Running a trucking or freight company requires a lot of hard work if you want to keep it growing and achieving for many years to come.
One of the most important aspects to running a successful business that is constantly growing is having the necessary liquid cash to pay your bills on time, make sure your employees are getting their paychecks when they expect them to and much more. When you have to worry about paying for your day-to-day expenses, you as a business owner are going to have a very tough time focusing on how to grow and improve as a business overall.
In fact, many business owners have a major difficulty keeping a steady flow of liquid income. That is especially true when the industry that their business operates in is invoice-based. The main reason for this is because customers and clients typically have several months to actually complete an invoice after it is sent to them.
It can be something of a catch-22 for businesses as well. While a trucking business such as yours certainly needs the money from the jobs that you complete, you absolutely need to keep your best-paying clients for the long term so that you can depend on the business they give you while also trying to gather new business. If you demand that a client pays their invoices upon receipt, that may strain the relationship.
Eventually, you could find yourself losing key accounts that make up a large percentage of your overall business.
Luckily, there is one fantastic way for trucking company owners to make sure that they are getting consistent cash into their company so that they can make the payments that they need to make in order to ensure that everything runs smoothly now and in the future. That way is known as truck factoring, invoice factoring for freight bill factoring. There are a number of companies that operate in this space and are able to help companies big and small.
If you are curious about what freight bill factoring is and how it can help a company like yours, simply keep reading to find out!
What Is Freight Bill Factoring?
To put it simply, freight bill factoring is a financial process that involves a trucking company selling its clients unpaid invoices to a freight bill factoring company that can offer the trucking company cash immediately. The way that it does that is by buying the unpaid invoices of the trucking company and then collecting that money from the clients that are responsible for paying for it.
Factoring unpaid invoices allows a trucking company to no longer worry about their financial status when it comes to liquid cash flow and instead focus on the important aspects of growing business. While it may seem somewhat complicated in terms of how it works, it is actually quite simple.
Step 1: Find A Freight Bill Factoring Company & Apply
It’s important to know that there are a lot of different factoring companies out there that offer fairly similar services. With that being said, it is always important to do the extra work necessary to find a company that will satisfy your company specific needs. Keep in mind that the vast majority of factoring agreements can be completed within 24 hours. Beyond that, it is also important to keep in mind that the contract agreements between a trucking company and an invoice factoring company are often quite flexible.
Once you have found a factoring company that you are interested in working with, you simply have to submit your application along with the required documents and the information for the invoices that you want to factor.
Step 2: Gain Approval From The Freight Bill Factoring Company
Once you have submitted your application to a factoring company you can expect to hear back typically within three to five business days. This evaluation period is the industry standard and is basically done by every invoice factoring company just to make sure that the invoices you want to factor have received all the services you issued a bill for. The factoring companies also take this time to do a credit check on the customers whose invoices you are looking to factor.
Step 3: Get Paid For The Invoices
Once you have received approval two factor the invoices, you can expect to get the first part of your payment installment within 24 hours. As previously mentioned, this frame of time is also something of an industry standard.
Remember the first payment will just be a percentage that is determined by the factoring company. When it comes to the trucking industry, trucking companies can typically expect somewhere between 85 percent and 95 percent of the entire amount of the invoices that they have factored.
Step 4: The Factoring Company Beings To Collect
The next step is a step that your trucking company won’t even really be involved in, but it is a very important part of the overall process. The factoring company will go to your clients and will start to receive the amount of the invoices that they originally owed you. Because the trucking companies purchased your invoices, they are now responsible for collecting the money that your client so.
The trucking company will also alert your client to the fact that they will be required to pay within 90 to 120 days.
Step 5: You Receive Final Payment
If the invoice factoring company successfully collected the money from the debtor, they will send you the second payment installment after they take out the factoring fee from it.
In some cases, the debtor could fail to pay them due to financial issues such as filing for bankruptcy or wanting to dispute the charges for your services. If that happens, you will be required to compensate them by following their terms. Depending on the factoring company and the type of factoring you agreed on, the compensation could be by giving them another invoice to factor or returning the money back.
How Does Freight Bill Factoring Help A Trucking Company?
Let’s break down the top ways in which working with a freight bill factoring company is going to play a major role in helping your company not only survive but thrive.
You Get Quick Funding
Of course, one of the most important reasons why truck factoring is so beneficial is because it offers quick funding. As you know, companies that apply for a freight bill factoring contract can receive up to 95% of the money that they are out from their clients within one business week. That’s a lot less time waiting around then the weeks or months it will take for all of your clients to complete their invoices.
Highly Flexible Amounts
Another fantastic aspect of freight bill factoring is that the amount that you will receive is highly flexible and based entirely off of your unpaid invoices. In fact, factoring agreements can range between several thousand dollars to several million. This means that you can continuously change the terms of future factoring agreements based on the amount of money tied to your unpaid invoices and the size of your company.
Get The Money You Need To Grow
It can be really hard to look deep into the future about how to improve and grow a business if you are constantly worried about getting the money that you are currently owed. By depending on freight bill factoring to make sure that you always have the liquid cash that you need, you can spend more time and energy figuring out how to beat out your competitors and dominate the market that your business operates in.
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You Get Additional Services
up until now, we have really only focused on the primary aspect of a freight bill companying service. However, there are many more services that a trucking company can benefit from by working with a freight bill factoring company. First of all, you will no longer have to worry about reaching out to your client to make sure that they are paying their invoices. Of course, that is because your freight bill factoring company will be doing that for you. Beyond that, you can also receive benefits like reductions on insurance payment amounts, gas cards, and much more. In fact, the percentage that you pay a freight bill factoring company may end up paying for itself through the other benefits that you receive from that factoring company itself.
As you can see, there are many reasons why your trucking company may want to seriously consider working with a freight bill factoring company. When it comes to getting ahead in any industry, uncertainty can play a major role in getting in your way. That is even more true if the uncertainty is based around the amount of liquid cash that you may or may not receive in the coming days, weeks or months.
With freight bill factoring, you will always have a great idea of how much money you will be receiving in the near future that can give you a major leg up and help you take your business to newfound heights that you previously did not even think were possible.