It’s frustrating; you work hard, make tight deadlines and deliver the goods, then you have to wait around to get paid. Meanwhile, expenses mount up as your equipment burns fuel and needs maintenance, overhead costs accumulate and wages have to be paid.
Cash management is vital for business success, yet it is one of the most difficult tasks for a trucking company to handle. To ensure your company’s success, getting your trucking invoices paid faster is as important as delivering freight safely and on time. This article will provide you tips and steps that you can take to improve your company’s financial stability.
The Importance of Maintaining Positive Cash Flow in the Trucking Industry
Cash flow is the lifeblood of business, it is either negative or positive. Negative cash flow is when your trucking company has more outgoing expenses than incoming money. You may be running a profitable operation, but if limited cash reserves prevent you from keeping up with expenses, the business will eventually fail.
Cash is king! You need to have money readily available to maintain operations without incurring major debt. Positive cash flow means money coming into the business exceeds outgoing expenses.
In an industry with daily expenses and slow-paying customers, maintaining positive cash flow can be difficult. That’s why having an effective accounts receivable management collection process is critical so your trucking company can stay ahead of the curve.
3 Steps to Effective Accounts Receivable Management
Taking control of your account receivables can reduce the sleepless nights spent wondering if and when customers will finally pay your trucking invoices. Here are some steps you can take upfront that will speed up the payment process:
STEP 1 – Create business cash flow systems designed for success
- Before hauling for a new customer, decide how much credit you’re prepared to offer them and set a time limit for payment.
- Set up a system that will track when an invoice is issued and automatically alert you when it’s overdue.
- Create a system for following up on late payments as soon as they’re overdue, including email and phone script templates.
- Make it easy to pay you. Be sure that your invoice format clearly states the amount due, applicable taxes, payment terms and options, along with where to send payments.
- Consider offering early payment incentives and state them on your invoice.
STEP 2 – Issue your trucking invoices right away
- Don’t wait to submit your trucking invoices. Invoice as soon as a job is completed.
- Confirm the invoice was received and is in the queue for payment.
STEP 3 – Following up on late payments
- Don’t wait to follow up. As soon as a payment is late, make a courteous call to inquire when it will be paid.
- Keep emotion out of it. If you can’t keep your head when dealing with customers who pay late, give the follow-up job to someone who can.
- For those customers who consistently pay late – review your credit terms and adjust. Even if that means insisting on COD until the customer’s payment history improves.
How to Get Faster Payment of Invoices
In an ideal world, you would deliver a load, invoice the customer and get paid all in one day. If that’s what happened every time you dropped freight, your business finances would be on solid ground. However, to remain competitive, you have to offer your customers payment terms of 30, 45 or 60 days.
To make matters worse, trucking industry customers are notorious for paying late. Paying over-the-road expenses and covering overhead, while waiting for payment of services, is a vicious cycle that can sink your trucking company. Fortunately, there is an alternative; freight factoring is the ideal financial solution to overcome the wait and create instant positive cash flow.
Freight factoring is the practice of selling your invoice receivables at a discount in exchange for immediate cash. Factoring is not a loan. It is a means of getting the money you’ve already earned from your invoices. Get money into your hands within 24 hours after you make a delivery.
Freight factoring is an alternative funding option designed specifically for trucking companies. It is the fastest, smartest and easiest way to get paid. This mainstream financial option is the preferred cash flow solution for a growing number of truck company owners.
Freight Factoring Helps You Get Paid Faster
The benefits of freight factoring are immense. When you factor an invoice for immediate payment, the factoring company takes care of the accounts receivable back office work for you. From issuing invoices, receiving payments and following up on late payments, the factoring company does it all.
Most factoring companies also provide unlimited free credit checks on your customers. The best factoring companies for trucking will also provide cost saving services such as fuel discount cards, so you can fuel now, pay later.
The best news is that factoring your freight bills is easier than getting a bank loan or line of credit. That’s because qualification is based on the creditworthiness of your customers, not your trucking company’s credit rating or business assets. Check out the pros and cons of freight factoring.
No matter what tools, work practices or strategies you employ, it is critically important to have control over your account receivables. Maintaining positive cash flow is the road to sustainable growth and a profitable enterprise.
Call today for more information about how freight factoring will improve your company’s cash flow.