In the recent American Trucking Associations’ Management Conference and Exhibition, ATA Chief Economist Bob Costello took the podium and gave a matter of fact forecast on the trucking industry. In his speech, Costello said that “At the moment, fleets are expanding slowly.” Later on, Costello shared a nugget of optimism when he said, “However, once capacity does tighten, carriers will see improvement on their bottom line.”
Currently, freight rates are lagging behind the rising costs of fuel, employee recruitment, and equipment. Until capacities tighten, it is a good idea for carriers to take advantage of transportation factoring. To be short and sweet, factoring is the process of selling your accounts receivable to a third party company at a discount so that you can claim your money without waiting for the shipper’s payment in 90 days.
As a business owner, you understand the importance of being liquid all the time. There is no shame in availing the services of factoring companies even if other companies might think that you are having cash flow problems. On the contrary, you might enjoy the many benefits it offers.
Quick Financing
In this time of economic troubles, daily expenses can be problematic, especially when your cash flow is hampered by the shipper’s delayed payment. If you are facing this scenario, factoring will take away all your worries. You will be able to meet payroll, address unexpected repairs, or pay the bills.
If you are considering taking out a loan from a bank to boost your capital, just remember that banks are infamously slow in processing loan applications. It is possible that your clients have already made payments before you receive any loan money from the bank.
Reduced Costs
Suppliers will not give you any discount if you are also promising payment like your customers. However, with cash on hand, you can immediately pay for your needed supplies at a discount, reducing your overhead expenses.
Avoid Collection Hassles
Collecting payment can be very tedious. Moreover, it restricts your employees from performing tasks that are crucial for the growth of your company. If you want, you can also request the factoring company to do the collection for you, freeing up your employees to perform more productive duties.
Reduce Staffing
Aside from collection, freight factoring companies also offer credit checks. As a result, you do not need to employ additional heads just to investigate the creditworthiness of your clients.
Enhanced Business Management
Having money in your pocket opens up many opportunities that were not previously available to you. You now have the flexibility to offer customers attractive terms. Moreover, you can pay existing debt to improve your credit rating.
With expenses like fuel costs and employee retention rising faster than freight rates, trucking companies are looking at transportation factoring companies to provide badly needed cash. Other than access to quick financing, factors help in reducing costs and staffing, relieving you from collection worries, and facilitates improved company management. When capacity tightens like Costello said, you would not want to be on the sidelines just because you failed to explore this option.