5 Tips for Freight forwarders to improve and stabilize cash flow

 

Poor cash flow can undo good progress a company has made. 

Healthy cash flow allows companies to handle financial instabilities in the short term.

In freight forwarding, keeping cash flow stable is a challenge. The primary reason is the extensive use of credit.

One way of improving cash flow is by getting a better view of your finances. It helps to plan your course of action in case of any business exigency.

The complexity of freight operations makes it harder to keep track of receivables and payables. But amidst a constant hustle of shipments how could one keep sight and even track the cash flow? Are there more ways? Let's explore.

Causes of unstable cash flow

At the core, a negative cash flow will occur when your company is spending more than it's earning. Maybe your sales conversions aren't coming through regularly. 

Could be your operations are missing cutoffs and deadlines.

Possible that your financial receivables are getting delayed.

Another major reason for irregular revenues is the improper use of software solutions. Technology, if harnessed well, can not just bring visibility of finances but also boost your operations and revenue. Let's head into some tips to improve and stabilize cash flow.

• Send timely reminders for timely payments

When you don't send invoices to your customers and vendors in time, it delays having stable cash flow. To not miss out on sharing invoices on time is to have them incorporated in the process. Workflows are processes with automation. If you want the invoice to be auto-sent once your shipment is booked, the workflow can ensure it is always done. Automated follow-ups remove or reduce the possibility of late payments thus keeping cash handy.

• Revisiting the contract with your carrier

Carriers work with multiple forwarders to fill complete or maximum occupancy of their containers. Depending on your ability to provide the guaranteed volumes, carriers can give you the best rates. It helps to understand your performance via software for freight forwarders and MIS reports.

• Being disciplined and saving on fines 

A part of your revenue can be lost due to the lack of visibility of expiring timelines. Demurrage and detention require careful planning. Not overshooting the free days remaining and returning an empty container within the agreed time can help save on the cash at hand. Allow freight forwarding ERP software to handle the timely reminders to the operations team.

• Setting the right price for your services

This one could be an invisible cost that's silently affecting your cash flow. Analyzing your competitor's pricing strategy is the yardstick to knowing if you are undercharging your customers. Setting your service charges lower than the industry standard robs you of potential revenue.

• Limiting your credit to select customers

It can be tedious to track your spending, especially when you have several clients. A few clients too could face this problem themselves in case of multiple shipments. The solution is to identify your timely-paying clients from the regular defaulters. Setting a credit limit allows you to not lose cash to late-paying customers. Combine credit limit with automated workflows to send invoices, reminders and keep cash flow under control.

It may seem negligible but even making small changes to the processes can bring multiplier effects on your cash flow. Follow your company's revenue movement closely and you will discover more ways to improve making financial decisions.