As Quarter 4 comes to an end, it’s time to plan for next year. Use your trucking company’s financial struggles this year to learn valuable tips for avoiding cash flow issues during next year’s shipping spikes.
In 2025, the trucking industry saw several companies close, while others merged or were acquired. Bankruptcies were also a problem. The economy is a factor, but fuel costs, higher auto parts prices due to tariffs, and consumer spending also affected shipping.
A strong company considers all these stumbling blocks and high points and plans accordingly. In the peak shipping season, work flows are steady, and money is coming in. You may not stop to think about how to use that to plan for lean times. Shipping spikes happen, and you can use them to your advantage.
Why Q4 Often Causes Cash Flow Issues
When the fourth quarter is so busy, how could it lead to cash flow issues? There are a few reasons.
1. Fuel Increases
You’re taking on more loads. That means more fuel is being used. You’re spending more money on diesel or gas, and that spending is exacerbated by how the trucking industry and invoicing work.
In addition, fuel prices fluctuate from week to week. In the first two weeks of December, average diesel prices ranged from $3.665 to $3.067. Heading into Christmas, average diesel prices dropped to $3.544. Those prices were higher than in 2024.
Gas prices are lower. They were in the $2.895 to $2.94 range in the first half of December and dropped to $2.841 toward Christmas. Prices vary by region. If you’re doing a lot of runs on the West Coast, prices are about $1 per gallon higher.
Accessing fuel discounts helps you save, but you do have to consider how much more you’re spending to take extra loads. You could easily spend more on fuel than you were planning, especially if there’s a post-holiday price spike that hits before you’ve been paid.
2. Get Paid Later Arrangements
Trucking is a field where you do the work and wait 30 days or more for payment. Work a driver does in September or October to ensure Christmas gifts and supplies are on store shelves may not be paid until November or December.
That means you’re burning through fuel delivering crates and pallets to retailers and warehouses, but you’re not bringing in any money. Fuel is charged to fuel cards, and you’re making only minimum payments for now. Interest is accruing.
You start juggling which bills to pay and which to delay. Or you pay some bills with your company credit cards, which means high interest rates increase the amount due. If you miss a payment, your credit rating takes a hit. Plus, you’re adding late fees to the amount you owe.
Suppose you have a fuel card with an APR of 20%. You let the balance build up for two months until you get paid. The interest on $5,000 would add less than $170 to your balance, reducing your revenue. The more you can pay each month, the better it is, which is why paying your balance in full is ideal.
3. Holiday Bonuses and Increased Payroll
The final impact on cash flow comes from the holiday itself. You have drivers who stick with you all year, and you want to reward them generously. You’re spending more because you offer holiday bonuses.
You may need to bolster your staff by adding drivers until the end of Q4. That means you’re spending more to hire new drivers.
Spending increases, but your clients don’t pay faster than the Net 30 or Net 60 terms you’ve set with them. That leads to cash flow shortages that can be hard to overcome.
Get to Know the CCC Formula
CCC stands for the Cash Conversion Cycle. In retail, it calculates the inventory that wasn’t sold and sat on a shelf. Trucking owners don’t often have to worry about that aspect.
In the trucking industry, you determine the CCC by taking the Days Sales Outstanding (DSO) and subtracting the Days Payable Outstanding (DPO).
- DSO – How long does it take for clients to pay you after they receive your invoice?
- DPO – How long does it take you to pay your important bills, such as truck leases, maintenance costs, insurance premiums, and fuel cards?
If it takes your clients 60 days to pay you, and you’re paying your bills in 30 days, there is a 30-day cash gap where you’ll have to borrow from savings, use a credit card, or find an alternative way to ensure you have money for emergency expenses.
Continuously Build Strong Cash Reserves
The best way to power through shipping peaks and declines is to build your cash reserves continually. Don’t get comfortable when money is coming in. Use that time to invest in your company and further strengthen your cash reserves.
Building savings is part of your end goal, but you also need to maintain a strong cash flow. You want to partner with clients who pay quickly. In an ideal world, you’d have clients who pay slowly and wait until the very last minute. There are ways to manage them. Freight factoring is one of the most effective tools.
Survive January With Thoughtful Planning
As Q4 comes to an end, start planning now. There’s a lag between Christmas and New Year’s shipments and the start of spring’s planting season. Set up advantageous partnerships now and be ready for times when you have to lean more heavily on cash reserves.
If you’re unfamiliar with freight factoring, it’s a financial partnership with a company that buys your unpaid invoices. In return for the small freight factoring fee, you get paid immediately. There’s no more:
- Waiting months to get paid.
- Struggling to cover fuel and maintenance costs in the lean months.
- Paying wages and bonuses with a company credit card and losing money to interest.
- Finding time to go to the bank to deposit a check.
- Handling data entry of payments and invoice generation.
- Contacting customers who haven’t paid on time.
Freight factoring makes sure you’re paid quickly. The inclusion of factoring apps makes it easy to upload invoices straight to your accounting software. Best of all, the factor takes over collections. You focus on finding work, route planning, and delivering loads on time.
Saint John Capital has some of the lowest freight factoring fees in the industry. We also share decades of experience in the trucking industry. Our factoring partnerships are more than paying you quickly. We provide you with additional tools, such as fuel discounts and low-interest business lines of credit, to help you survive busy times like Q4 and lags in other quarters.
We do not make you factor every client’s invoice. Pick and choose which invoices you want to receive immediate payment for, and handle invoicing on your own when you have a client who pays quickly. Learn more by reaching out to us by phone or through our online form.
