Do you have a cash flow management plan? Without one, your operations can unexpectedly come to a grinding halt. A lack of cash-on-hand or having no funding strategy in place can have dire consequences. The following infographic will help you plan for the inevitable peaks and valleys of your company’s cash flow.
Even the most successful trucking companies have them . . . periods when positive cash flow does not keep up with expenses. It is most often due to seasonal fluctuations, the higher costs of a growing business, or the result of slow paying customers. No matter the reason, your trucking company needs to be prepared.
Rule #1: Plan Ahead
Prepare a 12 month Cash Flow Budget. Create cost and revenue projections by combining your company’s past performance with future expectations. Calculate in your company’s DSO (Day Sales Outstanding) to determine a more accurate prediction of when funds will be made available. Identify the peaks and valleys of your cash flow and take action accordingly.
Actions to take during periods of Cash Flow Peaks:
- Create a Cash Reserve to draw on when needed
- Pay down company debt ahead of time
- Take advantage of early payment discounts from venders
- While your finances are in good shape, organize a Business Line of Credit from your bank.
Actions to take during periods of Cash Flow Valleys:
- Contact your customers to speed up collections
- Negotiate extended credit terms with your vendors
- Organize a trucking Cash Advance on loads in transit to secure funds as soon as you pick up freight
Rule #2: Be Pro-Active
Develop and implement a financial strategy to ensure the reliable access to cash. More and more trucking companies are turning to the advantages of Invoice Factoring to create instant and positive cash flow. Your invoices are paid to you within 24 hours of being issued. Services are convenient, cost effective and Professional Accounts Receivable Management is included as a value add.