Saving money is important for achieving both your short- and long-term business goals as a trucking company. Doing so helps carriers save for unexpected expenses, work toward purchasing new equipment and finding other ways to grow their business. When coming up with a savings plan, it’s important to remember that starting small is better than not starting at all!
What Happens if You Don’t Save?
A primary objective of any business is to ensure you can pay all your recurring expenses. Businesses with small margins may not have much left over after expenses are paid though, which can make it hard to start saving. Or they may feel inclined to immediately reinvest their funds back into their business in an effort to keep up in a competitive industry.
While it is possible to run a successful trucking company with that approach, there is a downside to consider if you don’t have a savings plan.
No plan for increased expenses
The operating costs of running a trucking company has increased steadily over the past several years, and it’s likely to continue rising over time if trends from the past decade are any indication.
Without a savings plan, your business could decrease its spending power and run into problems covering the rising costs of equipment, maintenance, employee salaries and more. Additionally, a savings plan often includes ways to cut costs, in addition to setting aside money in a savings account. If you’re not thinking with a money-saving mindset, you could also be missing out on opportunities to reduce spending.
Increased debt and financial vulnerability
Unexpected expenses are an inevitable part of running any business. Even if you stay on top of things like preventative maintenance, an emergency situation can still happen when you least expect it. Without savings set aside to pay for expenses, you’re more likely to take on a loan, which means new debt with potentially high interest rates. That debt can grow as interest accrues and even if you end up paying it off, you end up spending more in the long run.
Missed growth opportunities
Let’s say you’re preparing to make a big purchase on your equipment, and you need to secure financing. When applying for a loan, lenders might not feel as confident in your ability to pay off debt without statements from a business savings account. Further, with a savings plan in place, you can set aside funds to make a larger down payment on the equipment.
Creating a Savings Plan
While you don’t have to start today, creating a savings plan can help ensure your company has more financial stability with an opportunity for further growth in the future. Even starting small is better than not starting at all, and it can make a huge difference over a longer period of time.
With that in mind, here are some tips you can use to help you get started.
- Assess needs and set a goal. Start the process by figuring out what your business needs and making an honest assessment of your financial situation. From there, you can create a budget and set a savings goal based on your company’s current financial outlook. Your goal may be saving enough for a future purchase, a few months of expenses or something else. Whatever it is, make sure the goal is attainable, so you have an easier time sticking to it!
- Look for ways to reduce costs. Take a look at your spending and find out where there is opportunity for cost savings. This can include things as simple as enrolling in a fuel card program for the stations you visit the most.
- Make consistent contributions. As mentioned, even small contributions made on a consistent basis can add up in the months and years that follow. At RTS Financial, for example, we offer a savings program that’s tied to our factoring services. Carriers can set aside a small percentage of their factored invoices and transfer it into an account of their choosing, which means you can get closer to your savings goal every time you factor.
- Monitor your progress (while staying disciplined). Make sure to consistently track the flow of cash coming in and out of your business and regularly check your account balance. This can help you evaluate the effectiveness of your current savings plan and help you determine whether you should be more or less aggressive in your approach. Also, you may feel tempted to make an unplanned splurge throughout your savings journey. Consistently monitoring your progress can help by serving as a reminder to stay on track with your current goal!
- Celebrate your successes. Reaching your overall savings goal can be hard. You may experience some setbacks, or you may have to dip into your savings in the event of an emergency. It happens. Don’t let it deter you from working toward your overall goal. And when you do get there, don’t miss out on the opportunity to recognize what you’ve accomplished!