Why should you want to maintain a positive cash flow?
The answer is pretty obvious — we all know it’s highly essential for running any successful business. Trucking is no exception. If the cash leaving your business is consistently higher than the money coming in, it will lead you down the path to financial ruin. To spare you the pain of getting into this mess, we have listed five ways you can improve your trucking cash flow.
1. Track and Control Your Expenses
It’s vital to track and control your day-to-day business expenses to know how you can save on costs. However, there are other tips you can follow such as the taking advantage of fuel discount cards and not wasting your horsepower on small loads. It would also be good to do a profit and loss analysis every month to see where you stand at any given moment.
2. Keep Your Fleet and Equipment Well-Maintained
The practice of keeping your trucks well-maintained and with up-to-date equipment can be costly initially. However, it will pay you dividends in the long-run in terms of efficiency and reliability. Therefore, preventive maintenance should be one of the habits you need to develop in your business. Keep an eye also on those trucks and equipment that are always breaking down and are frequently in need of repairs. It might be less expensive — in the long run — to replace them now than keep on maintaining them way past the threshold of their usable or serviceable life.
3. Try Factoring
The reality is most trucking clients don’t pay immediately but in 60 or 90 days. This means you have to wait 2-3 months for the full payment. This delay can be a problem when you have an immediate need for cash to pay your bills or other debts. This uneven cash flow problem is not exclusive to smaller trucking companies but even established ones.
This is where factoring can help. Factoring is the process of converting your cash invoices and accounts receivable to cash. There are factoring companies that cater specifically to the trucking industry. However, when looking for one, try to use a company that understands your business and is reliable. A plus would be one that offer extras such as free load boards, tire discount programs, and other benefits.
4. Grow and Expand Your Business
Another option is to expand and grow your business as you try to meet the requirements of your clients and potential clients. The trucking industry is growing, so expanding might be the next logical step for you. When you do that, you tend to gain more clients from where you can derive a stronger potential source of cash flow. However, this won’t happen overnight. So be patient. You may need to get funding first. But this can be obtained through banks and other creditors.
5. Train and Empower Your People to Be Accountable
Both employees and managers make a lot of everyday decisions that impact the profitability of the business. Sadly, only a few are aware of how exactly their choices are affecting the company’s bottom line. It would be helpful if your people can be trained to be more aware of how their decisions are translating into business failure or success. In that way, they can be more accountable and empowered to make better decisions for the business.
The Bottom Line
Keeping your cash flow healthy and positive is not an easy task. But if you are determined and committed, you can make it happen. Let us know in the comments if you have other ideas for improving your trucking cash flow.