Experiencing a financial strain is not uncommon in the trucking industry. The balance between overhead, customer payments, and logistics is more tenuous than most people realize. However, a few delayed payments on invoices can lead to a financial strain which can force fleet owners to take out short term loans to cover the gap. Fortunately, there is a way to rightsize operations without having to take out loans.
Customer Payments Can Cause A Financial Strain
The whole concept may seem absurd, at first. A trucking fleet can have a ton of customers, which in turn generate a lot of invoices, yet a financial strain persists. The reality actually comes down to using customer-facing business practices on the back end. Traditionally, trucking fleets issue invoices with payment schedules of 30 days or longer. There is nothing wrong with this, and is a standard business practice with customers. On the accounts receivable side, the staggered payment schedule can cause a major financial strain. Waiting on customer payments is time when revenue is not coming into the fleet, which makes covering operational expenses problematic.
Removing The Financial Strain
Instead of waiting on customer payments, more fleets are using freight factoring services. Freight factoring services give fleets the ability to convert customer invoices to cash within 24 hours. On the accounting side, freight factoring services remove the financial strain caused by staggered payment schedules. On the customer-facing side, the payment schedule remains, so from the outside, nothing changes.
No Late Payments
Worse than the regular staggered payment schedules are unsettled accounts from delinquent payments. Fleet owners attempting to perform a collection on invoices which are aged out have to wait weeks before they see payments, due to the time line of collection services. Freight factoring services remove the financial strain caused by delinquent accounts by allowing fleets to trade in their backlogs for immediate cash. Freight factoring services eliminates the financial strain from both delinquent accounts in addition to providing working capital for invoices as they are generated.
No Need For Loans
All too often, trucking fleets turn to bank loans to cover the gap in payment schedules and alleviate the financial strain. Freight factoring is very different from a bank loans. There is no debt or payment schedules involved with freight factoring. Trucking fleets can maintain operations, accumulate growth capital, and keep operations moving forward.
If you would like to remove or prevent a strain on finances, without taking out loans for your fleet, contact the leaders at Express Freight Finance.