Many drivers become owner-operators so they can make more decisions for themselves and have more control over their lives. If you don’t develop a good plan for managing cash it’s only a matter of time before a serious crisis takes away your ability to make decisions for yourself. Poor cash management may also mean that cash reserves aren’t available when you need the money most, and that could put you out of business.

The following are typical signals of poor cash management that could prevent your
business from being successful:

• Over-advancing or taking cash advances to pay for meals, rent or other personal expenses. You are always working to get caught up.
• Not keeping truck money and personal money separate. It is very easy to use “truck money” on personal needs, often overlooking the need to save for things like maintenance and taxes.
• Turning down a better-paying long trip for a short trip to get paperwork in prior to the pay period cutoff. The focus is on short-term cash, not the greater revenue that
  might have been generated from the longer trip.

Solutions

You don’t have to live settlement to settlement. In earlier blogs, I talked about developing a budget. A budget can help you understand exactly how much you’ll need to cover business and personal expenses.

Open two checking accounts, one for business use and one for personal use. Have your settlement check deposited in your business account and from your business account, pay yourself the amount you need to cover your personal expenses. Leave the rest of the money in your business account to cover savings and taxes. Don’t touch it, except in an emergency and don’t take cash advances for personal needs. Every time your business account reaches
$5,000, put half of it into an interest bearing savings account that you can access without penalties.

How Much Should You Pay Yourself?

List all of your personal, non-driving, monthly expenses and divide that amount by
4.33 to determine the amount you’ll need each week. Use 4.33 to accommodate months that may have five weeks instead of four. Pay that amount each week into your personal checking account after your settlement has been deposited in your business account. You shouldn’t need to pay yourself any more unless an emergency arises.

Don’t take advances for personal reasons; open a business account for your settlement; pay yourself only the amount needed to cover personal expenses and leave the rest of the money in your business account. Don’t touch it except for retirement, investments, taxes and of course, surprises. Follow these simple steps and with proper money management habits, you can control your cash flow and have more money to show for your efforts.

I’ve spent time talking about setting up a business properly and the importance of
planning. In my next blog we will look at Fixed vs Variable Costs.