No one said that starting a business would be easy, but most trucking business owners will tell you that it’s worth it. But to be successful, you have to be aware of the challenges you’ll face as a business owner and work hard to overcome them.
Cash flow is one of the most important things to keep your focus on. This guide will explore how to improve cash flow to identify where you should make changes in order to succeed.
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What Is Cash Flow?
Cash flow is how the money flows in and out of your business. It is the money you earn and your expenses. If you are seeing that more money is going out the door than what you are bringing in, you could be in trouble. You want to see that you’re consistently bringing in more money than you spend each month to have a positive cash flow.
How Can You Manage Cash Flow?
Depending upon the size of your trucking business, cash flow can become tricky. First, you have the day-to-day operating expenses. Next, you sometimes run into clients that take their time getting you paid. This, paired with slim margins that the trucking industry is known for and high operating expenses can make it challenging for trucking business owners to stay ahead.
However, you can manage cash flow most importantly by being aware of it and diving into the challenges that you’ll face. By maximizing your cash flow, you can boost profits and stay ahead in case of unforeseen expenses. Find out how to improve cash flow in small businesses below.
6 Ways to Improve Cash Flow In Your Trucking Business
Improving cash flow doesn’t have to be complicated. In fact, proper cash flow will help protect you and your company from financial turmoil. Following these six tips will help you improve cash flow in your trucking business.
Cut Unnecessary Spending
Are you spending money on things that aren’t necessities? If so, it’s time to cut the fat. Spending money on any unnecessary costs can help improve profits. If you have any unused or unnecessary subscriptions, are still utilizing paper and haven’t converted to ELDs, or have other unnecessary business expenses, push to remove them sooner rather than later. You can even consider cutting out any overhead.
Expand Your Market
If you are located in a competitive market, you know how much competition is driving the price down. This is likely impacting your pockets. When you expand your market and search for jobs in areas with less competition, you can see your cash flow improve.
To expand your market, look at job boards and load boards to see what’s available. But keep in mind you need to factor in any additional expenses such as fuel and travel if you expand further than normal.
Immediately Send Invoices
By now, you likely have an electronic way to deliver invoices. If not, what are you waiting for? When you utilize an electronic accounting system like Melio, you can invoice customers immediately – even from on the road! Sending invoices has never been easier, and your clients can even pay you through the software portal, making it an easy process for everyone.
Unfortunately in the trucking industry, clients are slow to make their payments. This can dramatically impact your cash flow. Your unpaid invoices can cost you operating expenses, as well as waste your time as you try to track them down.
When you utilize freight factoring, you essentially sell the debt to another business for a small fee. You get the cash flow immediately and they work to track down the debt. It is no longer anything for you to worry about and you can keep focusing on your existing clientele.
Create a Cash Flow Forecast
If you haven’t done a cash flow forecast for your trucking business, now is the time. This process involves looking at your future expenses and sales, then estimates if you will have enough cash to continue running the business.
It will provide a deeper look at your income and expenses to determine the health of your company currently and hopefully identify any pain points that you can address before it’s too late. Using accounts payable/accounts receivable software, like Melio, can give you a clearer look at your invoicing and payment history records, which means you can create a detailed and accurate cash flow forecast.
When you offer electronic payments to your clients it allows them an easier way to pay their bills. Many companies have gravitated away from checks and prefer online ways to pay. You can also set this up through Melio and make it easier than ever for your clients to pay you for your hard work.
Cash Flow vs Revenue
Understanding the difference between cash flow and revenue is important for your trucking business. Cash flow as we discovered above is the net amount of cash that is transferred into and out of your business. Revenue is the money that is earned from the service you provide.
Solutions to Solving Cash Flow in Your Trucking Business
As you saw from above, many of the ways to improve cash flow begin with accounting. Having the best accounting software will help you not only stay on top of expenses but also help you get your invoices sent out and payments quicker.
Melio is a trusted accounting solution for truckers and fleet owners that can help you dive into any cash flow problems you may be facing and provide insight into where you should cut the fat