April 23, 2018
How to Avoid a Cash Shortage With Your New Trucking Company
What is one of the most common reasons new trucking companies go out of business? A lack of cash flow. Trucking companies have a lot of expenses that they need to have cash on hand to pay and when their money comes in is often unpredictable. Most trucking companies can’t expect to be paid for well over 30 days after they’ve provided their services.
There needs to be another option for trucking companies to stay in the green. That’s why Progressive Reporting partners with iThrive Funding to help keep your new company on the road.
What Expenses Do Trucking Companies Have?
If you’re running your own trucking company you’ll have to make sure you have cash on hand to pay for:
- Truck costs
- Truck maintenance
- Driver pay
- Your pay (So you can keep food on the table and a roof over your family’s head)
- Unexpected expenses
Tips to Manage Your Trucking Company’s Cash Flow
Calculate Your Break Even Point
Figure out how much it costs to keep your company running. From there, you can determine which jobs you can afford and which ones you can’t based on expenses.
Plan for Unexpected Expenses
Especially with a trucking company, you could have an unanticipated cost, such as a truck that breaks down without warning. Figure out some potential hidden expenses and be ready to pay for them.
Keep Some Cash Reserves
This is another great way to plan for unexpected expenses. By having cash on hand, you can avoid going into debt. However, it may not be possible to build a reserve if you’ve just started.
Use a Factoring Company
A factoring company can help keep your company on top of your cash so you don’t have to worry about cash flow problems.
Don’t go in the red to keep your trucking company on the road. Instead, let Progressive Reporting get your new company on the road and then iThrive funding can help your company stay on the road by avoiding cash flow problems. If you want to get your trucking company started, don’t hesitate to give us a call! If you have already started your new trucking company and want help managing your cash flow, check out iThrive’s factoring services!
What Does a Factoring Company Do?
A factoring company can get you the money you should receive from a load faster. It’s similar to a loan but better, and it doesn’t force your company into debt. Here’s how a factoring company works:
- Your trucking company hauls a load for another company. The company you hauled for can then take over 30 days to give you payment for your services.
- Rather than having to wait for your payment, you can ask a factoring company to give you the cash you would have received for that load within hours rather than weeks.
- The factoring company then takes a small percentage of your payment and takes care of all of the paperwork, including billing, invoicing and collecting. They’ll make sure the company you hauled for pays for your services so you don’t have to worry about whether or not you’ll be paid for your work.
A good factoring company can save you time and money on paperwork while keeping your company on the road. Having cash on hand can make it easier to take more loads and make more money while still taking care of fuel costs, truck maintenance, and insurance.
How to Create a Cash Reserve
One of the best ways to keep your company out of the red is to make sure that you have some cash on hand. The problem is that creating a cash reserve sometimes isn’t possible for brand new trucking companies. iThrive Funding can help you do that too, if you want they will set aside a percentage of each load into a savings account that you can access whenever you have something unexpected come up.
Don’t Expand Until You Can Afford It
Just because you have the funds to expand, that doesn’t mean you should. Don’t purchase another truck or take on more loads unless you are sure that it will add to your profit.
Try to Cut Costs
This is harder for a trucking company, but it is possible to lower expenses. One option is to perform regular maintenance on your truck(s). It may cost more at first, but the maintenance will save you from an emergency cost later. iThrive Funding’s fuel card can also help you save big on your fuel expense.
Let a Factoring Company Help
You need cash to build a cash reserve. If you’re having a hard time keeping a reserve of cash between loads, a factoring company can help you keep cash on hand by decreasing the wait time between payments.
How Do I Calculate my Break Even Point?
The break even point for a business is when:
Revenue = Total Expenses
Another way to think of the break-even point is:
Revenue – Total Expenses = 0
You may be wondering what the point of calculating the break even point is if you aren’t making a profit. By calculating this number, you can find out how many loads you can take without going in the red. From there, you can determine how many loads you should be taking to maximize profit and get your trucking company to grow! Similar to your break even point is your cost per mile, another important metric to know when it comes to helping you decide which loads you should take and which ones are not worth your time.
Have Questions About Cash Flow?
The coaches at Progressive Reporting can help you with your trucking company every step of the way. If you have any questions about running your trucking company, don’t hesitate to give us a call! We are happy to help keep your company on the road!