It seems that every week, another broker or shipper files for bankruptcy. As a trucking company owner, it’s alarming when you’re doing the work and aren’t sure your client will still be in business at the end of the month. What are the best ways to ensure you get paid quickly for the hard work your drivers do? Take a closer look at some of the problems that cause payment delays and how to approach them. With the right strategies, you can get paid quickly for the deliveries you complete.
What Leads to Payment Delays?
Before you even consider how to resolve untimely payments, you have to break down what causes the delays in the first place.
Brokers and Shippers With Iffy Credit
Before you agree to work with a new broker or shipper, are you checking their credit history? You should be. You need to verify that they don’t have outstanding payments or have a history of paying late. It also helps to run a search online to see if there are complaints from other trucking companies waiting for payments that just aren’t arriving on time.
Harmful Net Payment Terms
When you generate invoices, what are your net payment terms? Some trucking companies choose net payment terms of 30, 60, or even 90 days. If you haul a load on April 1st, and you give a broker or shipper terms of net 60, they have two months before they have to pay you. Can you afford to wait that long? If they go bankrupt a month from now, are you prepared to swallow the loss or fight in court to get payment?
Most companies in the trucking industry use net 30 terms with discounts for early payment. That discount for early payment may be worth it if it means getting money faster, but there are better ways to get paid quickly. If you’re offering a discount of 10% for early payments, you should consider services like freight factoring with fees far lower than 10%.
Dispute Resolution Policies
What are your policies for dispute resolution? You delivered pallets in pristine condition, but the client argues that the goods were damaged. While you work with the client to resolve this dispute, you’re not getting paid. You need to make sure you have policies in place that don’t hurt your bottom line.
It’s also important that someone is making sure the invoices you generate are correct. Even one wrong number can lead to time-consuming disputes. It’s worth having someone check every invoice before it’s sent. One wrong invoice can frustrate clients and could lead to a loss of business.
Old-Fashioned Payment Methods
How do your clients pay you? Are you still using invoices that are mailed or faxed to your clients? Do you require a check to be mailed? That wastes time. If you have net 30 payment terms, you won’t necessarily get paid for a month, plus it can take another week for the check to clear the bank.
If the check bounces, there are additional delays and you face costly overdraft or returned check fees. You can try to pass them on to your client, but there’s no guarantee you’ll get that money back. It’s time to look into EBTs and online credit card payment options.
Invoicing Processes That Help With Faster Payments
Those are the problems that can delay payments, and one of the easiest ways to fix them is by incorporating streamlined invoicing practices.
You need to create one invoice template that is used for all of your clients. Make sure it covers everything from your rates, additional fees, company details, and bill of lading number. Before sending it, double-check for data entry errors. Ideally, having invoicing software that uses AI to pull information from a bill of lading and generate a standard invoice will eliminate most errors.
When you send them, send them electronically. If you can, include a link or button saying “Pay Now” that makes it easy for your client to click a button, submit payment, and avoid having to write and mail a check to you.
Follow up with clients to make sure they have received the invoice. Don’t be afraid to call a few days before payment is due and make sure they don’t have questions or problems. If they’re a day late, start calling to find out why payment hasn’t been remitted. Keep your cool when making these calls. An angry, accusatory approach isn’t going to help secure a late payment.
Services and Tools to Get Paid Faster
Many services and tools ensure you get paid quickly. The most important thing to talk about is freight factoring. It’s a service where you sell your invoices to a third party for immediate payment. There is a fee that will reduce the amount you’re paid, and it’s usually no more than 5%. A 5% fee is far better than having to pay employees or bills using a credit card that’s charging 15%, 20%, or even 25% in interest.
Freight factoring has a lot of benefits:
- Steady cash flow
- Free business credit checks
- Invoices generated for you to upload to your bookkeeping software
- Additional services like fuel discounts and GPS Veri-Fast verification when you pick up and drop off a load
Any service has cons, and freight factoring is no different. If a client doesn’t pay and you’ve already been paid for that load, you could be held responsible for repayment of the money you were advanced. If you’re low on cash, it’s a hassle.
However, non-recourse factoring is a solution to that problem. If you don’t get paid because your broker or shipper suffers financial hardship and files bankruptcy or closes down, a non-recourse agreement protects you from having to repay the money.
Another con is that some companies require you to factor every load you complete for a broker or shipper. If you have solid clients who always pay early, you may not want to factor those invoices. Make sure the freight factoring specialist you choose allows you to pick and choose the invoices you factor.
You have to pay a fee for freight factoring, but it’s rarely more than 5%. Do your research and ask questions. Some companies have hidden fees that may not be clear if you don’t carefully read the terms and conditions. Take time to carefully go over a contract and do not sign it if you don’t agree to any of the fees or rules.
When you do enter into a freight factoring agreement, you might be paid 85%, 90%, 95%, etc. You don’t always get the entire amount upfront. The fee is deducted from the amount on the invoice, and you’re paid a percentage of the amount due to you.
Once your client pays, the remaining amount is paid to you. Make sure you’re okay with the partial payment. Usually, the less you’re paid upfront, the lower the factoring fee, but it does vary from one factoring company to the next.
TBS Factoring is ready to help you get paid quickly. We have tools to help you with your invoicing, and gas discounts are always available. Talk to our freight factoring specialists about your company’s needs, and we’ll offer a solution that works well for you.