Cash Management Considerations for Transportation Companies

Transportation companies sometimes find themselves with excess cash for a variety of reasons. Some companies many still have cash on hand from strong years in 2021 and 2022 or from paycheck protection program loans or employee retention credits.

Whether you have excess cash now or not, you likely will at some point in the future. Cash management is an important consideration for transportation companies, and having a prudent cash management policy can help you boost reserves and cover shortfalls when necessary.

How much cash transportation companies should keep on hand

The standard rule of thumb for businesses is to have three-to-six months of operating expenses on hand. This can vary on the size and type of the business, and don’t forget to consider:

• FDIC and NCUA insurance levels and your personal comfort level exceeding the limits versus potentially needing multiple institutions to stay within the limits.
• Potential risk of holding too much excess cash in an operating company in the event of litigation, cyberattack, or catastrophic event.

What transportation companies should do with excess cash

Once you establish a comfortable reserve, there are many options for additional excess cash. Some transportation companies use it for equipment purchases or for non-tax dividends or distributions to owners.

Another option is investing the cash in higher yielding accounts. Money market accounts may be an attractive option for businesses seeking a higher return rate their cash reserves while maintaining liquidity and low risk.

How CLA can help transportation companies manage cash

Considering the continued high interest rates, our wealth management team recently explored options for businesses with excess cash. Learn more and get our team’s advice in this recent article.