The Importance of Fast Payments for Trucking Companies and How Factoring Helps

Since cash flow is so important for a trucking company, it follows that your business needs to receive payment as quickly as possible after completing a delivery. Why are fast payments for trucking companies so important, how can you speed up payments, and what role does factoring play? Here are the answers to those questions.

The Impact of Payment Delays on Trucking Companies

Trucking companies need steady cash flow. Operational costs have to be paid constantly, and unexpected expenses are all too likely to arise at any time. In order to maintain the cash flow you need, you have to receive payments as quickly as you can after completing your work. Why is this so important?

Financial Strain and Cash Flow Issues

Your income needs to be as consistent as your expenses, in fact preferably more. When you experience payment delays, your cash reserves – if you have them – will diminish. As a result, your cash flow will soon dry up, which could lead to serious operational problems as your expenses quickly outpace your ability to pay them. You will start to experience serious financial strain, and slowly lose the ability to cover essential costs.

Operational Disruptions

As you start to fall short financially, and you start to lose the ability to cover weekly or daily costs, you are likely to start experiencing operational disruptions. What happens if a truck breaks down and you can’t afford the repairs, or your fuel fund starts to run out? Problems such as these could cause your business to grind to a halt. 

Effect on Business Growth and Stability

Payment delays and the resulting cash flow problems won’t affect only your current operations. They will also impede your ability to invest in your business’s future growth. Good cash flow is a prerequisite for major capital expenditures. If there is no cash, there is no growth – and if payments don’t come in quickly, there will be no cash. Slow payments can thus threaten the future growth and stability of your business.

Benefits of Fast Payments for Trucking Operations

Fast payments keep your cash flowing. You will always have cash in reserve, which means you can always cover your running costs and have money to invest in the growth of your company. By speeding up payments, you can:

• Keep your trucks fueled up.
• Cover ongoing maintenance.
• Pay your staff.
• Have money set aside for emergency repairs.
• Invest in new vehicles and other equipment.

What is Freight Factoring?

Since slow payments are a common challenge for most trucking companies, many of them turn to factoring companies to provide instant financial relief. Factoring is the process of selling your payable invoices to a factoring company. The company will then pay you a percentage of the total invoice value within 24 hours. You can use the instant cash injection to fund the ongoing running of your business. At the same time, the factoring company will take over the duties of collecting payment from your customer; when they receive payment, they will pay the remaining balance over to you, after deducting their nominal factoring fee. 

How Factoring Services Work for Trucking Companies

Factoring is a fast, cost-effective way to speed up the payments that are owed to your trucking company. Instead of waiting for your customer to pay an invoice in 30 days, you can simply hand the invoice over to the factoring company and get the majority of the outstanding balance paid to you immediately. Payment doesn’t get any quicker than that in the freight industry.

The Role of Factoring in Ensuring Fast Payments

Freight factoring prevents you from having to wait patiently for an invoice to fall due in 30 to 60 days. Instead, payment – at least for most of what is owed to you – is made instantly. If you have to deal with long payment terms and slow payers, factoring is the best way to speed up your payment process without putting pressure on your customers and affecting your relationship with them.

Advantages of Using Factoring for Trucking Companies

Why choose freight factoring? The fast payments that factoring facilitates offer the following key benefits:

Improved Cash Flow

Faster payments help keep your bank accounts topped up, giving you sufficient cash reserves to cover your planned and unplanned costs.

Reduced Financial Stress

Since you have enough cash reserves, or know that you can acquire the cash you need within 24 hours, you will be under less financial pressure. 

Better Business Planning

Factoring smooths your cash flow and helps you stay on top of your expenses. It also makes your finances more predictable, since you can trade your invoices for an instant cash injection at any time. This means that you are more empowered to make definite, reliable plans regarding the future trajectory of your business.  

Steps to Implement Factoring in Your Trucking Business

If you want to take advantage of the benefits offered by freight factoring, you can get started by filling out Little Mountain’s online application form. Once we have approved your application, you can start sending invoices for factoring right away. You send us an invoice, and we will send you up to 97 percent of your invoice’s value within 24 hours. It’s that simple. You can factor as many or as few invoices as you want, and you will not have to pay any fees if you choose to stop factoring with us. If you want fast payments for your trucking company, reach out to Little Mountain today.