As we enter a new phase of COVID-19 and freight trends shift, businesses might feel the effects of a slowdown in the global economy. The freight industry is no exception. In fact, the pandemic has resulted in a whiplash in demand for many goods like commodities, including oil and gas, which has resulted in a decrease in shipping activity. Furthermore, geopolitical events and inflation have signaled a looming worldwide recession. A “freight recession” has caused many businesses to reevaluate their financial operations in order to stay afloat.
So, what can you do to keep your freight business afloat during these tough times? Here are a few tips:
- Review your expenses and cut costs where possible. This may include eliminating or reducing discretionary spending, such as advertising or travel. You may also need to renegotiate contracts with suppliers or reduce staff hours/wages.
- Reduce capital expenditures. Postponing or canceling planned equipment purchases or lease agreements.
- Review your pricing strategy. As freight rates fluctuate, you may need to consider adjusting your prices in order to compete in a recessionary market.
- Improve your collections process. Implementing a digital payment solution can reduce the time and cost to collect outstanding receivables. This may include instituting a mandatory deposit policy or offering discounts for early payment.
- Strengthen your relationships with your creditors and lenders. This also includes tracking the creditworthiness of clients and vendors. This will help you access the capital you need to weather the storm.
- Review your insurance coverage. Make sure you have the right coverage in place in case of default or damage to equipment.
The COVID-19 pandemic has caused a bullwhip in demand for many commodities, resulting in a "freight recession." While this can be a difficult time for businesses, you can take steps to weather the storm, such as reducing expenses, minimizing inventory levels, and reviewing your pricing strategy. Seek professional advice from an accountant or financial advisor to ensure you are taking all the necessary steps to keep your business afloat during these challenging times.
A freight recession can have a major impact on your company's financial operations. It is therefore important to be aware of the key considerations for managing your finances during this time. By closely monitoring cash flow, cutting costs, and maximizing revenue, you can help ensure that your company remains financially viable during a difficult period.