When trucking business owners are constantly battling cash flow problems, they often neglect the most vital tool for managing a trucking business: a trucking business valuation. As they struggle to keep their head above water and continue pushing forward without a firm understanding of their business’ value, they often fail to identify opportunities to merge with a competitor, and often miss what was the right time to sell their trucking business.
For trucking companies who struggle to collect timely payments from customers, factoring offers a solution to gaining control of your cash flow. Below are 10 tips from Bibby Transportation Finance, a 203 year old factoring firm that specializes in addressing the cash flow needs of trucking and other transportation companies.
1. Pay your employees first, they are your highest priority and don’t forget the IRS – keep current with payroll taxes.
2. Pay attention to the credit worthiness of your customers so you are confident you will get your money. Remember a sale is not a sale until you have been paid.
3. Limit the amount of business you do with any one customer so you aren’t left penniless if they run into trouble and are unable to pay.
4. Bad business is worse than no business. Customers who fail to pay their bills on time should not be your customer any longer.
5. If a customer becomes undependable, change the terms to COD (cash on delivery). That way you can keep the customer and avoid the uncertainty of payment.
6. Keep an accurate and complete audit trail. Don’t do business on a handshake when the future of your company could be at stake.
7. Keep management accounts and use financial reporting. Plan how you will pay your expenses, rather than paying bills based on how much is in your checking account at that moment.
8. Cash flow counts. Focus on shortening terms with your customers and structure the pricing to coincide with those terms. If you wait 90 days to be paid that means you are financing your customer’s business. Or, if you give extended terms, get paid more.
9. Think about establishing a lending relationship when you don’t need financing; that’s the best time to ask for money. Then follow the financial reporting requirements. Make it easy for the financial institution to lend you money.
10. Explore alternative lenders. You will probably be surprised to learn what’s out there. It can take time to find financing sources. Do your homework and get all of your questions answered.
11. Again, when trucking business owners manage cash flow more efficiently, they are able to identify and exercise a variety of strategic options that can help them accomplish their long term objectives—whether that involves selling a trucking business, merging trucking businesses, or acquiring a competitor’s trucking business.
12. Again, when trucking business owners manage cash flow more efficiently, they are able to identify and exercise a variety of strategic options that can help them accomplish their long term objectives—whether that involves selling a trucking business, merging trucking businesses, or acquiring a competitor’s trucking business.
Again, when trucking business owners manage cash flow more efficiently, they are able to stay on top of their business’ value while identifying and exercising a variety of strategic options that can help them accomplish their long term objectives—whether that involves selling a trucking business, merging trucking businesses, or acquiring a competitor’s trucking business.
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