If you’ve worked for any length of time in the trucking industry, you understand cash flow shortage can put the brakes on your entire operation. From time to time, business owners find that they simply don’t have the necessary cash on hand to cover accounts payable. Whether it’s an abrupt increase in fuel costs, a sudden slowdown in freight or an engine or transmission repair wasn’t anticipated, cash flow shortage is a reality for trucking companies of any size. This begs the question of how trucking companies can handle cash flow deficiencies effectively. It’s always good to have a number of different tactics in place, and we suggest that you try to following:
- Consider having a reserve amount set back, placing a specific percentage of all income and revenue aside every month that will allow you to cover repairs or spikes in fuel costs.
- Have a draw loan available at all times from your bank or financial institution that is specifically designated to cover times when you feel a dip in your accounts receivable.
- If a bank loan is unavailable because you’re a startup or are experiencing credit challenges, contact a factoring company who will then purchase your shipping invoices upfront at a discount, allowing you to receive a large percentage of the value of each load upfront without having to wait three months to receive payment.
When you budget your bills, be sure to prioritize those which absolutely must be paid to keep your operations running smoothly over those that don’t. Things like insurance, utilities, fuel, rent, and payroll are all necessary to keep your business alive. These are the accounts payable that you should be addressing through revenue, reserve amounts, or factored invoices. If failing to make a payment would in any way jeopardize your ability to take on new contracts and haul freight, then you need to prioritize it. Consider creating a checklist where you list the most critical payments down to the least critical, and then simply pay them in that order month by month.
Another important tip is to try to anticipate when you will see your cash on hand drop. Do you have lean months or lean seasons of the year? If so, be sure to have a preparation plan. If you know you might need a loan during the final quarter of the year, don’t wait until September to contact a bank. Of course, banks and other traditional lending institutions have strict regulations and procedures which often make it impossible for trucking companies to secure a loan right when they need it. This is why freight factoring can often be the better option.
When you factor your invoices with a trusted third-party factoring company such as Accutrac Capital, you deliver your haul as normal, but when you send them a copy of the invoice documents, they will pay you a generous advance — often the same day you apply. You will receive 97% of the invoice minus a small factoring the, while the other 3% is held in reserve and remitted when the factor collects the invoice on your behalf. Visit their blog to learn more information about freight factoring and which plans will work best for you.
If you’re a trucking company owner, and you want to turn the obstacle of unpaid accounts receivable into an immediate resource, consider a factoring company for truckers immediately by contacting a reputable factoring partner that will help walk you through the terms and conditions.Follow these tips and you’ll be on your way to cash flow relief.