Maintaining a positive cash flow is vital for the overall health of your trucking business. It can be a big problem if you have more cash getting out than getting in as it could lead you to other financial troubles. To avoid getting into a financial mess, we have listed 5 easy ways to improve your trucking cash flow.
1. Consider factoring.
Even the most established trucking companies experience problems in having uneven cash flows. Most clients tend to pay net-60 or 90 terms, which means you have to wait a couple of months for the full payment. The problem starts when you have immediate needs for cash to pay debts and bills. This is when factoring can help.
Factoring lets you convert your cash invoices and accounts receivable to cash. It is important though to find a reliable factoring company that knows your business. You could look for factoring companies that offer services to the trucking industry as they also tend to offer extras such as tire discount programs, free load boards and other benefits.
2. Watch your expenses.
We know how important it is to keep an eye on your day-to-day operation costs. But there are other creative ways to control or lower your expenses:
- Don’t waste a lot of horsepower on a small load.
- Take advantage of fuel discount cards.
- Conduct monthly profit and loss analysis to monitor any stray numbers.
3. Educate and train your employees and make them accountable.
Dispatchers and managers make a lot of decisions in a day that could possibly affect variable costs, yet only a few know the monetary impact of their decisions. It is important that employees understand the financial side of the operation so that they will be more conscious on the effect of their decisions.
4. Keep your fleet in tip-top shape.
Keeping your truck in excellent condition and with up-to-date equipment can be costly, but it will keep your fleet reliable and efficient. Be sure to have preventive maintenance in place. Also, it is important to monitor those trucks that require frequent repairs. In the long run, you could save more by replacing old trucks and equipment as they are less costly to maintain.
5. Expand your business.
Expansion is a way to go in this ever-growing trucking industry. You need to expand to meet the needs of your potential clients. If you expand, you will gain more clients which means more potential cash flows. However, before that happens, you may undergo the tedious task of looking for funding.
Securing capital or additional funding is possible through banks and other creditors. There are also alternative sources of funding that sells trucking equipment with easy financing options.
Keeping your cash flow healthy is easier said than done. What’s important is your determination to make some changes in your operation to improve your cash flow. If you have other tips to share, please let us know in the comments below.