The Importance of Cash Flow Management in the Freight Industry

Cash flow management, or the management of money coming in, in the form of income and going out in the form of expenses is critical for trucking companies. Here, we’ll explore the reasons cash flow management is so important and how trucking companies can improve their cash flow management.

Top Reasons Cash Flow Management is Critical in Trucking

Cash is Critical to Maintaining Operations

They say cash is king, and there’s a reason for it. In trucking, it can seem like expenses are endless. That’s why it’s critical to have cash coming in, to account for the cash that must go out.

If you don’t have enough cash coming in, it can be difficult to keep operations humming. While there are loans and lines of credit that can help in a cash crunch, they can be expensive and difficult to get, and they often take time. A delay in paying necessary expenses can mean operations screech to a halt. If operations cease, it can be very difficult to get back on track.

Building Solid Business Relationships Is Difficult Without Good Cash Flow

Good relationships are critical in the freight industry. Despite all the technology used to manage so many parts of trucking companies, relationships are the backbone of any trucking business.

If you want strong relationships with your drivers and staff, it’s important that they always know they’re going to be paid on time and in full. When managing a business, everyone employed there relies on the company for their livelihood. Keeping good help means making sure they’re taken care of.

Great relationships with vendors are also dependent on your ability to pay them when it’s time. Keeping the lights on, fuel in the tanks, and trucks running smoothly are all the results of good vendor relationships.

Cash Helps You Overcome the Unexpected

The one thing that you can always expect in the trucking industry is the unexpected. Breakdowns happen. Delayed loads happen. Delayed payments happen. Driver issues happen. Weather happens.

When you’ve got plenty of cash coming in in a timely manner, it’s easier to cope with the unexpected. You can afford necessary repairs and account for delays without putting your company in the red.

Operating on Credit Can Be Costly

If cash flow is hampered, companies may be forced to rely on credit to keep running like loans or lines of credit. If credit isn’t readily available, it can take time to get access to the money needed. Application processes are rarely instantaneous, and a delay when you need money could leave you scrambling to meet financial obligations.

Not only is credit not always easy to access immediately; it can also be expensive. Interest adds up quickly and fees can have an impact on the bottom line.

Cash Flow Management is Even More Important in a Soft Market

When rates are lower and margins are thinner due to high operating costs, cash flow becomes even more critical on a day-to-day basis. With less cash coming in overall, making sure that it’s flowing smoothly can be the difference between staying afloat and sinking.

While the market has experienced its share of ups and downs over the past couple of years, there’s no doubt that we’re in a soft market. Effectively managing cash flow is the key to pushing through to a stronger market.

Cash Flow Management Offers Data to Drive Strategy

Without understanding the money coming in and going out of your business, it’s almost impossible to strategize effectively. Tracking cash flow is an important part of knowing when to invest in your business to promote growth and when to pull back on expenditures.

Tracking cash flow can be difficult when it takes time for invoices to get paid, especially if payments from shippers are late. When you don’t know when money owed to the company will come in, it can be difficult to plan how money should go out.

Freight Factoring Helps Maintain Good Cash Flow

One of the best strategies for maintaining good cash flow is freight factoring. With factoring, you can get paid quickly for each load, keeping cash flowing into the business at a similar rate as expenses going out. With programs like Express Freight Finance’s DropPay, trucking companies can even get paid instantly for loads as soon as they’re completed. You can sign up for DropPay here.Beyond freight factoring, Express Freight Finance offers other services to help trucking companies keep cash flowing. For example, fuel advances help trucks keep running when funds are low, while our fuel card program provides access to funds and fuel discounts to keep the tanks full. Express Freight Finance also offers customers free premium access to load board and dispatching partners.