Like most logistics businesses, back when we owned Roving Logistics, Christmas would make or break the whole year.
In 2012, our first year with Roving, we got absolutely hammered by Christmas. Being somewhat newcomers to the industry we simply didn't know our volumes would shoot up to a 100% increase in the two weeks leading into Xmas. To make matters worse, we took on additional work from several new clients who needed urgent Xmas deliveries done (something we learned never, ever to do again). We ran out of space on our trucks and in our vans, and found there wasn't a refrigerated vehicle for hire anywhere within NSW!
The next thing that happened was even crazier.
We'd been run off our feet with work, doing double volumes day after day. We were smashing it on the Profit & Loss, yet in early January we suddenly ran out of cash. How on earth had this happened?
We'd fallen into a very simple cash-flow issue. We generally paid our contractors 21 days after they did the work, and were typically billing our clients within 14 days, offering 14 day terms. The issue, however was that our clients generally extended their payment terms to 28 days. Throughout the rest of the year, as our volumes were stable, our contractor costs and revenue balanced so despite the revenue lagging behind bills, we were able to keep a small cash buffer in the account.
Over Christmas however, this all changed. With our contractors suddenly earning more due to the increased volume, we found ourselves with inflated bills, yet the cash didn't appear in our accounts for another 3 weeks.
It was during 2013 that we got CartonCloud up and running to automate our billing (reducing 14 days down to 7). We also modified our billing terms with all clients to be 7-day accounts, and we enforced it - no money, no deliveries.
This allowed us to be paid within 14 days of completing work, we were now being paid before we needed to pay our contractors.
Christmas 2013 was entirely different. In July we booked several refrigerated vans for hire over the 3 weeks leading into Xmas. We said no to the random clients who showed up on Christmas Eve with urgent deliveries, made decent margins over the holiday period, and above all else, we didn't run out of cash.
So if you need help with streamlining your logistics operations contact us today for a free demo.