Congratulations on being your own boss. The freedom, the power, the…responsibility! A great man once said, “With great power comes great responsibility.” That great man was Spiderman’s Uncle Ben, and it sounds like he knows what he’s talking about (hey, without him, Peter Parker would be a nobody!).
Likewise, running your own business means you get some great perks but you also have a lot to think about. One of the more common pitfalls in any industry is cash flow problems: although you may implement a creditor payment term, clients may not always pay on time. Not only that your outlays are consistent – like petrol, salaries, utilities, vehicle and equipment maintenance – these need to be paid immediately. Sound familiar?
Here are some ideas to help you manage your cash flow:
The freight factor
Freight factoring is the best thing to be invented since sliced bread. It helps trucking companies manage their cash flow by providing an advance on freight that has already been delivered (but hasn’t been paid for by the client). Basically, a freight factoring company pays you up front, and then collects from your client when your invoice is due.
Nowadays, most freight-factoring firms offer far more than just factoring – they’ve become something of a ‘one-stop shop’ for trucking companies, providing them with business tools, industry goodies (such as discount cards), or financial services.
Manage payables and improve receivables
Watch your ongoing costs and plan appropriately. Take advantage of creditor payment terms, and schedule electronic payments on the last day so you can retain funds for as long as possible.
On the flip side, set-up initiatives to speed up getting those receivables. Here are some ideas:
- Offer discounts to customers who pay their bill on time.
- Introduce a policy of cash-on-delivery to for those customers that you are constantly chasing.
- Use the deposit-upon-order method.
- Make payments easy for customers – avoid cheques and set up an online payment system.
Get more cash
All you need to do is get more clients. Easier said than done? Yeah, fair enough. But it’s not impossible. The Internet is an amazing and effective resource when it comes to expanding your network, and ultimately, clients. Get on social media, search potential business partners and clients, then reach out. LinkedIn and Twitter make it really accessible to rub shoulders with just about anyone, and trust us, potential clients will appreciate your initiative.
Track your cash flow like a hawk
Dedicate a person within the company to always keep tabs on what comes in and what goes out, and never miss a beat – even for small expenses that you think aren’t significant, like a take-away coffee. For larger companies it is worth implementing a cash flow management system and cash flow projection. You’ll know when you’re most tight on cash in the month, and you’d avoid big expenses around that time, then allocate those expenses closer to pay day. Using such systems also saves the business time and allows staff to use their time more efficiently whilst minimising administration tasks.
Develop a cash flow projection by:
- Reviewing customers’ payment history.
- Identifying upcoming expenditure and allowing for contingency for increase in costs, such as interest rates.
- Detailing amounts and dates of upcoming cash outlay.
Efficiency, efficiency, efficiciency
Whist being efficient doesn’t improve your cash flow, it does help save you costs in the long run. We’ve previously touched on the topic of efficiency to help you maximise your fuel efficiency, reduce fleet costs, minimise downtime, and run an efficient business. That should help your business become a lean, mean, efficient machine.
As with all money matters, the number one rule is to be prepared. At the end of the day, “cash is king”, so make sure you treat it with deliberation and care.