subject: The Importance Of Freight Bill Factoring [print this page] Anyone who runs or owns a trucking business is fully aware of the importance of having clients pay in a timely manner. However, good business practice demands the occasional leniency, and often times a regular client might as for a thirty day extension or credit before paying a freight invoice. In these situations, it is almost impossible to refuse, regardless of your own financial predicament. The question then comes down to feasibility. After all, as much as you want to offer the client flexibility and demonstrate your alacrity to assist them, the reality is your business cannot run without income for fuel, driver salary, and maintenance costs.
In the past, a trucking business had no choice but to wait until the client made good on an invoice. If the client was of considerable importance, a late invoice payment could essentially paralyze a company from doing any new business. Now, however, there is another option called freight bill factoring. When you factor in freight, there is no waiting period and no worries that your bills will not get paid on time. As a result, many trucking companies have chosen to use freight bill factoring with their business.
When employing freight bill factoring, the trucking company sells their freight invoices to a third party company. The money from the sale provides the funds to pay various the trucking bills. The third party factoring company will then wait for the client to make the invoice payment, while you continue normal operations.
The process is quite simple. First, the trucking company delivers a freight of goods to a client. The client, however, asks for an extension on paying the invoice. The trucking business agrees, then sells the invoice to a third party factoring company. The freight bill factoring company pays the trucking business 90 to 97 percent of the total invoice. The remaining balance is paid to the trucking business when the client makes good on the payment, at which point the factoring company will collect a nominal fee for services rendered.
Generally, a factoring company will charge a fee of 1.5 to 3 percent for a thirty day extension. Other factors may alter the cost, depending on the amount of goods and the credit history of the customer. The factoring company makes money through the fee, while the trucking business saves money from not having to halt operations and keeping their customers and employees happy. In summary, freight bill factoring can be an excellent tool in making sure your freight business runs on time, even if your customers are not.
