ‘Can I still utilize my credit card?’ The answer is yes, but with one condition: you must be responsible.
In the original version of Profit First, Mike Michalowicz discusses using debit cards over credit cards. While I appreciate his perspective, I respectfully advocate for a different approach, especially concerning ecommerce. Many of my clients have honed their skills in leveraging credit cards to their advantage, accruing points and gaining insights into their spending habits through the accompanying data.
Additionally, debit cards may lack robust fraud protection when linked to business accounts. If opting for debit cards, it’s imperative to consult with your bank to understand the level of protection offered in case of theft or compromise.
New Account, New Card
Credit cards seamlessly integrate into our ecommerce strategies by aligning with the principle of compartmentalization advocated by Profit First. Just as we designate specific bank accounts for distinct purposes, each card should serve a singular function. Whether it’s for inventory, operating expenses, advertising, shipping, or licensing fees, assigning a dedicated card to correspond with each account streamlines financial management.
This segmentation yields several benefits. Firstly, it imposes spending limits commensurate with the available balance in the associated bank account. Secondly, it fosters a clearer understanding of expenditure patterns within different facets of the business, simplifying record-keeping for bookkeeping purposes.
Pay Your Bill
Another prudent practice to prevent credit card debt from spiraling out of control is to settle the balance on a weekly or bi-weekly basis, synchronizing with profit allocations. While the allure of leveraging borrowed funds may be enticing, consistent monitoring of spending habits is paramount. Frequent payments facilitate real-time oversight of available funds and may obviate the need for additional cards.
Given the prevailing high interest rates and tightening credit access, reliance on credit cards as a stopgap measure for inflated spending levels is unsustainable. If you are unable to pay off balances monthly, it signals an unsustainable spending trajectory that you should end immediatly.
Use Responsibly
While credit cards offer perks and rewards, exercising financial prudence is critical. Diligent monitoring of expenditure coupled with proactive management of accounts ensures that credit cards remain a valuable asset in optimizing business profitability. By embracing fiscal responsibility, entrepreneurs can harness credit cards as a tool for informed decision-making and sustainable growth.
If you’re ready to take control of your finances and embark on a path to financial stability, the bookskeep Team is ready to help. Contact us today to start your journey towards financial success!
If your ecommerce business isn’t where you’d like it to be in terms of profitability, check out my book, Profit First for Ecommerce Sellers. It answers important questions about how to implement Profit First in an ecommerce business. Take control of your money and your business, and put Profit First to work for you!
You can also sign up for the Profit First for Ecommerce Sellers Online Course. As a Mastery Level, Certified Profit First Professional, I will teach you why Profit First works so well for ecommerce businesses and the particular challenges for businesses that have physical products requiring inventory management. You will learn how your behavior drives your money management habits for your business and how you can set up your business bank accounts to work with your habits.
Check out all our ecommerce accounting and profit advising services here!
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