For the fleet managers and owner-operators of small trucking companies, the idea of saving money for big equipment purchases or unexpected expenses in the future may not seem realistic.
Understandably, it can be hard to look toward the future if your company is focused on maintaining day-to-day operations. However, saving money can be easier than you think! With smart planning, it’s possible to build your savings and grow your business.
Throughout a series of blogs, we’ll be talking about how trucking companies and their decision-makers can make small changes that can help improve their financial health. This first installment will focus on the importance of saving money. Read on to learn more!
The Importance of Saving
We’ve all been told how important saving money is for our own future, but it’s just as important to build up your savings for your business. Doing so helps provide financial stability for if and when the market gets tough. It’s common for businesses with tight margins, like trucking companies, to occasionally be short on cash flow or have unexpected expenses, such as vehicle breakdowns. Having savings built up serves as a reserve fund to help carriers better handle these expenses.
Building your savings also gives you a better opportunity to grow and expand your business. Depending on your savings goals, you can decide when to re-invest your savings in your business, including purchasing new trucks or equipment, expanding your fleet, etc.
Planning, Budgeting and Saving
Running a trucking company means running a business that’s very cash flow intensive. Carriers have to deal with frequent and recurring expenses as part of their day-to-day operations, and it can be difficult to plan too far ahead when your primary focus is ensuring you have enough working capital right now.
With that said, effectively managing your cash flow while also strategizing for the future is a key part of ensuring your company’s long-term success.
How to start planning
When planning for the financial future or your trucking company, the first step is to assess where your business currently stands. To do this, start by evaluating your company’s finances, including total revenue, expenses, assets and liabilities. This will help give you a clear picture of the current state of its financial health. From there, the next step is to create a budget to optimize how you allocate your financial resources.
How to start budgeting
You’ll want to look at your trucking company’s fixed and variable costs when creating a budget. Fixed costs are the ongoing expenses that carriers can expect to pay regardless of how much freight they move. Examples of these can include the cost of your trucks, commercial insurance payments, scheduled preventive maintenance, wages for any salaried employees and more.
Variable costs are expenses that will fluctuate depending on how many miles you or your employees drive. The most obvious example of a variable cost is diesel fuel, which can be a challenge to properly budget for given that its price per gallon changes so frequently. Things like driver pay (if hourly) and food are also expenses that companies plan for but changes depending on how often drivers are on the road.
Once you figure out your fleet’s current operational costs, you can use that information to calculate total cost and revenue on a per-mile basis and determine your net profit. This is useful for helping fleets determine where they stand financially and how efficiently they’re operating.
How to start saving
You don’t have to set aside a large sum of money to begin building your savings. In fact, one of the best and most consistent ways to save money is to set aside a small portion of your income on a per-week or per-month basis. At RTS Financial, we offer a savings program for carriers that allows you to save a small portion of your funds when you factor, and then transfer those funds into a savings account that will grow over time.
Another important part of saving money is knowing where you can cut costs. This is where budgeting and knowing your cost and revenue on a per-mile basis can be very helpful. When you reduce costs, you can set aside your cost savings to help build your total savings over time.
What Happens if you Experience a Setback?
While we all know how important it is to save, it’s not always easy and may feel impossible at times. A big financial setback can be discouraging if it happens. However, part of building up your savings involves having an extra reserve to turn to when times get tough. If you have enough cash flow to continue your operations as normal during hard times, it means your approach is working! Stick to it by continuing to build your savings, even if it’s from zero, and you’ll be able to reach your goals over time.
RTS Financial Can Help You Save
Saving money will take time, but RTS Financial can help! Whether you need assistance with additional funding, building up your savings or sustaining your business long-term, our team is committed to helping you wherever you're at.