For most small-fleet owners, the trucking part comes easy. Managing the business is more complicated. “When you’re an owner-operator with one truck, you can be your own office manager, human resources department, computer troubleshooter, bookkeeper, and the boss,” says Dick Bennett, president of TFS Group, a Waterloo, Ont.-based financial services firm that specializes in dealing with owner-operators and small fleets. “Add a second truck, and maybe get your cousin or best friend to drive it. Add a few more trucks and pretty soon you’re out of buddies with a CDL and you’re behind a desk running a bona fide trucking company.”

And confronting all the pressures of managing that company, especially its finances. Following interviews with bootstrapping small-fleet owners across Canada, we compiled these common-sense tips for financial survival:

1. BILL NOW

Slow billing does two things: it weakens your cash flow and it tells customers that you’re not serious about collecting what’s due. Think of it this way: say you’ve got $10,000 in 60-day-old accounts. If you have to dip into your own line of credit to carry it, you’ll pay at least $200, assuming an interest rate of 12%. When you set the rates for carrying those loads, it’s doubtful you were prepared then to give the client $200 worth of discounting.

Get serious about billing. Send each invoice on its way within five working days of completing a job. Leave little to chance: be sure the bill contains no errors or omissions, and that all documentation (such as proof of delivery) has been provided. Indeed, don’t just bill promptly, bill often. Invoice twice a month instead of just once. If you invoice once a month, by the time you collect, another 20 or 30 days have passed and you get paid 60 days after you’ve done the work. Meantime, you’ve been billed maybe three times for the operational expenses involved in the job. Clamp down on slow payers, but be professional about it. Follow up your invoice with a friendly overdue notice at 30 days. If you haven’t received payment after that, place a phone call. A more stern letter is in order after 60 days. Keep precise records of when calls are made and what the response is. Have just one person handle this at your end to help build a rapport with the customer and to stay on top of details that could slip through the cracks.

When you no longer value the relationship, or when receivables are at 90 to 120 days, the next call you place should be to a lawyer or a collection agency. If your customer has not filed for bankruptcy yet and your invoice is less than $7500, you can go to small claims court and, for a few dollars, start collection proceedings against him.

While this may be throwing money away, if you can get a judgement before he goes bankrupt, you’re more likely to get your money.

2. QUALITY COUNTS There’s a perception that if only rates were higher, the prospects of profit-if not survival-at small trucking companies would rise as well. Revenue quantity is important, but quality counts for more.

Consider these areas:

w Rate structure: There are other ways to express price than by so-much-per-load. Consider other units of measure, such as unit prices for weight, cube, pallet, or the unit of measure of the customer goods. Use this technique to hide your weakness or expose your strength. If you operate 48-foot trailers but not 53’s, or tandems but not tridems, depending on the freight the use of weight or cube measures could effectively adjust the trip revenue.

w Empty miles: Your final destination when you leave home in Thunder Bay is … Thunder Bay. For all the miles you run, the difference in the cost of running empty versus loaded is less than a dime and the only miles you get paid for are loaded miles. Minimize the repositioning miles to secure backhaul loads. This sounds simple enough, but there’s too much lip service paid to the problem. “Oh, it’s covered by the head-haul rate,” is one favorite. Or, “It’s not that far.”

A rule of thumb (but please, do your own calculation): 10% empty miles costs you 10% of your revenue per mile. If you want a 5% rate increase from your customers and can’t get it, find freight with 5% fewer repositioning miles to accomplish the same thing.

w Configuration: You will have to analyze your customer’s traffic patterns to determine if your current configuration of trailers meets their requirements and doesn’t jeopardize your volume or price for the traffic you handle. Trailer lease prices over an appropriate term can be very effective for updating your fleet configuration to the needs of your customers (and their desire to pay).

w Accessorial charges: Consider what you can tack on for additional service fees. It’s incredible what some trucking companies have been able to claim: the return of PODs, confirmation within one hour of delivery, service schedules and performance standards, and pallet returns and demurrage.

Maybe it’s a sign of the times, but these charges are being made, and for the most part collected, by carriers who perform at or above industry standards (good service is being recognized). Increasingly, both sides of the same load-the shipper and the consignee-can participate in your revenue generation.

Once you’ve exhausted the revenue angle, you always have the costs side to address. But you know what? The revenue side is easier.

3. WATCHING PENNIES

Fixed costs are those you incur before you even turn a wheel: rent, salaries, vehicle payments, etc. Variable costs change depending on how much you truck. Driver pay, fuel, tires, tolls, fines, and vehicle repairs are a few examples. By nature, variable costs are tough to predict.

Unfortunately, this means that at some point they’re going to bruise your budget and choke your cash flow.

The trouble with financial statements is that they’re, well, financial. All the activities of dispatch, drivers, shop, and dock are reflected in dollar signs when most of the dialogue in the operations department is about miles, hours, loads, litres, logs, weight, time, and location.

There’s a simple way to measure these variable costs and revenues in operations terms: they’re called Key Performance Indicators, or KPIs. You can generate all kinds of KPIs-usually weekly-using dispatch information on loads, miles, and revenue. For example:

w Revenue per mile: This KPI is often expressed in loaded miles, empty miles, and running miles. When you do your budget, you probably multiply an average revenue per mile by certain mileage factors to estimate revenue. By measuring the miles run and the revenue earned, you can calculate the actual revenue per mile running and loaded, along with the empty-mile percentage. Many people overlook empty-mile accumulation or think its impact on revenue is insignificant. Big mistake.

w Average utilization of the highway fleet: Revenue per mile and utilization measured in miles per unit are two of the most important factors in profitability. The more miles you safely (and legally) accumulate on each unit, the more you can expect to generate a profit.

w Average length of haul: Let’s say your revenue is $1.60 per mile. That’s pretty good if you’re going to Texas, but it’s awful if you’re going across town. Generally, the longer the length of haul, the lower the revenue per mile and the higher the utilization of the fleet. It’s a balancing act among these three variables.

Stops per hour (P&D), on-time departures (scheduled LTL), and service quality are other KPIs that can easily be developed to measure costs, revenues, or service. Information from the source documents allows you to produce KPIs relating to the cost-side of the business, as well. The three largest cost areas-driver wages, fuel, and repairs and maintenance-all can be isolated and compared to miles-run just like on the revenue side.

Take several previous monthly financial statements and identify your fixed costs. You’ll see they’re very similar from month to month. Then compare your overall financial performance with the KPIs you develop. After two months you’ll be able to take the KPIs you generate (as often as you prepare trip reports) and determine what your revenue and variable costs will be.

Add that to your fixed costs, and you’ll be able to tell your accountant what your results are by noon Monday, the week following month-end.

4. FAST CASH

Canadian chartered banks are low-risk lenders. Because they provide debt financing (except for some new subsidiaries which are starting to provide some equity financing), they don’t bask in the upside of your company, but they’re greatly affected by loan losses.

It’s hard for small fleets to prove themselves to be a good risk. But every business must have financial resources it can call up quickly.

One option is to establish a line of credit at the bank. The beauty of the line of credit is that it only really “activates” (and costs you money) when you use it. One fleet owner we talked to says a $25,000 line is the least amount any trucking venture should have. He dips into his credit to cover unexpected expenses, or when cash flow gets erratic. Otherwise, he says, he leaves it alone.

Credit cards are a convenience. The interest rate may be high, but the loan is unsecured. The trick is to avoid the interest charges by paying off the balance before the grace period ends. If you always pay the monthly bill in full, then the four to six weeks of credit you enjoyed will have been virtually free. Also, credit card receipts help you track your costs, and most major credit cards are accepted on both sides of the border.

Tapping friends and family is a double-edged sword. Personal friends or relatives may have the funds and the faith in you that your bank manager does not, but understand what borrowing or having them invest can affect your relationship (“Marry for money and you’ll earn every penny,” the saying goes). Be clear on how long the money is available, because it will always take more money and longer to get a business off the ground than you originally intentioned.