If you own a trucking company or own and operate one for a living, then you’ve likely become all-too-familiar with invoices that aren’t paid on-time. 30 days late, 60 days late, some people will even wait until their invoice is 90 days late before paying it — or worse!
Trucking companies all around the world are dealing with late payments and it can cause extreme disruption to your business. When you set your pricing and payment structure, you expect your clients to respect those demands. Unfortunately, this rarely seems to be the case.
The issue typically isn’t with receiving the payment, because you almost always do. Instead, the issue arises with “when” you’ll be receiving it. For those that run a tight ship, this can easily get in the way of your own bills being paid on time and will eventually cause a domino effect to occur.
What Is Freight Factoring?
Many businesses are starting to turn to freight factoring as a means of keeping a steady flow of cash — even when customers or clients aren’t paying their invoices in a timely manner. This will ensure the invoice is at least partially paid during the waiting period, while also handing the responsibility off to someone else. This will effectively give you the time you need to get back to your business.
Freight factoring helps give trucking companies peace of mind when their invoices are unpaid. It will allow them to continue running a smooth business, despite customers not being diligent with their end of the bargain.
Essentially, the freight factoring company will send companies an advance worth around 85% of the unpaid invoice. The company will then do what they do best and reach out to the customer in hopes of getting the invoice paid ASAP.
Once the invoice is paid by the client, the freight factoring company will return the rest of the unpaid invoice and take a small cut for themselves. As you can see, you won’t be needed during the process and it will allow you to focus on the things that matter most — like finding new clients and increasing cash flow.
What Does the Process Look Like?
Let’s say you own a trucking company or work as an independent truck owner-operator and you have a list of unpaid invoices sitting in your accounts receivable. Whether they are two weeks old, one month old, or several months old, you’re likely battling the uneasy feeling of not knowing when you will be paid exactly.
If you’re interested in relieving yourself of that responsibility, you can apply for assistance from a factoring company. Once you apply, you’ll be asked to link your accounts receivable software to the factoring company. You’ll let them know which invoices you want them to take care of and they will send you an advance worth up to 85% of the invoice.
From that point, you simply sit and wait for the customer to pay the invoice so you can receive the rest of your payment — minus any fees from the factor. Before you know it, you’ll have an effective way of ensuring you are paid on time and will build a good relationship with your factoring company for future use.