A shipper is a company or party that is ultimately responsible for getting goods to a customer. It might be the manufacturer or a company tasked with getting goods to a specific destination. Shippers need trucks to get items from Point A to Point B, and that’s why many trucking companies work closely with shippers.
When you’re working with a shipper, you need to make sure the contract is favorable to you. The shipper’s goal is to get goods delivered as quickly and affordably as possible. Your goal is to turn a profit. That can be difficult if neither of you wants to give some leeway. Have you considered leveraging freight factoring to come up with a favorable arrangement?
What Is Freight Factoring?
Freight factoring is a service where a trucking company picks up or delivers a load, submits the bill of lading to a factor, and gets paid immediately. It eliminates long waits for an invoice to get paid, which makes it easier to plan monthly finances.
In exchange for this service, the factor charges a small fee, usually no more than 5% of the invoice total. Suppose you delivered a load for a shipper that paid $10,000. Typically, you’d get $10,000 weeks later when the client pays. If you’re paid by check, it could take a week or two for the check to arrive in the mail and clear bank processing.
While this system works for some, some companies have bills to pay and can’t wait for a client to get around to paying invoices. Bills pile up, interest charges increase, and late fees drive up expenses even more. Getting paid quickly helps companies maintain a steady cash flow.
In addition to getting paid quickly, freight factoring arrangements often include extra services. You might find that getting discounts of up to 90 cents per gallon offsets freight factoring fees. Loyalty programs that offer discounts on legal advice, truck parts, and tires are extremely beneficial to a trucking company. Discounted insurance partnerships are another perk that’s hard to overlook.
There’s another advantage to freight factoring. The factor takes over invoicing duties. Instead of spending hours each week generating and sending out invoices, the freight factoring company handles it. You receive an invoice that you can upload to your bookkeeping software. Your office staff have time to devote to other important tasks like marketing, route planning, and scouring load boards for new clients.
How Does That Help You Negotiate Better Contracts with Shippers?
While freight factoring sounds beneficial for your company’s needs, you may not realize the value it provides when it comes to contract negotiations. Freight factoring adds a multitude of benefits that make you more appealing to clients.
Better Credit Rating
Because you’re getting paid regularly and paying bills on time, your credit score improves. When choosing a trucking company for a new contract, shippers pay attention to a company’s credit history.
If you have a positive credit rating, you’re likely to draw new clients. And, those clients may bring higher paying contracts that help you increase profits and funds needed to grow. It also helps you secure favorable interest rates on business loans, truck loans, and business credit cards.
Load Finding Tools at Your Fingertips
The busier you are, the more money you make. That’s another way to negotiate contracts. You’ve discovered the benefit of having a full trailer on each trip down and back, and it’s boosted your profits. Launch the load-finding app, look for loads that fill the space in your trailer, and do the same for the return trip. You have new shippers on your roster, and they’re willing to pay a lot more than past clients.
You can use this to keep updated on what the going rates are. Freight factoring companies can also help you better understand the current rates that allow you to stay competitive without losing money on the trips you take. Once you have an idea of what you should be charging, you’ll have data you can use to negotiate fair contracts.
Non-Recourse Arrangements Reduce Risk
There is a risk taken with every client you have. They might seem financially stable right now, but will that change in six months? It’s not always easy to predict when a company will run into financial issues. Non-recourse arrangements offer a level of protection against unexpected closures or bankruptcies.
As a second level of protection, you can use free business credit checks to check a company’s past credit history to make sure there is nothing alarming. You should be able to see some patterns with late or missing payments that can alert you to a risky partnership. If you’re offered a contract that seems too good to be true, a poor credit rating adds evidence that all may not be as it seems.
Business Growth
You have money coming in, and that makes it easier to keep bills paid, lower interest rates, and qualify for beneficial financial programs to grow your business. As you free up capital, you can expand your fleet. The more trucks and drivers you have, the easier it is to negotiate better contracts.
Tips for Finding the Right Partnership
How do you find the best freight factoring partner to help you maximize profits while growing your business? It takes time and research. Don’t rush into a contract without comparing every possible option. The cheapest arrangement may not be the best when you consider other factors like insurance and fuel discounts. Compare these areas as you narrow down your search.
- What are the freight factoring fees?
- Are there additional charges for things like clients who pay a day or two late or bank transfers?
- Are you penalized if you don’t submit a minimum number of invoices?
- How quickly do you get paid for the work your drivers do?
- What is the advance arrangement? Do you get 100% of the money due or only 85% to 95%?
- If your client fails to pay an invoice, what happens?
- How do you submit bills of lading to get paid?
- What other services are available? Are there fuel discounts available?
For more than 50 years, TBS has helped people within the transportation industry get paid fast. With our range of services, you can get paid quickly, save money on your fuel, find more loads to run, find suitable insurance, and stay in compliance with state and federal agencies. Reach us online or by phone and learn more about these services.