Everyone in the trucking industry counts of the last three months of the year for an increase in revenue. While 2019 may not experience the capacity demand of the previous year, maintaining a healthy cash flow allows trucking companies to make more accurate plans for 2020.
Learning from 2019
The year-end push in 2018 was an anomaly of sorts. Shippers were trying to stay ahead of impending tariffs and were ordering goods well ahead of schedule. This placed a lot of demand on the freight industry as a whole, and even products normally slated for early spring were being shipped in November and December. The spike in volume resulted in high revenue for trucking companies of all sizes, and many fleet owners were expecting the momentum to continue into 2019, but making big plans for growth. Once the first quarter of the new year came, the freight industry started to snap back to its normal pace. Businesses that would have been impacted by tariffs relocated to avoid the extra taxes. Shippers were not purchasing as much. This rubber band effect left many trucking companies overextended, because cash flow was not as high as it was at the end of 2018.
Impacts on Finances
There were two major reasons why the aftermath of last year’s crunch has such an impact on the trucking industry. First, optimistic fleet owners saw last year as the start of a trend, so they reinvested revenues into expanding operations and purchasing additional trucks. A few months into 2019, many trucking companies found themselves scrambling to make up for growth expenditures as demand slowed. Second, outstanding receivables from 2018 placed a strain on cash flow. Many trucking companies issue invoices with payment schedules of 30 days or longer, so even after the new year started, they were waiting for payments well into the first quarter of 2019. Between the drop in demand and unpaid receivables, many trucking companies faced uneven revenue cycles and increased overhead from jumping on growth opportunities.
Setting Expectations and Improving Cash Flow
Trucking companies can position themselves for a comeback after the artificial demand spike of 2018. The best way to do this is by improving cash flow and managing expectations. Instead of waiting on staggered invoice payment schedules, trucking companies can get fast access to revenue by using invoice factoring services. At Single Point Capital, we offer same-day factoring services to trucking companies of all sizes so they have the working capital necessary to cover overhead expenses, smooth out revenue cycles, and build up reserves to start off 2020 on the right foot. By eliminating long waiting periods on receivables, trucking companies can position themselves better for growth in the upcoming year.
To learn more about the many benefits of our invoice factoring program, contact Single Point Capital today.