When you are running a transport hire firm, your clients expect you to be reliable and always have fully maintained, top-quality vehicles available. To do this, you must have the finance to upgrade vehicles, pay for servicing and maintenance, and have a supply of various types of transport.
If you have problems with your cash flow, you may not be able to afford to maintain your fleet. Forecasting can help you to spot potential problems before they develop.
Cash requirements of a transport hire business
There are many demands on the cash flow of a rental business, which includes the fleet of cars or vans, employee expenditure, business premises and fuel costs. To expand the company, more vehicles must be purchased and expenditure will increase. To be able to survive, a company requires a positive cash flow, which means there should be sufficient money coming into the business to cover expenditure.
Preparing a cash flow forecast
To achieve a realistic cash flow forecast, be prepared to set aside time on a regular basis to document and review income and outcome. Although profit and revenues may be healthy, your cash flow could still have problems as this is based on actual receipts coming into the company. At its simplest form, a cash flow forecast can be set up on a spreadsheet, using all the costs and income of the business on a weekly or monthly basis. Add up the totals for each every month, so that you can monitor any shortfalls in cash.
You will also be able to see where higher demand occurs or where it falls, so that you can make adjustments to reduce costs. To make this process easier, many companies use an accounting service so that the forecasting is done for them.
What can affect cash flow
There are many factors that can affect the cash flow of a transport hire business. One of the most common is the cost of insurance and fuel, as this will increase expenditure. It is crucial to strike the right balance when calculating charges. Those vehicles that are always out on hire can probably be a higher rate, whereas those that are rarely in demand may need to be priced lower and have fewer available.
Cash flow forecasting can help to predict any problems that could affect the company. If you would like to know more, please give us a call soon.