A cash reserve for a business is what a personal savings account is for an individual: A pool of savings to draw on when unexpected financial issues pop up. But for a business owner, a cash reserve means more than just being able to weather a storm, says Devin Kirschman, vice president of CarrierNet.
“It could be the difference between going out of business and making it,” he says. “It could be the difference growing and staying where you are.”
At CarrierNet, Kirschman and his team work to help transport carriers of all sizes find stability where they are while growing their business. One of the ways they do this is by suggesting their clients keep a cash reserve while they take advantage of CarrierNet’ s factoring service.
“A factor like CarrierNet is about your business,” Kirschman says. “We’re built on the strength of accounting principles, and we want you to know where your money is and how to effectively use your funds to stay in business. If you don’t have a reserve to insure against potential loss, we will help you create one.”
How Cash Flow Affects Cash Reserves
“I would love to say that every trucking company has a reserve like this, but in my 15+ years of experience doing this, I see that for 90 percent of companies, the money comes in and immediately goes out to other expenses.”
Transport carriers who understand where their money is— their cash flow — know that it is always moving in and out of their business during a given time period. For small carriers with one or two trucks, it might be hard to establish a cash reserve when dollars are tied up in over-the-road costs and other business areas. This is where CarrierNet can help.
How A Cash Reserve Works
Kirschman explains that when CarrierNet clients use their factoring service they have the option to have some of the funds held back from their advance and placed into a reserve. “This money helps mitigate risk because its’ already there, and it doesn’t have to come out of liquid capital,” Kirschman says. He adds that one of the benefits to having a reserve held by the factor, rather than a bank is that the factor isn’t an ATM, so the money isn’t something that can be withdrawn in the middle of the night for non-business reasons. If the client wishes the reserves are dispersed twice a month — or the client can continue to let the reserve grow and plan out when they will need that lump sum to cover a major operational expense such as insurance premiums, large mechanical repairs or enlarging your fleet.