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Business owners often focus on profitability, but it’s actually cash flow problems that cause trouble for most. Particularly in transportation, an industry with tight profit margins, high overhead expenses, and lengthy waits for payment, cash flow issues can quickly overtake even the most profitable enterprise. So, what are small trucking companies to do when money’s tight and invoices aren’t getting paid fast enough? Get started with the cash flow management tips below and avoid late payments and poor cash-flow management, which can cause small businesses to fail.

Positive Cash Flow is a Business Essential

Research shows 82 percent of business failures are related to cash flow, per Entrepreneur. It can happen to the best of companies simply because growth requires cash. As your business levels up, you’re drawing on cash reserves created from being in a lower revenue bracket. Larger companies have a leg up here because they can go to banks and get short-term loans. Meanwhile, 53 percent of small businesses go without the funding they need, according to the latest Small Business Credit Survey.

Naturally, cash flow is vital for covering daily expenses, such as payroll, fuel, and upkeep. But, it’s crucial to have cash on hand for emergencies and slow periods too.

How to Fix Cash Flow Issues for Your Trucking Business

Even though cash flow problems can create huge headaches for trucking companies, there are lots of things you can do to help turn yours around.

Consider Increasing Your Prices

With small trucking companies, it’s not so much an issue of setting prices too low as it is unintentionally underbidding. To make sure you’re charging the right amount, calculate your cost per mile. To do this, you’ll divide your anticipated expenses by the number of miles you plan to drive. Some sources suggest you only need to do this annually, but when fuel prices fluctuate, it’s wise to run your calculations much more frequently—perhaps even for each bid.

Negotiate Better Terms with Shippers and Brokers

In the trucking industry, it’s common to wait 60, 90, or more days to get paid. If you’re tied into these types of terms, see if you can negotiate faster payment to get cash inflows rolling in faster. Be aware that there is a major difference between negotiating better terms and getting Quick Pay. The latter is a service provided by some brokers as a faster way to get paid. However, you are paying for the privilege as opposed to simply getting paid faster. Moreover, accepting Quick Pay can harm your negotiating power by signaling to the broker that you have cash flow problems. They may offer you less for your loads as a result. Many truckers also struggle to break free of Quick Pay brokers once they start, unable to accept higher-paying loads elsewhere simply because they need Quick Pay to cover operating expenses. 

Sell Assets You Don’t Need

Trucking is generally a lean business, especially for owner-operators. However, if you have equipment you’re not using, be it an extra trailer or even office equipment like computers, consider liquidating them for cash and improve your poor cash flow.

Delay Any Capital Spending

It may go without saying, but if you’re strapped for cash or foresee a common cash flow issue or shortfall, hold off on any unnecessary inventory and hiring spending. Bear in mind, this doesn’t mean skipping out on maintenance. Instead, caring for your equipment properly will help you avoid costly expenses in the long run.

Review Insurance Costs

Insurance is one of the biggest expenses for transportation companies. Shop around for a better deal or see if there are insurance-related expenses you can comfortably cut. Don’t skip insurance altogether or cut yourself short, though—there’s a fine balance between having the insurance you need in order to stay protected and be legal and being over-insured.

Reduce Overhead Expenses

Explore all your current overhead costs. Can you use a fuel card to save at the pump or get discounts on maintenance? Do you have physical office space you can downsize? Can you outsource some of your office tasks to vendors to cut back on expenses?

Send Out Invoices Immediately

Often, small trucking companies hold off until the end or start of the month to send invoices. That can add weeks onto your already lengthy revenue cycle. Start sending invoices as soon as you’ve delivered a load to speed up payments.

Set Up a Line of Credit

Last year, 62 percent of small business owners used their personal funds and credit cards to cover business expenses and working capital, according to the Small Business Credit Survey. If you’re able, try setting up a line of credit when you’re in good standing so that you can draw on it during lean times. Naturally, you’ll want to pay off any cash you use as quickly as possible to avoid getting trapped in debt and to ensure your credit use helps build your score overall.

Stay Away from Load Boards Whenever Possible

Load boards are an “easy” way to find work, but they’re also incredibly competitive. It’s easy to set your bids too low in an attempt to win business or collect less than you deserve just because the going rate is low. Try to work directly with shippers for the long term as much as possible to maximize your pay and develop relationships that will keep you off the load boards for good.

Get Qualified for Freight Factoring

Freight factoring, also referred to as invoice factoring, gives carriers immediate upfront payment for unpaid freight bills, employees, and supplies. Instead of waiting months for a client to pay, you’ll simply send the invoice to a factoring company after you’ve sent a copy to your client. Your factoring company will then advance most of the invoice’s value right away and will wait for payment from your client. When you choose a factoring partner like Viva, you’ll get incredibly competitive rates and perks like fuel cards and avoiding cash flow issues. Plus, approval isn’t contingent on your credit, so most will qualify. Click here to get started.

Armando Armendariz

Armando Armendariz, Director of Business Development and Partner of Viva Capital, facilitates new business, establishes referral partner relationships and oversees sales—over 15 years of experience in banking, finance, and business entrepreneurship.