By Dan Rutherford, Virtual CFO
Would you send your drivers out on a cross country trip with a paper map? By now, GPS has become such a regular part of the industry that it’s hard to remember what things were like before.
Why is GPS such a powerful tool? Because it’s dynamic. It allows you and your drivers to know up-to-the-minute ETAs, to plan for detours and roadblocks, and to navigate around traffic. Take a wrong turn? You get back on track without wasting time.
GPS is a no-brainer. But when it comes to finances, too many companies are still using the equivalent of a paper map: the budget.
Every year, you sit down with your bookkeeper or maybe your tax planner, look over your expenses, and decide if and how to change things for next year. Then you hope for the best.
But what do you do about a spike in fuel prices? What if there’s an amazing opportunity to purchase a new vehicle – can you afford a loan? Do you have enough cash to buy it, flat out? What if a major client walks away, or a few drivers quit?
Unexpected things happen in business all the time. We know that for a fact. The question is, when the unexpected happens, are you using a paper map to try to get back on the road, or do you have a GPS?
A dynamic forecast is your GPS. We start by building it with the most important key performance indicators (KPIs) for your business, for example revenue per truck, utilization, and revenue per mile. We look at revenue, profitability and cash flow, both on a short- and long-term basis, and if things aren’t going in the right direction, we can test different scenarios to figure out the best way to course correct.
Dynamic forecasting isn’t just about damage control – although it helps to sleep at night knowing you’ve got that covered. It’s also about knowing if it’s time to jump on an opportunity or whether it makes more sense to wait this one out. Is it time to buy a new vehicle?
Before you commit all that cash, you want to know if you’ll have enough to make the next few payrolls – even if gas prices happen to surge this quarter. You’ll also want to know if you’re using your current fleet to its fullest.
There’s no crystal ball in business. But you can choose to run your business with a paper map or with a GPS. I’m pretty sure I can guess which one is going to get you further, faster – and with fewer surprises along the way.