Many small transport or fleet businesses do not take heed financial experts’ recommendation to take a cash flow protection insurance Australia policy until it’s too late. Well, it does not really matter how profitable a business or how brilliant you are as a trucker-owner, if you can’t manage its cash flow– all efforts are for nothing. No wonder studies reveal that many truck driver who ventured into starting their own trucking services often fail.
Cash flow is the lifeblood of businesses. As the word implies, it is how money comes in and out of a business. For new startups in the transport sector, the danger of mismanaging cash flow can lead to its eventual failure. Running out of money to finance the whole shebang will shut a business down faster than a cannon ball. But what common cash flow problems have continually wrecked havoc to small time players in the transport sector? What can be done to remedy this problem? To give you an idea, here are 6 common pitfalls to remember/avoid.
Too much optimism. Being relentless in your pursuit to go on board is no biggie. It is, in fact, commendable to be enthusiastic in all business dealings. However, overestimation of returns or even of trucking deals can easily dwindle business adrenaline. Try to start slow and steady. Look for clients who are inclined to pay rather than ride on your excitement and pay you peanuts. Keep your objectivity in check and always review facts for sound judgment.
Impulsive Spending. It’s so easy to splurge with a startup capital. In fact, many rookie trucker who venture into converting their expertise as business usually fall to the trap of “spending to earn something.” Don’t! Always weigh things over. Always see the advantages as well as disadvantages. However, it is wise to keep watch of the transport business’ bottom line. Do a cost-benefit analysis before taking the plunge. Most importantly, do make sure to stick to a realistic budget.
Too much past due receivables. Another cash flow killer in small-scale transport businesses is having too many unpaid invoices from clients and being passive about it. Some truckers-turned-transport-entrepreneurs tend to be less strict in managing receivables to lure in more clients. This, however, will lead clients to do the same misdeed over and over again. Instead, be prudent in collecting payments. Impose penalties to late payment and discounts to early ones.
Zero budget planning. Without a doubt, experienced truck drivers know the ins and outs of every road and highway. However, many of them find planning day to day cash flow to be challenging. This is where financial management training comes handy. Learning how to make a cash flow statement or a budget plan will rein in unnecessary spending leading to more money coming in to the business’ treasure chest.
No extras. It is common for startup transport business to experience cash flow hiccups. To fledgling businesses, however, having no cushion in a slow month or when accidents happen can lead to gargantuan upheavals. As much as possible, have at least three months of cash needed to keep your transport operation rolling.
No insurance. Truck drivers may live by life, medical or accident insurance but managing a business is an entirely different arena. When it comes to cushion from unforeseen disaster, it is always wise to have a cash flow protection insurance Australia policy to fall back on. Just make sure to obtain one from a reliable insurer though.
Without a doubt, these cash flow problems are some of the biggest challenges to keeping a new small transport business afloat. Even with a cash cushion or cash flow protection insurance Australia at hand, it is highly recommended that one goes to a seminar or training on how to manage finances before taking the plunge. When done accordingly, unexpected issues can be addressed effectively.