Invoice factoring has taken a dominant position in the financing options of growing trucking and transportation companies. More and more transportation company owners are leaning towards new and innovative ways of improving cash flow in their companies. Access to immediate cash allows trucking companies to grow by taking on new and larger accounts. Invoice factoring allows them to create a sustainable financing process they can count on for the future.
Owners of trucking and transportation companies include invoice factoring as part of their financing toolkit to overcome cash flow issues and to increase their ability to operate at peak capacity. Factoring is commonly used in the industry as it is an ideal solution in solving a wide number of cash flow challenges.
How to Pay your Operating Expenses
Even the most successful trucking companies go through periods where their outgoing cash requirements exceed the cash-on-hand. That is especially true for transportation companies that offer extended credit terms to customers. When you invest your resources upfront to deliver your services, it is often difficult to wait 30-60 days for payment. In the interim, you still need to cover payroll, fuel, fleet maintenance, and the endless day-to-day expenses needed to keep your trucks rolling.
Freight factoring (factoring your freight bills) provides immediate cash to cover operating expenses. Utilizing specialized financing products designed for the Transportation Industry such as a “Factoring Line of Credit”, assist you in the management of your cash flow according to need. Cash can be drawn from your account as required and the associated costs are calculated only on the funds drawn.
Cash Flow “Roller Coaster Effect”
One of the key strategies for keeping your cash flow healthy is to tightly manage your invoicing and the accounts receivable aging. Every trucking company owner will tell you that delayed payments are problematic. In fact, the larger your company becomes, the more likely you’ll eventual deal with a large customer who demands extended credit terms. This can cause a “roller coaster effect” on your cash flow.
Fewer Headaches with your Accounts Receivables
Trucking companies that use invoice factoring to improve cash flow also benefit from professional accounts receivable management that is included with the service. This combination of financing, credit checking and accounts receivable administration translates to more control, less administrative costs and fewer headaches.
How Invoice Factoring Works
Factoring your accounts receivables is very simple; you issue invoices to your customers and forward e-copies to the factoring company to receive cash within 24 hours. In turn, the factoring company processes your receivables, sends you money, provides credit information, provides on-line reporting and follows up for payment.
Invoice factoring reduces your administrative time, improves collections, facilitates risk management and keeps your cash flowing.
Managing Cash Flow in Growth or Transition
The financial demands of a company in a period of growth or transition require a flexible and effective funding source. Business opportunities always arise for growing companies. The more you expand the more you need to secure a reliable funding source for your business.
The very nature of a trucking company demands the ongoing disbursements of cash for fuel, insurance, payroll, and equipment maintenance. A strong cash flow helps the operation to run smoothly. Traditional lenders may not understand the funding requirements of trucking companies. Banks hesitate to extend credit to trucking companies due to the volatility of the industry.
Factoring companies, however, take a completely different view of high growth companies and trucking businesses in transition. The more your business grows, the more funding you receive. As long as you deal with creditworthy customers, your trucking company’s funding capacity continues to grow at an equal pace to revenue growth. You now have reliable access to the working capital needed to support your trucking company’s growth, or to see it through its time of transition.
If you are a trucking company looking for a financial resource to support you company, learn more about invoice factoring today.