Page 1 of 2
Plugging those costly profit leaks can be critical to your operations when revenues fall and the balance sheet gets squeezed
Profit drains become even more painful during leaner, slower economic times, such as what many industries, including limousine and chauffeured transportation, are experiencing nationwide.
Here are eight steps you can take to smooth out the path to a consistently healthy bottom line in your transportation business:
01 Clamp Down on Those Accounts Receivables
IF YOU DO ANY of your own billing, you must maintain comprehensive records of how much money your clients owe you. Whatever system you use to keep track of A/R, it must be capable of telling you whether any accounts are overdue by 60 days or more. If that comes to 10% or more of your total A/R, you need a more aggressive collection policy. The more casual you allow yourself to become about collecting the money owed to you, the more casual your clients will become about paying you.
02 Manage Your Cash Flow
COLLECTING WHAT IS DUE you is only part of the job. How you manage the revenue generated by your business will have a great influence on how much of that money finds its way to your bottom line. Profitable management of cash flow calls for never allowing any of your money to sit idle. The worst place to deposit your daily receipts is in a low-interest/no-interest checking account. Instead, open a money market account at your bank and have it linked to your checking account for telephone or online transfers. Deposit your daily receipts into the money market account where they will immediately start drawing interest. Keep a minimum balance in the checking account and transfer cash by phone or online only as needed to cover checks.
03 Don’t Be In a Big Hurry to Pay Your Bills
EVER NOTICE HOW CHECKS are slow to come in from people who owe you money? That’s because hanging on to cash as long as possible keeps that money available to draw interest or to work in a business. Set up a system that provides for paying bills only when they’re due. Don’t jeopardize your credit standing by paying bills late. Pay your bills when they are due -- not before, not after.
04 Make Use of Available Technology
YOUR BANK WOULD LIKE you to pay your bills electronically, and they’re making it easy and profitable. Lately, the sluggish stream of Americans viewing and paying bills online is turning into a raging torrent. At today’s cost of 42 cents postage for each check mailed (sure to continue rising), plus the cost of buying checks, the savings in money and time is becoming an irresistible lure to computer-savvy business owners. Service providers now offer a wide variety of easy-to-use systems, and experts say that security is a minor concern. “Online bill payment is at least as secure as conventional payment [paper checks],” says Elizabeth Robertson, senior analyst at the research firm, Tower Group. Some experts say that banking and paying bills online actually reduces the odds of identity theft by cutting off thieves’ access to the papers they need. User friendly websites make online bill paying almost as easy as logging on to check your e-mail. Check with your bank. Chances are that it offers free online bill paying. You’ll be surprised at how easy and profitable it can be.
05 Hire With Caution
YES, FINDING GOOD DRIVERS is more difficult than ever. Still, your staff is the cornerstone of an efficient and profitable operation. A single employee functioning at less than optimum and honest levels can wreak havoc on your business and on your bottom line. At the very least, check all references and do a search on criminal convictions (not charges) before hiring. If you have any doubts or unanswered questions, don’t hire that person. Always check with former employers. It’s not a foolproof system, but it can help to avoid hiring the wrong person. Increased turnover is only one of the problems generated by hiring the wrong person. A personality that isn’t comfortable in your environment can harm your business in ways that are far less obvious.