“How used cooking oil collectors can smooth their cash flow” sounds like the title of an essay from an accounting consultancy but is, in fact, a very important topic for used cooking oil collectors and grease trappers, because cash flow is cited 82% of the time as to why businesses fail.
In this post I will explain how used cooking oil collectors and grease trappers can smooth their cash flow and how that will keep them in business for the long run.
What determines cash flow for a used cooking oil collector?
Profits are the difference between revenue and expenses, often called pre-tax income (PTI). Cash flow is the net amount of cash going into or out of a company. Cash flow determines whether you can pay your suppliers and employees and maintain a credit standing that allows you to purchase on credit. Needless to say, if you can’t pay those two groups you won’t be in business long.
How do used cooking oil collectors get in trouble with cash flow?
Building your business requires trucks, facilities, storage tanks, pumps, tools and employees. Your company is doing well, and the price of oil is high so you’ve invested in growing your company. What happens if there is a lull in the business? The price of oil drops? Tanker trucks that aren’t available to move your oil? Used cooking oil is notoriously vulnerable to market fluctuations—the price you’re paid for your oil one day isn’t always guaranteed the next. It’s easy for a dip in business or in the price of oil to derail a company’s ability to service their debt. (To learn about how to customize trading to your business goals, see: Reiter Trading)
Used cooking oil collectors smooth their cash flow by….
Pairing your UCO collection business with a service that’s less vulnerable to the whims of the market, such as grease trap pumping, can help even out your cash flow. Imagine the waves of an oscilloscope and then a flat line going through the middle. If you combine the two lines you have small undulating waves-managed cash flow.
Do I have to start a whole new business just to smooth cash flow?
No, you don’t! Adding grease trap cleaning, a business likely to provide a steady cash flow, to an existing UCO business is fairly simple. You set the price and restaurants pay your company directly for grease trap cleaning, a service they’ll need regularly no matter what current price of oil. They’ll be happy to have one company handle both their kitchen oil recycling and their grease trap maintenance. Plus, additional cash flow is available if the grease trapper collects and refines trap brown grease.
UCO Collectors and Grease Trappers
When UCO collectors smooth their cash flow by adding a grease trap business, it is critical they use the resources they have rather than invest in all of the startup costs for a new business. One way to avoid large startup costs is to use the same trucks and staff to do both functions. But then the UCO collector has to manage and optimize two different routes using the same physical assets.
Fortunately, Reiter Software has a solution. Reiter has long been the leader in providing software for UCO collectors to manage their businesses-from fill rate tracking to route optimization to accounting. Recently, Reiter announced their COST software for Grease Trappers which is fully integrated with the UCO software and is perfect for managing the two businesses as one. Take a look at COST for grease trappers. Increase your revenues and smooth your cash flow. It will help mitigate the ups and downs and make your business more profitable and more predictable. Call 888-428-5617 now for a demonstration.