We caught up to George and Wendy of the George and Wendy Show to learn more about the thoughts and concerns of the trucking community regarding the ELD Mandate happening in December.
Starting your own business is a major undertaking. Once you make it through the initial stages of business planning, budgeting, finding the money to capitalize your new company, and hiring employees there is not much left to do, right? Wrong!
IS CASH FLOW THAT IMPORTANT?
This is when it gets interesting. Once you have produced your product or provided your service, there is still a major concern that needs to be addressed; cash flow. If not addressed, this can be one of the first things to drag you down and minimize your business’ ability to survive.
First of all let’s define cash flow. The American Bankers Association defines it as a company’s funds that are available for working capital or expansion. You have to have available cash to pay all of your expenses related to running your business plus afford the costs of growth. Studies have shown that up to 90%of all new businesses underestimate the amount of start-up capital they need to launch and run a new business.
Where does cash flow come from; hopefully it comes from sales to your customers. What generally happens, is start-up sales begin much slower than anticipated and young businesses neglect to factor in the time delay between a sale and receiving payment and having access to that cash. All of a sudden bills are due and the checkbook is empty.
FIGURING OUT HOW TO EXTEND CREDIT
If that weren’t enough, newer companies begin to find that some of their credit sales either don’t pay within terms or even worse don’t even pay at all. Now the question arises as to, whom do I extend credit to and how much should I grant them? Managing cash flow is tough enough but having to become an expert at making credit decisions and collections is not a set of skills that were anticipated.
So what do you do when your cash is running lean and credit and collection decisions seem to get tougher? An operating line of credit at a bank could be an option. But, unfortunately banks and other federally regulated financial institutions frequently aren’t permitted to work with start-up businesses due to stringent underwriting standards. Among other performance requirements they like to see is a history of profitability as well as some positive equity.
IS FACTORING THE RIGHT OPTION?
The answer for many young companies is to turn to factoring as a solution to both their cash flow needs as well as a means of outsourcing their credit and collections problems to a group of experts in these areas. Factoring is very much a maligned and misunderstood form of accounts receivable financing.
Factoring originally started as a means of providing businesses with credit information and credit insurance on their customers. The factoring client did not receive any money from the factor until the customer actually paid the invoice, and should it not pay the factor suffered the loss not their client. This was the birth of non-recourse factoring.
Two things changed over the years. Companies needed cash for their receivables now, not later. Plus, because the factor’s credit department minimized the actual credit losses a company might suffer there was no need for the factor to purchase the receivable on a non-recourse basis. Non-recourse factoring is essentially a form of credit insurance and adds to the cost of factoring. A less expensive and more versatile form of factoring emerged called recourse factoring.
CAN FACTORING REALLY HELP MY COMPANY GROW?
This has become almost a perfect solution for young and growing companies. They have access to cash by selling their receivables to the factor plus, they are able to outsource the gathering and interpretation of credit information and receive assistance in decision making from the factor’s credit experts. The client’s of a good factoring company should find they repurchase less than 1%of the invoices they factor. Plus a good factoring company will assist in the collection of all outstanding invoices and should be able to provide you with 24/7 access to credit and A/R performance reports. The cost benefit comparison for most industries favors recourse factoring.
Factoring has often been labeled as very expensive. But, when banks were surveyed and ask what they would have to charge to provide the same services the average discount rate was 7% while a typical factoring company is going to provide you with the cash you need and all of the other value added services for around 2.0-3.0%. That is often less than you would pay Visa or MasterCard to accept credit card payments from your customers.
The lesson to be learned is to try and make sure you have plenty of excess cash when you start your business and if cash starts becoming a problem, factoring is a great option.
We connected with Brandon Martin of Hammerdown Dispatching to hear about the functions, misconceptions, and stories of life as a dispatcher. Learn more about the purpose of a dispatcher. What are reasonable, realistic expectations? Hear more about how a quality dispatcher will work through a thorough consultation to determine a trucking company’s needs rather than a cookie-cutter program.
Many are gearing up for a “once-in-a-lifetime” viewing of Monday’s solar eclipse. A mess-load of sky gazers are scrambling to find the perfect spot to see the shadow of the moon completely cover the sun for a couple minutes on August 21st… the first since 1979.
According to NASA, the eclipse will start at Lincoln Beach, Oregon just after 9 am PST. Over the next couple hours, the eclipse will cross over Idaho, Wyoming, Montana, Nebraska, Iowa, Kansas, Missouri, Illinois, Kentucky, Tennessee, Georgia, North Carolina, and South Carolina.
While many will be focused on finding a good seat Monday morning, there are plenty of other issues to be concerned with. How will power grids have to adjust when anticipated solar energy dips? Will the glasses purchased from Amazon protect my eyes or cause me to see spots for life? Will I get stuck in these crazy traffic jams?
The Oregon State Police shared an image of a traffic jam on Thursday saying Highway 26 was backup all the way to Prineville for 15 miles as thousands made their way to the site of the Symbiosis Gather, an arts and music festival that relocated this year to be in the solar eclipse path.
Officials in Oregon, Idaho, Whyoming, Nebraska, and Colorado have ordered extra-wide-load trucks off the highways through Tuesday to ease congestion. The National Guard has been called to assist to control traffic in Madras, Oregon.
The Federal Highway Administration offers a number of tips for general drivers who might be on the road during the event:
- Don’t stop in the middle of roads or park on the shoulder
- Exit the highway to a safe spot for viewing purposes
- Don’t attempt to photograph while driving
- Don’t where eclipse glasses while driving (my favorite)
- Use your headlights
- Watch out for pedestrians
- Prepare for additional congestion prior to and the day of the event
- Avoid travel in the area of the main eclipse path
Many trucking companies cite safety as a big concern and won’t even operate on Monday. Some companies are simply going to avoid the path of totality and delay or even cancel trips to the Central Oregon and Salem areas.
Whatever you do, be safe out there and try to avoid the traffic nightmares. The next total eclipse will occur in April, 2024. Enjoy!