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Freight Factoring is a great option for trucking companies that are looking for a better way to get their money fast, without the need to wait for invoices to be paid. Typically, it includes selling the invoice to the factoring company, where you will get immediate cash, instead of having to wait for the client to pay the invoice, which can take over a month in some cases. However, payment disputes can cause challenges, especially if you are using a factoring service for your invoices. It’s important to understand exactly how disputes are handled in order to protect your cash flow and ultimately keep your business stable. We’re going to look into how payment disputes can affect factoring and the best courses of action if you find yourself in that predicament.
What is a Payment Dispute?
First off, let’s talk about what exactly a payment dispute is and what it involves. Typically, a payment dispute occurs when a client challenges the invoice. This can happen in any business situation, ultimately, but when it comes to factoring, it can cause other challenges due to the fact that you’ve sold the invoice to the factoring company. Here’s a look at some of the reasons that a payment dispute might be made in the trucking industry:
- Damaged or missing freight
- Late deliveries
- Incorrect documentation
- Weight and dimension discrepancies
- Duplicate charges or other charge discrepancies
- Rate disagreements
Why Payment Disputes Can Be Stressful for Owner-Operators and Carriers?
When a payment dispute happens, there are a lot of reasons that it can be stressful for an owner-operator or carrier. Here are a few of the reasons that it can be stressful, and reasons why it can be difficult to navigate a payment dispute:
Cash Flow Disruption
One of the main reasons that a payment dispute can be stressful is because to the disruption of cash flow. Delayed or withheld payments can cause a huge issue for a business when it comes to cash flow, putting that money to your business, and anywhere else you’d normally put that money. Even a short hold on the payment can cause financial strain within the business.
Lack of Control
The lack of control of the situation and the uncertainty behind the payment dispute are something that you will encounter when dealing with a payment dispute. It can feel like there is a lack of control because, for a carrier, they’ve already fulfilled their end of the contract, and now they are not getting paid for the work that they did.
Relationship Strain
Disputes in general can cause relationship strain and stress between careers and clients or partners that they have been working with. In this business, there is heavy reliance on the strong relationships and partnerships that come with the job, so any strain on them could cause potential issues for the future of the relationship.
How Does Factoring Work When There Is a Dispute?
When working with a factoring company, with a dispute, the process is a bit different what it would otherwise be. It’s important to know the steps of what will happen and what to expect if this happens while you are working with a factoring company, in the event that a payment dispute ever happens with your business.
Factoring Process
At first, the process is the same for the factoring process. The carrier will deliver the load, then they will submit the invoice to the factoring company, and they will receive the initial payment they’d usually receive from the factoring company.
Invoice is Disputed
If the invoice is disputed, then the factoring company might place the invoice on hold until the dispute is resolved. Ultimately, the factoring company that you’re working with has the obligation to protect both the carrier and itself for non-payment risk. They will play a pretty big role in helping to get things going with the payment and solving the issues at hand.
Documentation
Documentation is important to keep so that you can provide it if there are any payment disputes. Some things you should provide immediately once there is a payment dispute would be the bill of lading, receipt confirmations, and proof of delivery to help protect yourself. The factoring company may also intervene and help to speed up the process by communicating on your behalf for certain things.
How Factoring Helps Protect Your Cash Flow During Disputes
Working with a factoring company like TBS can help protect you when it comes to disputes. We help with providing guidelines on the proper documentation before invoicing the company. They also help with providing experience and helping to deal with disputes when it comes to brokers and shippers. Factoring companies will also still provide ongoing funding for the non-disputed invoices while the disputed payment is being resolved, keeping your cash flow consistent. Factoring companies also provide guidance to ensure that common mistakes are not made, which could lead to a potential payment dispute. They help to be an extra set of eyes on transactions, helping to ensure that the paperwork is submitted, documented, and that everything is accurate.
Working With TBS Factoring to Stay Protected
At TBS Factoring, we work hard to provide the best factoring experience for owner operators and carriers. We provide all of the needed factoring services ot keep your cash flow consistent and keep you protected, but we also have experience when it comes to payment disputes and helping you through that process. We provide funding solutions that are reliable, even if there are payment disputes going on, which can alleviate stress and ensure that you still have a consistent cash flow. Ultimately, payment disputes aren’t uncommon, and they come with the territory of working in the trucking industry, but having support when dealing with them can make all the difference. If you are looking for a factoring company that has experience in all of the areas needed, including payment challenges, contact us at TBS Factoring, and we can give you a rundown of what we offer and how we can help you stay on track with your business.
