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How Does Invoice Factoring Increase Business Profits?

Why do a growing number of trucking companies include invoice factoring (also known as freight factoring or transportation factoring) as part of their financial strategy? The answer lies in the easy access to working capital to fuel growth and prosperity plus the many ways invoice factoring boosts profits. With the reliable cash flow that invoice factoring creates, truck company owners can maximize operational efficiencies to deliver better service and take action to lower costs. Keeping trucks on the road and hauling freight while reducing costs is key to increased business profits. Factoring companies that specialize in transportation factoring provide tailored funding options to help your trucking business grow and increase profitability.

Immediate access to working capital

Business dynamics have grown increasingly complex for trucking companies. This is due largely to the ongoing challenges of a difficult industry combined with global supply chain disruptions and an uncertain economy. Greater competition in the marketplace, growing costs, increasing demand to incorporate emerging technologies and the ongoing pressures of maintaining a productive driver pool continues to plague the trucking industry. Of these many barriers to success, late paying customers is one of the most disruptive and challenging aspects of running a profitable business. Poor cash flow hinders financial resources restricting a trucking company’s ability to operate efficiently. Freight factoring is a mainstream financial strategy designed to eliminate the need to wait for the money you already earned. It provides immediate access to funds and allows for easy working capital management to maintain a solid balance between growth, profitability and liquidity.

Efficiency is the key to profitability

Profitability is enhanced when your trucking company operates at peak capacity. When you have to invest manpower and resources upfront to deliver your services, it’s often tough to wait 30 or 60 days for an invoice to be paid. In the interim, you still need to make payroll, pay for fuel and maintenance, and the dozen other day-to-day expenses needed to keep your trucks rolling. Even the most successful trucking companies go through periods where their outgoing cash requirements exceed cash-on-hand. The factoring of freight bills to pay operating expenses is now common practice for both small trucking companies and larger fleets. With immediate access to revenues, trucking companies can financially support operations to run at their most productive levels — efficiency is the key to profitability!

Build a strong credit history

The ability to utilize available working capital without restrictive covenants allows trucking operations to react quickly to new business opportunities. This provides the confidence to deploy working equipment to meet customer demand knowing that fuel costs, driver wages and other over the road expenses will be met. It also ensures cash is available to pay bills and meet overhead expenses on time, plus maintain insurance premiums and cover taxes when due. Paying these costs on time is important to building a strong credit history. Having a financial report that shows your company as a creditworthy business has several distinct benefits:

  • Higher qualification status and lower interest rates on any future loans
  • Better leasing terms on new equipment or office space
  • Indicates that your company is financially stable, an important considerations for shippers to gain confidence in your company’s ability to serve their ongoing needs.

Fuel cards significantly increase business profits

Trucking companies that utilize freight factoring have the financial resources to take advantage of supplier discounts on early payment options and reduced costs on inventory blowout deals such as on tires, fuel additives, etc. But a far greater source of ongoing savings come from the use of fuel cards.

Of all the reasons for working with a freight factoring company to help improve your trucking company’s bottom line, taking advantage of fuel discount cards has the most immediate and dramatic positive impact on profitability. Fuel cards provide significant discount pricing on the cost of diesel fuel at major truck stops across North America. Whether you operate one truck or a fleet, trucking companies of all sizes are eligible to qualify for high volume discount pricing. This is due to the factoring company’s ability to pool the collective fuel consumption of its customer base to secure discount pricing from fuel aggregators. These savings are then passed onto the factoring company’s trucking clients to benefit all that participate in the program.

eCapital’s robust fuel card program provides the following benefits:

  • Delayed payment with credit terms on all fuel purchases
  • Save $0.12/gallon off the cash price
  • Accepted at over 16,000 major truck stop locations
  • Save $1000s on the cost of fuel
  • $100/day cash advance option
  • Easy qualification for any fleet size
  • Complete control of your EFS fuel cards via simple-to-use Fuel Management Portal

Choosing the right invoice factoring company to work with

A factoring company that specializes in the trucking industry will offer not only freight factoring, but a number of financial tools and strategies to ensure your company stays cash rich. Cash advance on loads in transit and delayed payment on fuel costs are key financial services provided by the industry’s top rated factoring companies to maximize your company’s bottom line. Essential to the financial success of this strategy is choosing the right factoring company to work with. The three most important aspects of factoring that will positively or negatively affect your trucking company are; cost, service and trust:

Cost: When business owners first seek a factoring company, it is often the cost of factoring that governs the decision process…and rightfully so. If the cost of factoring your invoices exceeds any savings gained through the process, you may improve cash flow management, but it’ll be at the expense of your company’s bottom line. However, if you keep your factoring fees under 3% and offset the cost with the additional savings offered by discount fuel programs, improved A/R management, free credit search tools and more, your trucking company gains a huge financial advantage.

Service: Trucking is difficult business at best, with unique challenges specific to a capital intense industry. Utilizing the services of a factoring company that understands your business is essential to ensuring correct action is taken when additional financial support is required. A factoring company that provides a dedicated and knowledgeable Accounts Manager to work with you on a daily basis is the ideal option.

Trust:  Working with a financial partner that you can trust to watch your back and respond in a helpful manner when special circumstances arise is critically important. Be sure to choose a factoring company that delivers transparency and a sense of urgency to keep your fleet moving during financially challenging circumstances.

Reliable funding with the power to increase business profits

Today’s financing sources for trucking business is becoming tighter and more restricted making invoice factoring an ever more viable option for business financing. It doesn’t matter if it is to raise immediate working capital, buy new equipment, or ease cash flow problems, factoring can often offer a practical funding solution with the power to increase business profits. Utilizing the financial benefits of invoice factoring places your hard-earned money in your hands immediately.  Combined with the cost saving benefits of specialized services, your trucking company gains the immense power of positive cash flow while enhancing the profitability of your company.

As the economy seeks revival, volumes are expected to remain good throughout 2021 and beyond as capacity tightens keeping rates high. For trucking companies that are positioned for growth, this is an exciting period as we head into the final two quarters of the year. It is the trucking companies that react quickly and efficiently to emerging opportunities that will capitalize the greatest and benefit with the most profitability.

For more information about how invoice factoring, discount fuel programs and other factoring services help to increase business profits, visit eCapital.com.

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