Most freight transportation contracts allow customers to pay invoices in up to 60 days. Waiting weeks (or months) for a payment can be difficult, especially for small carriers and brokers without the financial resources to wait a long time.
Fortunately, a number of shippers offer quick-pays to their carriers and brokers. As its name implies, a quick-pay is a quick payment from the shipper/customer to the freight carrier. Because the payment usually comes within 10 days – improving your cash flow – quality shippers and brokers who offer quick payments are considered coveted clients by carriers.
Quick-pays are not always reliable
One problem with quick-pays is that they are not 100% reliable. Your shipper can always revert to slower payments if they deem it appropriate. And they won’t always notify you that payments are about to slow down. As a result, relying solely on quick-pays for good cash flow can be a risky strategy. Although quick-pays can improve your cash flow, you never know how long the quick payments will last.
Many clients don’t offer quick-pays
To complicate matters, not every shipper offers quick-pays. Some will always demand payment terms from their carriers, and you will have to offer terms if you want their business. However, offering terms if you can’t afford to wait for payment can also be very risky. You could experience cash flow problems and be unable to pay for fuel, repairs, or drivers. Obviously, you want to avoid this situation. There is one way to solve this problem and improve your working capital.
A better solution than quick-pays?
If your carrier or brokerage needs reliable cash flow, consider financing your freight bills. This solution provides many of the benefits that you would get from quick-pays, but it does not require that your clients pay sooner. Rather, your freight bills are funded using a freight factoring company – providing you with immediate working capital that can be used to pay company expenses. For more detailed information on how freight financing works, read, “What is Freight Bill Factoring?“.
Freight bill factoring offers a number of benefits. The most important benefit is that your cash flow becomes predictable and reliable. Also, you can grow your client base by pursuing clients who require payment terms. Since you can always factor a freight bill if you need funds, slow-paying clients become less of a problem. Lastly, the line is designed to grow with your sales; it can increase easily as your sales to qualified clients grow – an ideal option for fast-growing carriers.
Getting freight factoring is fairly simple, especially compared to other options. It’s important that you work with reliable clients because their invoices, and their payments, secure the transaction. Also, your company should not have serious legal or tax problems. Lastly, your receivables should be free of encumbrances.
Offer terms and improve cash flow
Financing your freight bills allows you to work with customers who pay in 30 to 60 days – without hurting your cash flow. This strategy enables you to diversify your client base and run your trucking company to its true potential. When used correctly, freight bill factoring can provide the financial support you need to grow your business.
Get more information
Do you need to get paid quickly? We are a leading factoring company in Canada and offer high advances at low rates. For more information, call (877) 300 3258 or get an online factoring quote.