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Dollars & Sense

How to Navigate a Cash-Flow Crunch

By Sean M. Lyden - Staff Writer
Posted Sep 23rd 2019 1:03PM

A union strike that shuts down several automotive plants. Trade wars that create economic uncertainty. A drone attack in Saudi Arabia that drives up global oil prices.

These are just a few recent events outside of your control that may be impacting your business as an expediter.

So, how do you respond when your business starts taking a hit?

Focus on what you can control—cash management.

Ideally, you will have built up a large enough emergency fund to weather most economic storms. But if you don’t have a lot in reserves, here is a three-step cash management strategy to help you navigate through the crisis.

Step #1. Check your fuel (cash) gauge.
When cash gets low, you’ll find yourself wanting to avoid looking at your financial accounts. Everything in you wants to just stick your head in the sand and hope the situation will improve on its own.

But when it comes to your finances, ignorance is anything but bliss, and the problem won’t fix itself.

If you’re going to survive the cash-flow crunch, you need to confront the facts and make sure you have enough fuel—or cash—to make it through to the other side.

How?

Check and monitor your accounts daily, no matter how ugly they’re starting to look.

  • What are the balances in all your checking and savings (personal and business) and investment accounts?
  • What’s your available credit for each of your credit cards?

Then project your cash flow for the next four weeks or so. Add up all your estimated expenses coming up during that period—truck payment, fuel, maintenance, food, insurance, mortgage, etc. Then subtract that number from your total available cash from your checking, savings, and credit card accounts.

Suppose you didn’t earn any income during the next four weeks. Do you have enough access to cash to keep you afloat?

If “Yes,” then project your numbers out further than four weeks. About how much cash “mileage” do you have before you run on empty? This will give you insight into any longer-term adjustments you might want to make to extend your “mileage.”

If the answer is “No,” and it looks like you’re about to hit a major cash-flow crunch, then proceed to Step 2 and map out your options.

Step #2. Map out your options.
The reason why it’s critical that you monitor your financial accounts and cash-flow situation daily is that it helps you spot potential short-falls early—before you’re actually in trouble. This way, you have time to map out a strategy with your expenses to help you successfully navigate around the crisis.

What expenses can you trim to help your cash go further?

Are there any payments you can delay for the short term until your cash situation improves?

For example, if you have an automatic payment scheduled for the 15th of the month, but you know you’ll be paid on the 29th, contact that vendor or lender to see if they could cancel that payment and reschedule for the 30th.

The idea here is to make a list of potential options and map out what expenses you could shift around to help you weather the storm.

#3. Take Immediate Action.
Start immediately to cut the expenses you’ve targeted. If you need to contact vendors and lenders to ask for an extension or change terms, reach out to them as soon as possible.

The sooner you act, the more time there will be to make the changes necessary to get you through the cash-flow crunch.

The Bottom Line
Whether you’re an expedite owner-operator, contract driver, or fleet owner, one thing’s for sure: events outside control can put you out of business if you’re not prepared.

So, plan now to build your emergency reserves. But if an event puts you in an immediate cash-flow crunch, use these three steps to help you navigate through the crisis.

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