With the consistent need to purchase fuel, maintain your trucks and make payroll and the not so consistent payments from your customers many transportation companies need to look for ways to increase their working capital. The only way for transportation companies to increase their working capital is to increase the amount of current assets (i.e. cash on hand) and/or decrease the amount of current liabilities (i.e. bills). Here are a few tips to increase working capital for transportation companies.
Have an easy and effective way to collect on your invoices
Make sure you have an invoicing process or system in place that is easy for you and your customers. Your invoices should be sent out in a timely manner and be clear to read with the payment terms clearly identified. You also need a process or system in place to remind your customers of past due invoices and for collections when the invoices go unpaid past the stated terms.
Look for ways to save on your expenses
Your overhead is the first place to look when examining ways to increase your working capital. If you can lower your fixed costs you can likely tip the scales in a positive direction. Payroll is often a transportation company’s second largest overhead expense so you should look for options to lower it. One way is to see if there are possibilities for outsourcing some functions such as accounts receivables/collections and marketing.
Another way to save on your expenses is to look for loyalty programs or other programs that will lower your current expenses. For example, are there fuel programs or maintenance programs you can take advantage of to lower the cost of things you need on a regular basis?
Examine your accounts payable
Take a look at how you can stretch out making payments on expenses so you hold on to your cash for longer. This could mean taking full advantage of payment terms or working with partners with payment terms fall more in line with your cash flow cycle. It could also be beneficial to see if there are any early payment discounts offered to save you money.
Get paid more quickly with Freight Bill Factoring
Factoring your freight bills allows you to eliminate the 30-60+ days you have to wait for your customers to pay giving you access to the funds you need to pay for things such as fuel, maintenance, and payroll. Factoring services allow you to use your existing untapped collateral (your invoices) without assuming any debt.
All you have to do is deliver the load, submit your paperwork via fax or scan to us and we will get you the funds within hours. The factoring company then waits to get paid by your customer and once we do we will submit the balance of the funds minus our fee to you. It is quick, easy and with no hidden or unexpected fees you know what to expect from us every time.
There are several equipment financing options available that allow you to leverage your equipment to help increase your working capital. One way would be to sell your existing equipment to an equipment leasing company who will then lease it back to you for a lower monthly payment than you currently have. Additionally, an equipment leasing company can help you get access to new equipment that could help lower your maintenance, fuel costs and repair bills as well as help give you a competitive advantage by having access to the latest technology and efficiency.
Our team at Tetra Capital would be happy to discuss with you ways we can help increase working capital for your trucking company. Give us a call today at (801) 676-0182.