There's nothing more frustrating that doing a good job, sending off your invoice and then not getting paid. Controlling bad debt for your trucking and transportation business is simply good business. The best way to control bad debt is to be prepared up front with processes and solutions that limit, or better yet, eliminate bad debt; before it happens. Reputable accounts receivable factoring companies provide several solutions, such as non-recourse invoice factoring and professional accounts receivable management, to tackle this problem.
In a recent study, 49% of the small business owners surveyed said they'd be writing off bad debt this year. Another 43% said that they currently have customers who are more than 90 days late on paying their invoices. One in four admits that they have trouble collecting late payments from their customers.
What is bad debt?
Bad debt is a financing term that refers to a debt that has become uncollectible. Revenues are listed on your trucking business's financial statements as soon as you issue an invoice; even though they have yet to be paid. After you've gone through all steps to collect on your invoice, there comes a time when you accept that the debt can't be collected. It is then called a bad debt and must be written off as an expense on your income statement; effectively zeroing out the income entry.
Reduce Bad Debt – Before you offer credit terms to a customer, make sure they are creditworthy.
One of the best ways to reduce bad debt is to take a realistic look at your credit policies. Have a documented process for checking a new customer's credit history to determine if and how much credit your trucking business should extend. If you maintain a policy of only doing business with creditworthy customers, your chance of incurring bad debt will be greatly reduced.
For existing customers who don't pay on time, re-evaluate your credit terms and either adjust them, or eliminate them by insisting on cash up front or COD on all work until their payment history improves.
Eliminate Bad Debt – Consider Non-recourse Freight Factoring for creditworthy customers.
If you do business with creditworthy customers and want to eliminate the risk of bad debt, or simply reduce the time it takes to get paid; consider non-recourse factoring for your trucking and freight business.
What is non-recourse factoring?
Non-recourse factoring is a simple, risk-free form of alternative financing where qualification is based on your customers' creditworthiness, not yours. It gives you ready cash to make operating expenses and grow your trucking business.
- Up to 95% cash advance, in 24 hours
- No long-term contract
- Easy electronic paperwork
- No more collection calls
With non-recourse factoring, you submit your trucking invoices or freight bills to a factoring company in exchange for immediate cash. Then the factoring company does the back-office work for you. Professional accounts receivable specialists perform credit checks and follow up on receivables; so you don't have to. If your customer doesn't pay, the factoring company absorbs the cost.