No matter the size of your freight business, cash flow problems are inevitable. Although this is not something that any business owner wants to encounter, it’s normal.
Because of the contract based nature of the freight industry, you are constantly waiting for invoices to be processed and paid.
This can hurt your business’s cash flow, and it’s credit in the long run. If you are like the many freight business owners that believe this problem is unavoidable, you are mistaken. There are many ways to keep this problem from taking over your business. Here are 5 simple things you can do for your freight business to boost cash flow and grow larger than ever before.
1. Make Payment Terms In Your Contract Clear
No matter how big or small your clients are, it is important that you enforce the same, clear payment terms in every contract. This is a standard business practice that you should implement, if you haven’t already.
If you already have your payment terms laid out in your contracts, take the time to read through them. Get a third party individual to read the terms also. This will help you understand if your terms are clear enough for a new client to understand.
By highlighting or stating the payment terms in your contracts, your client’s will be clear on exactly what is expected from them in your business together.
If you are concerned about a client not paying on time, ask for a deposit or incorporate a late payment fee into the payment terms. This will ensure that your freight business won’t be out of cash for an extended period of time.
2. Send Out Invoices Immediately
To keep your client’s accountable for their payments, try sending out invoices immediately. Rather than waiting for the monthly billing schedule, send invoices out right away. This will instill the need to make payments faster in the client’s mind. By waiting for the first monthly payment, your clients will be less likely to send out payments on time because of your non-urgent response.
When you send out the invoices right away, be sure that you give multiple forms of payment options to allow clients to make payments that are easiest for them. By making this a simple procedure for them to do each month, they will be more likely to keep on time and on track of their payments to your freight business.
3. Assess Your Expenses Often
In the freight industry, expenses can accumulate quickly. With the constant fluctuation of gas prices, the need to update or repair vehicles, and other business expenses pile up without you even blinking an eye.
It is crucial that you keep track of every expense that your business makes, and to review them every few months. This will give you a better idea of where your money is going, where you can afford to spend more, and where you need to cut back.
If you notice that your freight business’s cash flow is very poor, don’t be afraid to look for financial help. Utilizing freight factoring to get cash for unpaid invoices is a great way to start building a strong source of capital for your business. With freight factoring, you simply sell your outstanding contracts, invoices, or account receivables to get up to 96% of the total in just 24 hours or less. This often comes at little to no credit risk for your business.
4. Spread Out Bill Payments
While it may be easier to pay all of your bills at the same time, this can hurt your business’s cash flow. Rather than just one major payment to all bills, spread them out over two or three times a month. This will help spread out the frequency of outgoing cash.
5. Create and Stick to Your Budget
One of the easiest ways to better take control of your cash flow is to create a budget. Your budget should be a clear and realistic goal that your business contributes to every month.
Many business owners create budgets with the all intents and purposed to adhere to it, but fail to do so. Without sticking to your well thought out budget, you will not have a clear idea of your income, expenses, and current cash position.
These five simple tips can help your business save thousands of dollars every year. With your savings, you will be able to secure a strong source of income to grow your business larger than ever before.