Every day counts in the race to collect cash. If your aging report averages 45 days or
more, you may be missing some important steps along the way.

Slow-paying customers and slim operating margins are a bad combination, especially in a capital-intensive business like trucking, but it is a reality that fleets face every day. To speed up cash flow, managers must continually work to reduce their days sales outstanding (DSO), or the number of days it takes to collect cash after completing a load.

DSO has internal and external cycles. The time it takes you to present an invoice to a customer after delivering a load is internal DSO. External DSO is the time it takes for your customers to pay after receiving an invoice. Shortening either cycle by even one day can have a significant impact on cash flow. Vortex Truck Lines, an 85-truck, Oakland, Miss.-based truckload carrier, for example, brought in an additional $90,000 by reducing its internal DSO by three days based on its average daily sales of $30,000, says Tom Fowlkes, chief financial officer.

Like many carriers, Vortex Truck Lines improved its cash flow through technology. Document imaging helped the carrier cut three days off its internal DSO. The company has also made improvements to cash flow through consistently monitoring credit to avoid slow paying customers and by closely following a graded serious of actions to collect, Fowlkes says.

“Brokers, if they’ve ever dealt with our company, understand quickly that I mean business about paying us.”

Ounce of prevention
One of the best ways to improve cash flow, Fowlkes says, is to be very selective in who you do business with. Like thousands of other carriers Vortex Truck Lines subscribes to a credit monitoring service that specializes in transportation. In addition to the usual general business credit advisory services, transportation credit services, such as CompuNet Credit Services and TransCredit, collect information on brokers and shippers.

Overall, cash flow is everyone’s responsibility, not just the CFO or controller, says Conner Burns president of Burns Management Advisors, a management consulting firm specializing in transportation. Since operations personnel are typically the ones who ultimately decide who to book freight with, Fowlkes says he requires dispatchers to pull a credit report on a new customer before extending credit to ensure that credit quality remains consistent.