As an owner-operator, one of the most important pieces of your business that you need to manage is your cash flow. How much money (cash) you have coming in, versus how much money you have going out for your business & home expenses. It is crucial for the longevity of your business that you are not consistently running low on cash each week. It’s been said that in business, your cash flow is the fuel gauge of your business. If that cash flow gauge is running on “E” too frequently, you are setting yourself & your business up for failure. It’s fitting then, that in this analogy, fuel can be one of the most important factors in managing your cash flow for your business.
When should you fill up your fuel tank? One of the common problems we see from drivers is the timing of fueling up, and the death spiral of cash advances it can create due to a lack of cash flow. Whether you're just starting out and short on funds or trying to recover after a large truck expense, it’s important to try to time your fuel-ups with your settlements/pay. Too often we see drivers making the mistake of filling up right before their settlement payday. Fueling up a nearly empty big rig can cost over $500. This isn't an issue if you have your cash flow “topped off” with plenty of money in the bank. However, if you are running low on cash, and choose to fill up right before you know exactly what your pay will be, it can be very difficult to budget appropriately. Often there can be times where expenses show up larger than anticipated on a settlement sheet, and without getting the funds first to know what money you have to work with, you may be putting yourself in a tough spot. We frequently see drivers unnecessarily top off their truck right before settlement day. When this large fuel expense is factored into their settlement pay, it ends up leaving them short of what they will need in order to stay afloat cash-wise for the next week. Typically this will lead to the driver needing to take a cash advance in order to keep their truck/business operating that week. A better strategy could be to only fill your tanks up halfway or waiting until the day after settlements are finalized to preserve cash.
Cash Advances & the Dangerous Death Spiral Cash advances & the dangerous death spiral of borrowing that money is one of the biggest reasons we see owner-operators fail. Oftentimes, we hear drivers say there is a feeling of “Free Money” regarding taking a cash advance. However, that “Free Money” is realistically very costly. By taking a cash advance you are effectively getting your future settlement pay ahead of time. This means you are on the hook to provide a service in the future to pay for that advance in cash. When that cash advance is taken out of your next paycheck, and you haven’t budgeted your cash flow appropriately, you may need to rely on that cash advance just to keep your business afloat. This is where a lot of drivers start getting into financial trouble. If the cash advance starts becoming mandatory for you to pay your business and personal expenses, it’s very hard to dig yourself out of that hole.
Plan Your Fuel Ups Accordingly
Bottom line, fuel is your biggest expense, but also the one you have the most control over. If you are implementing the tips given in our previous “Fuel Series” articles, and planning your fuel-ups in accordance with your pay schedule, you will be in great shape to start building a healthy cash flow for your business. After all, running on fumes can only keep you going for so long before the engine stops.