5 WAYS YOUR TRUCKING COMPANY CAN BOOST ITS PROFITS IN 2014

Transcription

1 T114 5 WAYS YOUR TRUCKING COMPANY CAN BOOST ITS PROFITS IN 2014 ecapital.com

2 TABLE OF CONTENTS Introduction 3 1. Increase your cash flow 4 2. Know your customer Use a fuel card Keep better records Optimize your efficiency 18 About ecapital 21 Got a question? Need some advice? Give us a ring

3 INTRODUCTION As a business owner, you enjoy many perks and benefits. But, you also face your share of challenges. Perhaps the most important one is being profitable. This guide includes five practical ways to strengthen your profits within the next year. Applying them can enable you to earn more with less work, and give you better financial security. Thank you for your interest in this report. Whether you re a veteran or a new business owner, we know you ll find something of value. Continue reading to find 5 ways your trucking company can boost its profits in 2014 Got a question? Need some advice? Give us a ring

4 1. INCREASE YOUR CASH FLOW Got a question? Need some advice? Give us a ring

5 1. INCREASE YOUR CASH FLOW Don t worry. This isn t as difficult as it sounds. In fact, there a few tools available that can enhance your cash flow almost overnight. But, before we get to those, let s look at why a better cash flow is critical to your business. With more cash at your disposal, you can: Take on more loads. Having better cash flow allows you to accept loads from companies that take a while to pay their invoices. So, you ll have more load options and less downtime. Many of these slower-paying companies pay more per mile, too. Offer better terms. While most businesses set their payment terms, you may win over a company and gain more loads by offering longerterm pay periods. Remember, companies face cash flow problems of their own. Those that do may give you more loads because you re giving them up to 60 days to pay your invoice. Improve your credit rating. Having extra cash on hand enables you to pay all your bills on time, get early payment discounts, and strengthen your credit score. That s an important consideration for truck drivers. It also means avoiding costly late fees and related penalties, like higher interest rate charges. Reduce your stress. Let s face it. The strain of living payroll-to-payroll adds up, both mentally and physically. As a trucking company owner, you already have plenty of things to stress about like drivers, customers, vehicle maintenance, safety and compliance. Knowing you have enough cash in your checking or savings account to pay for your ongoing expenses is a relief that can make your life easier. Got a question? Need some advice? Give us a ring

6 1. INCREASE YOUR CASH FLOW - FACTOR So, how do you go about boosting your cash flow? While there are many ways, these three can do the job in a hurry. Factoring Factoring companies turn your invoices into cash, often within 24 hours. They essentially buy your invoice, and assume the responsibility of collecting on your bill from your customer. So, you get your money without having to wait days and that s it. Most reputable factoring companies only charge a few cents on the dollar for this service. As a bonus, many factoring companies also provide other services or products (for free or a small fee) that can save you time and money. Some of these include fuel discount cards, customer credit-checking, fuel advances, and industry-related discounts. Factoring is ideal for small to medium sized trucking companies. This allows you to accept loads from customers with higher rates but slower payments, as a factoring company will give you the money right away. Factoring is versatile it can be used for loads obtained from a broker as well. Factoring is ideal for carriers whose brokers don t offer quick pays or advances, but provide the best-paying loads. You can typically take advantage of many of these additional services or products including fuel discount cards without a strong personal credit history or being charged a fee. You may not even have to face a credit check or pay an application fee. However, entering into an agreement with a factoring company is an important decision. Before doing so, here are a few things to consider. Let s start with the length of the contract. Most factoring companies require you to begin with a long-term agreement. This could be a problem if you discover the service isn t up-to-par. However, a few factoring companies offer a short initial contract period. This is a great way to kick the tires and experience the service first-hand. Also, be careful about minimum requirements. Many companies advertise what looks to be a good rate, but impose minimum volume or fee standards. So, the rate may not be as attractive as it seems. Got a question? Need some advice? Give us a ring

7 1. INCREASE YOUR CASH FLOW - FACTOR For example, let s say a company s factoring fee is 5%. But, you ll have to meet a minimum volume of $20,000. You feel you can do that, so you agree to the deal. However, your business slows unexpectedly, and you only have $10,000 in invoices to submit. That means you ll end up paying the same amount in the end, and your rate will essentially double. Fortunately, some factoring companies don t box you in with minimum requirements so you won t get trapped like this. Some factoring companies force you to submit every customer invoice they essentially want all your business. But, here s the problem. It often doesn t make sense to factor every invoice. What if some of your customers already pay quickly? Why would you want to be hit with factoring fees on their invoices? Again, some companies offer more flexibility and allow you to choose which invoices you factor with them. Smart trucking companies will learn as much about a factoring company as possible before they sign anything. Plus, there s no better judge of a business than its clients. Companies that treat their clients properly are quick to provide customer testimonials. Take some time to speak to these customers and get feedback straight from the source. Factoring can be an excellent way to immediately improve your cash flow on loads that pay well but slowly, and save you time and money. There are plenty of things to consider when choosing a factoring company. Of course, it s not always easy to make an apples-to-apples comparison. The challenge then, is to make as complete and careful assessment as you can. You shouldn t base your decision on just the rate. After all, this is cash flow we re talking about the lifeblood of your company. You should make your choice on a variety of factors, including customer service, the company s stability, the strength of the products or services, and the other things mentioned above. You ll be better off in the long run for doing so. Factoring can be an excellent way to immediately improve your cash flow on loads that pay well but slowly, and save you time and money. Got a question? Need some advice? Give us a ring

8 1. INCREASE YOUR CASH FLOW - ADVANCES As you know, fuel typically represents your largest source of ongoing expenses. Paying these bills eats away at your available cash. Advances can ease this strain. They can be used to pay for fuel or other expenses even before you complete the trip. Many factoring companies offer this service for a small fee. In most situations, advances give you 40% of what the load pays in just a couple hours. You can choose to get funds several ways: They can be transferred to your bank account, added to your fuel card, or through and express code. So, an advance will spend like cash at truck stops without the worry of carrying a large amount of money. However, only about 25% of brokers and factoring companies offer advances. Also, brokers usually offer loads that pay far less than the industry average. And their advances range from $20-$50 per transaction. So, it s better to only use an advance for the best paying loads, and go to a factoring company if your broker doesn t offer this service. In most situations, advances give you 40% of what the load pays in about 24 hours. You can also choose to get funds transfer. Instead of receiving your cash advance in your bank account, some brokers or factoring companies can apply your funds to your fuel card or issue a comcheck. So, an advance will spend like cash at fuel truck stops without the worry of carrying a large amount of money. Got a question? Need some advice? Give us a ring

9 1. INCREASE YOUR CASH FLOW - QUICKPAY Like factoring, quick pay allows you to get paid right away on your invoice after you deliver the load. However, in this case, the money comes directly from the broker that gave you the load. Unfortunately, not all brokers offer this service. In fact, just like with advances, only about one-fourth of all brokers provide this service. A quick pay can be an inexpensive solution with an industry standard rate of 1.5%-3% per transaction that leads to better cash flow. Additionally, some quick pays can take up to 5 days to pay, yet still charge the same rate for next day payment. Brokers that offer quick pays tend to have the cheaper paying loads. So, it makes more sense to seek the higher-paying loads, and if a quick pay isn t available then, factor the load for faster payment. Overall, advances, along with factoring and quick pays, can be an intelligent, quick way to upgrade your cash flow. ADVANCES + FACTORING + QUICKPAY = $ Got a question? Need some advice? Give us a ring

10 2. KNOW YOUR CUSTOMER Got a question? Need some advice? Give us a ring

11 2. KNOW YOUR CUSTOMER How many times have you been in this situation? You have a truck on the fence, a driver that s stranded, or a driver deadheading back home. You hear about an available load. But, it s with a broker or shipper you don t know anything about, including the company s credit status, reliability, or payment schedule. Should you gamble and take the load, and hope the company pays? Or should you pass on the job, and hope another one shows up soon from a company you re familiar with? It s a tough situation. Being able to do a fast credit check on these companies can make your decision easier. Doing so gives you a glimpse into the company s payment history, so you ll have a better idea if a company is a slow-payer or even a non-payer. Many factoring companies keep their own database of a broker/shipper s payment history, and will share this information with their customers. You can find out either online or by phone within minutes how fast a broker/shipper pays with a real-time snapshot. While some factoring companies provide this service for free, others charge a per-usage fee. Of course, you can always ask your colleagues about their experience with a broker or shipper you plan to haul for. But, you may not have the time to do so in many situations. Also, you could just ask the broker/shipper about their payment schedule. But, the answer they provide may not be accurate. Additionally, some third-party services may charge $15-$20 per month for this service, and their data won t be as extensive. These services rely on others to recount their experience with a broker or shipper. Meanwhile, factoring companies have first-hand experience with a customer s payment history. They provide the best glimpse into past and current payment history, so you ll have a firm understanding of how quickly or slowly a customer pays and if there s been a change in the pattern. As an example, a customer that used to pay in 30 days may now take days. Or, a company that once took 60 days to pay may now only take 14 days. Nothing beats having the facts. Having easy access to payment histories enables you to take on jobs you might have otherwise passed on due to a lack of credible information. Best of all, it allows you to escape the financial strain of dealing with a slow-payer or non-payer. However, as mentioned earlier, some of these slow-payers may have higher per-load rates. Using factoring, a quick pay, or an advance in these situations can enable you to take advantage of these opportunities without having to wait to get your money. Got a question? Need some advice? Give us a ring

12 3. USE A FUEL CARD Got a question? Need some advice? Give us a ring

13 3. USE A FUEL CARD While there are many fuel discount cards available, not all are created equal. Some allow you to buy large amounts of fuel at the credit price without having to carry a lot of cash. Other cards enable you buy fuel at the cash price instead of the credit price. Still others may offer cash rebates or discounts at the pump. Even better, some cards designed for fuel purchases give you the versatility of a debit card. These cards offer a discount off the cash price or retail price, and save you hundreds or even thousands of dollars each month on fuel charges. Of course, this can significantly accelerate your annual profits. Credit Card for Fuel Purchases Some credit cards offer cash rebates on fuel purchases, but require good credit. These rebates also may be subject to a monthly limit, and you ll be charged the highest credit price for fuel. Typically, these programs place limits on fuel rebates because trucking companies can rack up rebates pretty quickly. Depending on the rebate program, you may wind up paying the retail price in the end. So, this option doesn t give you the best savings in the long run. Fleet Discounts on Fuel You can obtain the highest discounts on your fuel purchase in a number of ways. If you have 50 or more trucks, you might be able to negotiate with the truck stops or card companies and get a discount on the cash or retail price. However, smaller trucking companies and owneroperators will not be able to negotiate for these discounts. Midsize Fleets and Owner-Operator Fuel Discounts The good news is, midsize trucking companies and even owner-operators can still get discounted fuel. A card that combines powerful discounts with a payment mechanism is the best way to go. This allows you to receive your discount at the pump, and only carry one card. To get the steepest discounts, you need to be a part of a large group with strong buying power. The bigger the group and the more fuel purchased, the better the discount. Got a question? Need some advice? Give us a ring

14 3. USE A FUEL CARD ATM/Debit Card Fuel Discount Cards To get the payment mechanism built into your fuel discount card, you ll need a payment network like OTR, TCH, EFS, T-Chek, or Comdata. This will permit you to buy fuel directly from the card. The powerful fleet network will pass the discounts to you all in one package. However, companies that provide this typically run a credit check and require you submit an application fee. They may also charge monthly or annual fees, in addition to their per-transaction fees. Why use a combined fuel discount ATM/debit card? Controls on spending. If you have drivers, you ll be able to control how much and what they spend money on. You can also decide whether to allow them to buy scale tickets, DEF, tires, repairs, etc. It s more secure than cash. If you lose the card, you can turn it off, transfer funds to another card, and then have a new card sent to you. Increased flexibility. It s a debit card, discount card, and ATM card in one package. Better reporting. This gives you an easier way to keep track of when and where your card was used, and how much fuel was purchased. It s especially helpful if you only use the card yourself, or if you have a few drivers. Many factoring companies, fuel tax reporting, and state associations also use the power of their fleet network to get discounts combined into one payment card. In the end, the more trucks using their cards, the better discount you ll receive. Some factoring companies such as ecapital offer the same fuel discounts that large fleets are able to negotiate. They combine it with features of an ATM/debit card without any application fees or credit checks. So, you ll get great discounts even if you don t have good credit or the buying power of a large fleet. Got a question? Need some advice? Give us a ring

15 4. KEEP BETTER RECORDS Got a question? Need some advice? Give us a ring

16 4. KEEP BETTER RECORDS If you re serious about improving your profitability this year, don t skip this step. Not knowing how much you re paying for individual expenses throughout the year makes it harder to identify and control them. While you may be able to recognize some trouble spots easily, others will surprise you. It s these sneaky charges that can crater your profits. However, here s some good news. It s getting easier for truck drivers to monitor their costs. Inexpensive driver accounting software is readily available online, such as mint.com or budgettracker.com. Designed with truck drivers in mind, these programs are user-friendly and make it relatively simple to record daily expenses. If you have a laptop, you could install the software, and input your expenses at the end of every day while you re on the road. Got a question? Need some advice? Give us a ring

17 4. KEEP BETTER RECORDS Of course, you can always use a spreadsheet or just a legal pad to record your expenses. The important takeaway is to have some system in place and use it consistently to better understand where your cash is going. Other ways to improve your record keeping include: Saving those receipts Keeping receipts of all your costs not only aids your record keeping, but gives you the documentation needed to claim certain expenses on your tax returns. Since many of your expenses occur when you re on the road, it s smart to store your receipts in something that s easy to transport such as a manila envelope or an expandable folder. Incorporating your business Doing so offers some record-keeping advantages, and provides protection on personal assets. For instance, you may not have to collect all those annoying receipts to take the standard per-diem allowance, which doesn t require such extensive record-keeping. While you ll have to pay to incorporate your company, the benefits you receive may be more valuable to you. It s wise to ask a lawyer or a tax expert for more information on this move before proceeding. Using a professional service Using a tax professional or a certified public account to develop expense reports or prepare your returns may seem expensive. But, if doing so enables you to save hundreds or thousands of dollars on your taxes each year, isn t it worth it? Additionally, if it frees you from hours and hours of agonizing paperwork and allows you to sell to more customers and recruit better drivers it may pay off big in the long run. Should you decide to let a tax professional handle your return, try to find one that s experienced with preparing returns for trucking companies. That s because the rules and deductions that apply to you can be complex, vary by state, and may not be known by some tax preparers. What s the bottom line in all of this? Keeping good records can help you increase your efficiency and maximize your profits. Got a question? Need some advice? Give us a ring

18 5. OPTIMIZE YOUR EFFICIENCY Got a question? Need some advice? Give us a ring

19 5. OPTIMIZE YOUR EFFICIENCY A common sentiment in the trucking industry is that if you just drive enough miles, the costs will take care of themselves. If only it were that easy. It s true that the more loads you haul, the more money you ll make. But, an inefficient operating system will hamper your profits no matter how much you drive. You can t just outdrive it. Besides, why drive 1,500 miles for the same profits you can make at 1,200 miles with an efficient system? Fortunately, you can improve your efficiency in many ways and without too much effort. Some of these include the following: Don t be a deadhead The act of deadheading driving home from a haul with an empty truck is a profit-killer. You re essentially driving for free, spending money on gas, and creating wear on your truck. Load-matching sites, like 123loadboard.com, help you find loads for the return trip, and can get you the best paying loads closest to your location. Fortunately, you can improve your efficiency in many ways and without too much effort. Be a smart driver While you may know every one of these tips, they all can boost your operating efficiency. So, they re worth repeating. Take it easy when accelerating and decelerating. Hard starts and stops punish your vehicle, add to maintenance costs, and waste fuel. Slow down. Every mile per hour increase over 50 MPH cuts fuel mileage by roughly one-tenth a mile per gallon Be vigilant about monitoring tire pressure, and make the necessary adjustments for better mileage and braking power Add aerodynamic treatments for enhanced fuel performance Choose tires with low rolling resistance Take advantage of discounts Why pay full price when you don t have to? Use fleet discounts (offered by many factoring companies) whenever possible to save on fuel, repairs, maintenance, tires, and more. Remember, if you re not sure if you qualify for a discount or if one exists there s no charge for asking. Got a question? Need some advice? Give us a ring

20 5. OPTIMIZE YOUR EFFICIENCY Be smart about peak and slow cycles Saturdays tend to be slow for picking up loads. It s the same for the first week of each quarter. So, these represent good times to get tasks completed that would otherwise clutter your schedule. On the other hand, Mondays and Fridays are typically busy as is the last week of each quarter. Embrace technology Or at least don t run away from it. Technology can improve your profits by enhancing your efficiency. For example, a GPS system can ensure you stay on course and not waste time and fuel on lost miles. Plus, it can provide a reasonable way to get around a detour, accident, or traffic jam. Additionally, you can download driver-friendly apps to your smart phone that supply breaking news about traffic alerts, road conditions, and upcoming weather changes. Having a smart phone or laptop on the road can also help you find loads and get the best prices on lodging or meals. Meanwhile, products such as digital fuel economy gauges provide instant feedback so you can adjust your driving on the fly to improve fuel mileage. Also, anti-idling systems enable you to run sleeper berths without having to idle the truck. In the long run, technology can save you time and money and accelerate your profits. Got a question? Need some advice? Give us a ring

21 ABOUT ecapital Got a question? Need some advice? Give us a ring

22 ABOUT ecapital At ecapital (formerly Freight Capital), we re on a mission to provide businesses with a smart way to improve cash flow. Why? We believe a steady cash flow can change the course of a business. It can help a company define its future and turn barely breaking even into kicking tail and taking names. ecapital is a forward-thinking force that enables businesses to make tomorrow better than today. We founded our company on the idea that you simply should not have to wait 30 days or longer to get paid for the work you ve already done. We pay you sooner. As soon as same day, in fact. That way you can get back to doing great things. Whether that means buying better equipment, hiring more employees, or getting a new gumball machine, ecapital shares your dreams. It s as simple as that. This is our passion. The reason we exist. Have any questions about what you read? Feel free to call us at or send an to info@ecapital.com. We d be happy to help. Got a question? Need some advice? Give us a ring