What to do when you predict a Cash Flow Shortage

What to do when you predict a Cash Flow Shortage

Accutrac Capital 16-Aug-2013 0 Comments

Every transportation business has them; times when incoming cash can't keep up with the demands of outgoing cash. That can be especially true if your trucking business services seasonal customers where demand peaks and then dies off, sometimes for months at a time. Having a back-up plan for these challenging periods is just good business. Accounts receivable factoring companies that specialize in the transportation space provide freight bill factoring, load advance and fuel cards to overcome periods of low cash flow.

Having a solid plan for what to do during these times can prevent a cash flow low from turning into a cash flow crisis.

What to do when you expect a cash flow low

If the month of January is always your "dead" month, for example, there's no need to wait until then to put plans into place to survive the cash flow challenges it brings.

  • Speed up collections. If you don't already, consider offering cash discounts to customers if they pay their invoices quickly.
  • Negotiate extended terms with vendors. If you know you're going to be strapped for cash, work with vendors to arrange a later date for making payments.
  • Organize a trucking load advance. Work with a factoring company to receive up to 50% of a load's contract value before you deliver it.
  • Use invoice factoring (invoice discounting) to speed up cash flow. Selling your freight bills to a factoring company at a discount in exchange for immediate cash can be a great solution to see your trucking company through the cash flow lows.

Plan ahead for the peaks and valleys of cash flow

Preparing a 12-month cash flow budget is a great way to get a clear picture of when you can expect cash flow to peak or come up short. Planning business expenditures and a backup plan based on these predictions puts you in the driver's seat instead of relying on knee-jerk reactions as you're up against the roller coaster cash flow ride.

Here are some things to consider:

  • During times of excess cash flow consider:
    • Creating a cash reserve to draw upon later
    • Repaying debt ahead of time (especially credit card and high interest debt)
    • Taking advantage of early payment discounts from vendors
  • Organize a business line of credit to draw on when necessary. Remember that it's best to do this during good financial times, not when you've hit a cash flow bottom.
  • If a business line of credit isn't desirable or possible, consider a factoring line of credit (an alternative financing product exclusive to Accutrac Capital) to create available cash without creating debt.

For more information about a Factoring Line of Credit to create accessible cash for your US trucking company, visit www.accutraccapital.com.

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