Using an invoice factoring company is becoming less of a concern to your trucking customers in today’s business environment. As stringent requirements for funding from the conventional banking system continue to restrict a majority of trucking companies from qualifying, Invoice Factoring has become more mainstream.
Today, more businesses than ever, in all stages of development utilize freight bill factoring (a form of Invoice Factoring) to support their working capital needs. Here are 7 question you should ask before you factor your receivables.
What benefits will your customers and your company have utilizing a factoring company?
Using invoice factoring will improve your company’s cash flow and provide benefits to your customers. A reputable and professional factoring company may even improve your working relationship with your customers’ accounts payable departments. Experienced accounts payable professionals are most likely to be familiar with invoice factoring and appreciate working with the AR management work practices of a factoring company.
Will factoring help your financial stability?
All businesses require some form of financing, no matter what business development stage they are in. Your customers know that trucking companies use invoice factoring to maintain positive cash flow and to accelerate growth. Knowing your trucking business has secured ongoing financing often signals strength and stability rather than weakness.
Your company will be recognized as a financially healthy business, rather than one that is struggling day to day to manage cash flow. With factoring, your customers continue to give you their business because they know, in advance, that you are financially capable of completing the reliable delivery of their shipment.
Will factoring affect your customer relationship?
Understandably, one of the greatest concerns about using invoice factoring is how it will affect your customer relationships. Most successful businesses grow by carefully serving their customers and managing their customers’ perceptions. Professional factoring companies understand the importance of your customers and place great efforts in maintaining healthy, positive relationships.
Professional, well-mannered communication is one of the hallmarks of a reputable invoice factoring company. It is in the best interest of the factoring company to deliver the highest levels of expertise and service, not only to your company but also to your customers.
Does the factoring company notify my customers?
Yes; notification occurs when your lender notifies your customers that their payments for the services you provide should be paid to your factor, instead of being paid to you. Many customers that are new to invoice factoring share a common concern. They have the perception that if the factoring company contacts their customers, they will think your trucking company is in trouble.
The truth is, because factoring receivables has become mainstream, especially in the trucking industry, your customer’s accounts payable departments deal with factoring companies all the time. How smoothly notification goes with your customers depends greatly upon the experience, methodology and professionalism of the factoring company you have chosen.
Do all invoices need to be verified with my customers?
Some factoring companies require that every invoice you issue needs to be verified. This creates an invasive environment for your customers’ accounting departments and can affect your relationship with them.
A reputable factoring company that specializes in the trucking industry has the experience and systems in place to avoid this potential difficulty. Based on industry knowledge and armed with reliable credit information, a qualified factoring company will utilize a sampling approach to verify invoices. This approach reduces the risk mitigating process to a comfortable level that your customers will appreciate.
An experienced factoring company will establish a working relationship with your customers where the verification process is tailored to integrate with the existing systems and work practices as established by your customers’ accounts payable department. This approach creates an environment of enhanced credit protection with minimal disruption to your customer.
Will factoring really benefit my customers?
Rest assured that the benefits of invoice factoring are applicable for both your trucking company and for your customers. Many of your customers are likely to be larger firms that have worked with factoring companies before. They understand that a factoring company is well versed in the accounts receivable process and has years of experience in managing collections. This intimate knowledge of the invoice process makes your customers’ jobs easier to manage the flow of documentation, clarify information on charges, simplify dispute resolution, and more.
The obvious thing to avoid is choosing a factoring company that is less than professional or is overly aggressive in their collection efforts. Instead, carefully select a factoring company that thoroughly understands the complexities of the trucking industry and is capable of managing collection duties effectively with discretion.
How to choose the right factoring company?
Choosing the right Factoring Company is not always the easiest. It is important to find a factor that understands your industry and your customers. Here are a simple check list to look for:
- Reputation: Choose a highly reputable factoring company that specializes in the transportation industry.
- Low Rates: Look for innovative factoring products at the industry’s lowest rates.
- Fuel Discounts: Select a factoring company that provides significant fuel discounts.
- Customer Service: Ensure your factoring company assigns a Dedicated Accounts Manager’s to provide both your trucking company and your customers with superior customer service.
- Trusted Advice: Look for a factor that has the industry experience to help with credit decisions, expedite funding and provide professional accounts receivable management.
- Credit Tools: Select a factoring company that provides a free credit search tool to aid in risk management.