If you run or own a trucking business, you already know that some of the biggest issues you face include managing fuel costs, finding and retaining responsible, qualified drivers, and maintaining consistent cash flow. One of the most effective ways of improving cash flow and saving time is to opt for freight factoring. There are a number of benefits of freight factoring for both brokers and carriers. Here’s a closer look at how it works — and how it can help your business and your bottom line.
Freight factoring is a type of business financing that lets you receive immediate advances on your invoices. In exchange for a fee, you get the money right away, which means you have working capital to run your business instead of having to wait 30 or more days to get paid after delivering a load.
Benefits of Factoring Freight Invoices
Whether you have a fleet of five trucks or 50, factoring puts money into your hands quickly. That speed of payment favorably impacts your business in the following ways:
· Immediate cash flow: You won’t be waiting 30 days to get paid ever again! Many factoring companies have same-day or next-day payment options. One of the most significant benefits of factoring services is that you have the funds to pay for fuel, salaries, equipment, repairs, and other expenses without having to put them on a credit card or otherwise finance them. It's important to have consistent cash flow ready for immediate use in times of surprises - such as fuel prices spiking or emergency truck repairs. You also want money on hand in case your business booms and you need to hire additional staff to help run the business!
· Ability to haul more loads: An increased cash flow means you can pay out your expenses and take on more loads than you otherwise could. Increased cash flow gives you the power to to invest in a new truck and then pay additional drivers to pick up more loads. You'll also have extra cash for these extra trucks to fuel up. You'll be growing your business faster than you realize.
· Quick payments: Factoring is much faster compared to when brokers pay. Some brokers pay every 30 days while others pay every 45 days. Most factoring companies will pay you within the week, if not on the same or next day. That means you get your funds fast so you never have to wonder when you'll get paid. All your invoices will be sorted out and paid directly to your bank account by the factoring company.
· Time savings: Factoring eliminates the need for you or your office employees to spend time invoicing, following up on invoices, collections, or checking on payments. Factoring companies take care of the invoicing, collections, and disputes on your behalf with brokers. That's essentially what you pay the factoring fee for. This frees you up to focus on other areas of your business, which can result in greater productivity and profitability.
· Protection from bad debts: One of the sometimes overlooked benefits of invoice factoring is that it protects you from bad debts. A bad debt occurs when a creditor owes you money but is unlikely to pay. Factoring, especially non-recourse factoring, protects you if a broker goes out of business or can’t pay on a load. The factoring company absorbs the loss of that invoice while still paying you out. This means if you have a non-recourse factoring agreement, you won't ever have to worry about bad debts.
· Less stress and fewer headaches: Another of the many benefits of invoice factoring may be harder to quantify but is no less important. With factoring, you know you’ll be paid — and quickly. That takes a lot of “what-ifs” out of your day-to-day life, which means less stress for even the busiest owner or manager. You will have your money in your bank account from your factoring company one way or another, and that money will arrive significantly sooner than when your broker would pay you!
Freight factoring can ease many headaches trucking business owners experience. The immediate cash flow will allow you to grow you business in ways you couldn't before. It also gives you a sense of security that you will be able to make payroll for your drivers or pay for surprise repairs or equipment you need. With invoice factoring you can stop waiting and keep hauling more and more loads while your factoring company takes care of invoicing and collections for you.