By Dan Rutherford, Virtual CFO

Make-or-break strategies for small businesses.

It’s clear that 2024 is going to continue to be a challenging year for the trucking industry. With stimulus money running out and interest rates up, it’s no surprise that deactivations are also steadily on the rise.

In this environment, where it seems like so much is out of an owner’s control, the best approach is: Control what you can.

With all the moving parts for transportation and logistics companies, no one can blame an owner who is just trying to get through the week, cash-wise. Fuel costs, unexpected breakdowns, payroll – it’s a lot.

But if you’re going week-to-week, how can you look ahead to bigger decisions like hiring or major purchases and how to finance them? In leaner times, it becomes way too risky to just go with your gut.

Cash flow management might sound like a lot of number crunching, but it’s really just a way to take the information you already have about your company’s revenue and expenses and put it to work for you. By knowing your major monthly, quarterly and annual expenses and when you can expect client invoices to be paid, you take your gut out of the equation.

Cash Reserves

Part of cash flow management means building up enough cash reserves to weather any storms. We recommend anywhere from 10-30% of annualized gross revenue, depending on your size and level of risk.

That may sound like a huge number – and you don’t have to get there overnight – but there’s a reason why people love to say, “Cash is king.” If you’ve got a strong cash reserve and know what the next quarter and year will look like for your business, you’re going to be the one to make it through tough economic times. Having cash is a bit like driving a monster truck versus a scooter: the scooter might feel fun and carefree, until you get stuck behind a pile of boulders.

When you stay on top of your cash flow with weekly check-ins, you won’t be worried about coming up short for a payroll, and you won’t have to worry about getting hit by an unexpected expense. But it goes beyond that: You’ll be ready to grab those once-in-a-lifetime opportunities because you’ll already have the data to back up your decision.

As industry conditions tighten, the businesses that will survive and thrive will be the ones using data to understand and manage their cash flow.,

A solid financial model of your operational decisions is the secret to successful scaling. Our experienced CFOs create a dynamic forecast to help you analyze how those decisions impact your cash flow and financial statements. Are you ready to consult with our Virtual CFOs? Contact Dan Rutherford, Virtual CFO and Transportation + Logistics Industry Expert, for a free consultation