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Fuel for Growth: Improving Cash Flow at Transportation Companies

Allison London

Cash flow can be a roadblock for many transportation companies. The volatility of fuel and labor costs as well as the 30-, 60- or 90-day billing cycles mean even the best-run transportation companies will often have to wait months to get paid by their customers.

Transportation companies don’t have to let the financial condition of their businesses deteriorate while they are waiting to get paid. Here are three ways these companies can maintain their business’s financial strength without borrowing money or raising capital:

Boost the Efficiency of Your Fleet

Fleet cards help transportation companies save money on the cost of fuel and maintenance as well as monitor their workforce’s spending.

Depending on the card issuer, the networks will cover thousands of gas stations nationwide. Gas discounts on fleet cards range from 3 cents to 10 cents per gallon and many cards offer rebates of 10% to 15% on maintenance and repairs, according to Fit Small Business.

Maintenance and repairs also can be a way to improve working capital, even if it costs a little more upfront. A regular maintenance schedule can increase fleet mileage, avoid higher costs down the road and those savings can pass to the bottom line.

Consider Factoring Over Capital Advances

Factoring can boost your cash flow from operations without borrowing debt or raising capital.

Here's how it works: A transportation company sells its unpaid invoices to a factoring company. The transportation company receives up to 97% of the amount in cash within a few days. Then, the remaining cash is returned, minus a small factoring fee, once the trucking invoices are paid in full. It is a simple process, and factoring approval is based on the creditworthiness of the transportation company's clients.

“The transportation industry is one of the most factored industries out there, particularly over the road trucking, making it one of the more competitive segments of the industry,” says Louis Greenblatt, president of Evergreen Working Capital in Baton Rouge, which serves specialized transport companies.

Reduce Employee Turnover with On-Demand Pay

The American Trucking Associations expects that a combination of a tight labor market and an aging truck driver population means transportation companies will face a shortage of qualified workers for the foreseeable future.

The constant turnover of experienced drivers can cost transportation companies a lot to attract new personnel. Many employers are now providing guaranteed minimum weekly pay, so that the drivers will have a more consistent paycheck. But is that enough to keep labor costs steady?

Transportation companies can enhance their working capital by making every day a payday for their drivers through GoDo, which is 100% free to employers and employees, and allows employers to float payroll for up to 30 days.

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