with cash flow challenges have a few options for catching up and staying current with their expenses. However, unless their funding source turns out to be a birthday present from a rich aunt or a buried treasure chest, all funding plans come with some cost. Whether it’s the interest charge on a credit card or the fee that a factoring company charges for advances on freight bills, these expenses represent the simple “cost of doing business.”
When it comes to getting their freight bills paid in a timely manner, savvy trucking professionals always ask “How much will it cost me to factor?” Yet, there’s a flip side to that cost-of-doing-business question. The next question should be: “How much would it could cost me if I did NOT have a factoring company?”
How freight companies lose out if they don’t factor invoices
- Missed opportunity cost. If you have to turn down a shipper or freight broker because they demand extended payment terms, you’re turning away business. Some customers may pay well, but they are just not willing to negotiate shorter payment terms — yet you need to get paid in 30 days or less. When you work with a factoring company, you won’t miss those often-lucrative opportunities because you’ll get paid upfront, regardless of when the shipper pays.
- Missed discounts and savings: Factoring companies that specialize in transportation can provide you with new ways to save with fuel discount cards and tire discount programs. You will also save on hiring extra staff or outside vendors to handle your invoicing, credit checks, collections, and even some of your bookkeeping duties
- Increased risks: If you complete a job for a shipper with a history of bad credit, slow payments, or non-payment, you could get stuck spending time and resources to try to collect what you are owed, or, worse, stuck with a bill that could jeopardize your whole business. Factoring companies protect you on the front end of a transaction with an in-depth credit analysis of your potential customers and on the back end with professional collections services to get you paid.
- Increased penalties and fees: When you don’t have the funds to cover your expenses, you can get hit with a variety of unnecessary costs, ranging from overdraft fees on your checking accounts and interest charges or late fees on your credit cards to penalties incurred if you miss deadlines for filing taxes. Factoring helps you avoid these costs by speeding up your cash flow.
Ready to hear more about how factoring can save you money and help you grow your trucking business? Contact Interstate Capital now!