Running a profitable business and still running out of money is not an uncommon problem for American business owners. According to a U.S. Bank study, 82% of businesses fail because of cash flow problems. Not because they can’t provide quality service or attract good customers, but because they can’t manage their cash flow. The same goes for starting a trucking business.
If you start a trucking company and you don’t put together a working trucking business plan you could end up faced with a major cash flow problem. This could tank your entire company. Everything from late payments to unexpected truck repairs can reduce or stop cash flow in a trucking business. It’s important to be aware of these potential issues before they arise. Then you can lay out a strategy for addressing them when they arise.
1. Poor quality equipment
Purchasing or leasing the right equipment is crucial to the success of your trucking business. After all, your trucks will serve as the basis of your day-to-day business operations. You need quality equipment to transport cargo from origin to destination in a timely and efficient manner. Any time a truck breaks down or requires unexpected repairs, you are losing money and risking late deliveries. Even using outdated equipment can affect the success of your trucking business. An old truck will consume more fuel and oil than a new truck, which means your expenses will be higher than they would be otherwise.
2. Unreliable drivers can destroy your trucking business.
Eighty percent of all cargo in the United States is transported by the trucking industry. Therefore, there is plenty of business to go around. However, if you don’t have reliable truckers to transport your cargo, your trucking company won’t be in business for long. Finding dependable, qualified drivers to haul freight may be a big problem for trucking businesses, but it’s not a new one. In 2019, the truck driver shortage topped the list of the trucking industry’s 10 most critical issues for the third year in a row, shedding light on a problem that has plagued the trucking industry for years.
3. Clients who don’t pay on time
The clients you decide to haul freight for can also have a significant impact on your cash flow. You want good-paying clients who will give you steady work and pay you fair market prices, on time. Even if you find a client that pays a good rate per mile, if that client consistently pays late, it will delay your cash flow. That could prove to be crippling for your business unless you have enough money to keep the company afloat until you get paid.
4. Paying too much for insurance
Insurance is one of the most expensive fixed costs for trucking businesses. Paying more for insurance than you have to could result in a cash flow problem. You should evaluate your fleet’s insurance policy at least once a year. If cash is tight, you might consider increasing your deductible to lower your premium payments and free up some cash. It’s also not a bad idea to regularly check your company’s credit rating. If your rating has improved, you may qualify for more favorable insurance rates, either from your current insurance company or from another company.
5. Overhead expenses
Trucking businesses have a lot of moving parts, from dispatching to driving the trucks to accounts payable, accounts receivable and back-office tasks, among others. Starting a trucking business can make you a highly profitable business owner. However, having a lot of overhead expenses can quickly lead to a cash flow problem, even for the most successful trucking business. Take a look at your fixed expenses like payroll, office space and service providers. Determine whether there is any room to cut unnecessary expenses or at least reduce some expenses. Leasing a less expensive space for your headquarters or switching telecom providers could potentially save you hundreds of dollars a month in expenses.
For more information or help on improving the cash flow for your trucking business, reach out to TruckingOffice today.
Increase Your Cash Flow Instead
One of the biggest concerns in a truck business is cash flow. Sudden vehicle repairs, unpaid invoices, and IFTA fines or penalties can deplete a company’s available cash. Of course, there are some ways to ensure that you still have the money you need when you need it. Try these suggestions to help improve your trucking finances:
- Use a reliable TMS to track fuel use, mileage, and expenses. This will allow you to know where your money is going and how to cut back.
- A TMS will automatically generate and send invoices which facilitates timely payment.
- Dispatching software streamlines the process of assigning loads and prevents costly deadheading.
- Avoiding IFTA late filing or payments prevents unexpected fines or penalties.
- Regular vehicle maintenance prevents costly repairs and down-time.
- Make sure drivers are qualified and have a clean driving record and a reputation for being dependable.
- Keep drivers happy In turn, they will be more likely to deliver goods on time and observe safety precautions on the road to prevent costly accidents or late deliveries.
If you want to take charge of your trucking finance issues, begin with our TruckingOffice TMS package. You can try it for 30 days without charge, so get started today. Your company’s bank account will thank you.