The simplest answer is a two part answer:
- Most carriers fail, due to lack of funding. Lack of funding, is a multiple part discussion of 3 parts being: A) Float, B) Factoring C) Function
A) Float- Float is capital that you need to operate between invoices. This capital base is your operational funds, ei., payroll, fuel, maintenance, financing payments, insurances, emergency funds. This is, and should be, readily available for any daily business expenses that the operations should need or be required to operate.
B) Finance- Finance is the management of the day to day operational payments, both inbound and outbound; which allows the Carrier to operate and function without delay. Most new businesses and even older businesses have to actively monitor and finance through various services such as operational line of credit, factoring, daily planning, and monitoring to control the lack of capital used for operation. When a Carrier is having issues or delays repairing equipment, or slow payments for the equipment and/or payroll—-this is typically a finance management problem.
Factoring is a service function provided to the operation based on the Accounts Receivables, ei INVOICES to customer base, typically desiring or wanting some type of payment terms. Most are NET 30 days from Invoicing date. However, Larger more established clientele, WALMART< ect, want long term contracts with 90-160 NET terms, however, when you operate with corporations long term and guarantee their contract requirements, these customers can and will garner a instant credit for just having them as your major customers.
C) Function- This is the load booking, invoicing, and finalization of load–COMPLETED- So that the freight movement can be paid. With fleets on the road modern technology allows almost instant invoicing upon customer delivery receipt signature accepted, and issued to Accounting for billing to the client. However, if your company is not booking quality freight, with rates above or (I cannot believe I need to say this) at minimal at average rates, then you will only be costing your operation, the company, driver, and equipment–either one at a time, or all, as the collective, valuable opportunity to grow, profit, or maintain.
2. TOO MUCH MONEY- Typically, someone comes along with tons of capital thinking they can volume freight the business, and try and bypass some plateau’s that are just inevitable…..sure I will admit it, with enough capital, as long as you are not an idiot, and are half was paying attention, CAPITAL, COULD SOLVE PROBLEMS, BUT WHEN YOU HAVE TOO MUCH MONEY, YOU ARE WASTEFUL AND DON’T UNDERSTAND THE BASIC FUNDAMENTALS OF A BUSINESS ASSOCIATED WITH THIS INDUSTRY, YOU WILL NOT GET YOU RETURN BACK FROM THE OVERLOOKED WASTE. This will show, and permeate from the top down to you organization, burning money, time, and wasting…….
Money does not buy education, direction and a clear defined organization. Will there be issues? GUARANTEED, it is understood that money does not buy; what most problems are actually caused piss poor ownership.