Cash flow is lifeblood of any business and needs to be properly managed and taken care of in order to achieve long-term financial success. Unfortunately, many small business owners fail to understand this reality and poorly manage their cash flow when first starting out. According to American Express, 90% of small-business failures are by poor cash flow. Yet, these issues can be easily managed by proper planning and smart spending habits. In the trucking industry, it can be very easy to fall behind the fast-paced demand for hauling freight. With fuel, maintenance, and driver expenses, it can be difficult for trucking companies to keep up with the demand of the transportation industry. Further, owner-operators that run their own trucking business have a lot to worry about when it comes to managing cash flow.
In order to manage the cash flow of your trucking business in a highly competitive field, follow these 5 steps and plan for a better road ahead.
- Maximize Cash Inflows
- The key to cash flow management is proper planning. The first step in ensuring your trucking business has enough cash flow to expand and maximize profits is establishing a plan for bringing in as much cash as possible. If your business regularly provides a service or product, consider subscription sales whereby customers prepay. If an order is unusually large, require a partial security deposit to protect your business and avoid losing cash flow. Also, if necessary, consider providing layaway programs that allow customers to reserve products or services and receive them when they have the cash to pay.
- Reduce Cash Outflows
- The second step in maintaining proper cash flow is devising a plan for cutting costs and reducing spending. Whenever possible, buy used equipment that is in good working condition to save your trucking company money. Also, don’t replace old equipment until absolutely necessary. Proper maintenance done on a regular basis can significantly extend the life of equipment and save your trucking business money later on. Another way to reduce spending is to trade products or services with other businesses. Build relationships with other companies that use your product or services and capitalize on opportunities to trade one service or finished product for another.
- Invoice Quickly
- Don’t wait until the end of the month to receive payment for your work. Invoice your customers as soon as the work is completed to maintain proper cash flow. There is no reason to the delay the payment process even more. Make sure your invoices are correct and have your bank account number clearly printed on them to ensure that there is not any confusion or inaccuracy. By invoicing quickly, your trucking business will have a quicker turnaround between spending and earning, making for a more consistent and reliable cash flow.
- Pay Slowly
- Though you want your customers to pay as quickly as possible, the same does not go for your own bills. Take advantage of flexible payment periods and hold off on paying bills until the required deadlines. By paying slowly, your business will be able to boost its cash flow as much as possible and avoid being strapped for money when customers have not yet paid for your product or service. Prioritize your spending and take note of the most important bills, such as payroll, taxes, rent, and utilities, which should never be paid late.
- Payment Options
- Flexible payment options help you and your customers. By providing a variety of payment options for your customers, it is more likely that you will receive payment quicker and with less hassle. Offer wire transfers, credit card purchases, and direct deposit options so that your customers will be able to choose the payment method that works best for them. Discount offers can also be used to incentives customers to pay their bills early.