Cash Flow and Turbulent Times
Below is an article I recently published on LinkedIn but thought I would share it here as well.
One of the most important metrics for any business to watch and manage is cash flow. Regardless of whether there is a current global crisis or if the global economies are hitting all-time highs, keeping an eye on cash flow is important in both situations. For many businesses, the toughest decisions during cash flow questionable times are regarding the repairing or replacing of mission critical equipment like forklifts, aerial lifts or personnel carriers.
The current COVID-19 Pandemic is something unseen in recent history and is placing a strain on almost all industries in every global sector. Often times the first reaction to a business cash flow strain is to cut back on forklift maintenance programs and just “make do” as long as the business can. New equipment financing, leasing or outright purchasing is also normally halted due to economic uncertainty. While this makes complete sense, businesses still have financial/vendor/customer commitments to meet. If forklifts or other industrial equipment goes down due to a lack of maintenance it can bring many businesses to a screeching stop. Couple that with the prevention of buying more equipment and it’s a recipe for disaster.
So, then the question becomes… How do you operate a business effectively, efficiently and continually, during cash flow questionable and economically turbulent times?
In short, equipment rental might be a good short term or even long-term solution for most businesses. Below are a couple reasons as to why a forklift, aerial lift or personnel carrier rental program might be a good fit for your business. There are also a couple resources to assist businesses during the current pandemic at the end of this article.
Reasons to consider equipment rental programs:
Fixed Monthly Cost:
a. Almost all equipment rental programs have a fixed monthly cost (with exception of potential damage/abuse charges). Part of the fixed cost of a rental program is the inclusion of standard maintenance. Having the monthly cost of the equipment defined upfront helps with budgeting and having the maintenance included means that there should not be any unexpected cash costs for carrying that rental equipment. If the rental forklift goes down then the rental company will repair or replace it to keep the customer business operational.
Flexible Rental Structures:
a. With economic uncertainty, having the ability to return rental equipment or swap out one piece of equipment for another to meeting changing business needs is a huge benefit. Maintaining old or outdated equipment is an unpredictable cash game and often times leads to throwing good money after bad. Most rental companies offer a variety of rental terms from hourly to multi-year contracts.
Avoid New Equipment Debt
a. Taking on new debt for industrial equipment when cash flow is uncertain in the coming months can be a risky venture while increasing debt to income ratios (something banks tend to keep an eye on). A rental forklift or other piece of industrial equipment can be a good solution to this problem. A forklift rental agreement does not count as debt on the company balance sheet and will not affect debt to income or debt to equity ratios for most accounting structures.
Exploring the idea of an equipment rental program to help manage cash flow efforts can only assist in managing the business both in the short term and in the long term, regardless of situation. Almost all equipment rental companies can assist in finding, structuring and implementing a rental equipment program that meets all required business objectives. Even more so with the current crisis at hand with the coronavirus.
Below are some resources to assist your business with how to proceed:
Useful Covid-19 Links
Covid-19 Key Facts – CDC : https://t.e2ma.net/click/bq02nc/rum7iy/nfcu0l
Special Tri-Lift NC, Inc. Operational Statement About Covid-19 : https://t.e2ma.net/message/5jrrxc/dmqqs0
Corona Virus Stats for the USA (Worldmeter) : https://www.worldometers.info/coronavirus/country/us/
Schools, Workplaces & Community Preparation & Action – CDC : https://t.e2ma.net/click/bq02nc/rum7iy/37cu0l
Covid-19 Interactive World Map – John Hopkins : https://t.e2ma.net/click/bq02nc/rum7iy/j0du0l
8 Things Your Small Business Needs to do During Covid-19 : https://www.uschamber.com/co/start/strategy/business-owner-tips-coronavirus-pandemic
FREE Covid-19 Awareness and Safety Tips Poster : http://tri-lift.com.live.prod.cwsplatform.com/wp-content/uploads/2020/03/TLI-Covid-19-Poster.pdf
Linked to the LinkedIn Article I wrote: https://www.linkedin.com/pulse/cash-flow-turbulent-times-robert-bond/
Thanks for the vote @payroll