Entrepreneurs
hail from hundreds of disparate cities, industries and backgrounds, but one
thing they have in common is an appreciation for plastic. Paying by credit
card is convenient, it allows business owners to maximize their cash flow,
and it offers the accumulation of rewards or points that can add up to
thousands in free services each year. For regularly recurring bills,
however, nothing beats the convenience of automatic bill payment, the kind
typically offered online through consumer and business checking accounts.
Now,
paying recurring bills automatically by credit card, which offers the best
of both worlds, is catching on big with small businesses. Over the past two
years, New York City-based American Express has seen its charge volume for
automatic bill pay for small-business customers grow by 30 percent per year,
says Karen Rosenberg, vice president of OPEN from American Express, the
company's small-business unit. She sees it as a way to replace
check-writing, with added benefits. "It helps [business owners]
consolidate spending on the card and lets them better track and manage cash
flow," she says.
American
Express and its rivals, MasterCard and Visa, have all developed
sophisticated online reporting tools to enable users to keep track of
expenses and slice and dice them for budget purposes. Looking at a monthly
or quarterly statement, business owners can see how much they're spending on
utilities or subscriptions, or on over-night deliveries, says Doreen Amano,
vice president of global product development at MasterCard International in
Purchase, New York. "That can potentially help with negotiation with
vendors when it comes to rate reduction," she notes.
Credit
can cost money, too, if balances are allowed to slide. One finance charge or
late penalty can erase a month's benefits of card use, so it's only worth
doing if the balance is paid in full each month. In an effort to minimize
debt, many entrepreneurs are turning to debit or check cards instead, which
offer a lot of the same benefits.
"There's
an overall concern about accumulated debt among small-business owners,"
says Diana Knox, senior vice president of Visa USA in San Francisco. She
notes that business credit spending is up, but Visa has seen both business
credit and debit growing by double digits over the past few years. Business
owners can sign up for automatic bill pay with Visa and earn points or
rewards through the Visa check card, just as they would with a credit card.
And through its online reporting tool, Visa Information Source Select,
launched this past summer, entrepreneurs can view all their credit and
signature-based debit transaction information in one place.
For
those who want to pay everything automatically on the same piece of plastic,
the wait will be a little bit longer. The list of merchants set up to handle
automatic bill payment is certainly growing, but it's only a fraction of the
vendors out there that business owners have to pay each month.
