How a Factoring Company Helps Assess Credit Risk & Improve Cash Flow

How a Factoring Company Helps Assess Credit Risk & Improve Cash Flow

Accutrac Capital 0 Comments

How a Factoring Company Helps Assess Credit Risk & Improve Cash FlowOne of the many advantages of working with a factoring company that specializes in the trucking industry includes access to a large database of credit information on brokers. Load Boards are a popular place for getting freight, but will you get paid? Without the proper tools, performing credit checks on new clients can be time consuming and costly.

Dispatchers need to act quickly to get the freight; but often it's without doing due diligence to see the creditworthiness of the broker. Taking credit risks can be costly for your trucking company, resulting in a scenario that's all too common; waiting to get paid in 60 or 90+ days, if at all.

Credit Risk Assessment

Assessing credit risk is a job that requires a certain degree of understanding and accurate credit monitoring. As a trucking company you work hard for your money and it is only fair that invoices get paid in a timely manner. Credit decisions without the proper due diligence can catch up with you and leave you in a difficult position. The following example illustrates this point;

XYZ Trucking has just secured a new customer that will keep three trucks on the road each week with long haul to Los Angeles, California. A steady demand for fresh produce covers the back haul. This is an excellent opportunity for any trucking company. XYZ Trucking assigns its best equipment and drivers to the lane committing all resources to ensure the reliable and safe delivery of each load.

For the next three months, deliveries are made, invoices are issued and drivers are paid out of XYZ Truckings cash flow. The challenge is the new customer has yet to pay any of its invoices, resulting in a major cash flow shortage. The issue is not that the new customer will not pay; they are just notoriously slow payers despite XYZs ongoing efforts to collect.

Managing your Trucking Companys Credit Risk

Your trucking company is extending credit every time you take on a load and issue an invoice. The trucking industry is well known for having customers that stretch out payments as a common business practice. In todays economic environment, the average number of days it takes for your trucking company to collect on accounts receivable's can easily extend well past your cash flow comfort zone. To minimize the potential financial risks, it is recommended to perform both upfront and ongoing credit checks using easily accessible and relevant information.

Credit Applications and References

New clients should always complete a credit application  and provide current credit references. Make sure you cross reference the information as it is not uncommon for trucking companies to collect credit applications but fail to call the references. Most credit references will be from companies that have experienced a good working relationship with your potential customer.

If your customer has trouble providing these references, it may be an early sign the company has a poor credit history. Another approach would be to check the customers website for a list of clients, then call the respective accounting departments for references.

Even if your potential new customer happily completes a credit application, it does not mean they do not have a few skeletons hiding in their financial closet. The most effective method to assess your customers ability to pay is to run a credit report. There are several fee-based options available to you providing different information at varying costs. Select a service that best meets your needs and budget.

Gain Free Access to Credit Searches

Accutrac Capital, a leading invoice factoring company for the trucking industry, offers access to a credit search tool to assist you in your due diligence. This essential tool is provided free to clients of Accutrac Capital as a value added service.

___We have amassed a database of over 8,000 active companies specifically related to the trucking industry. says Charles Sheppard, President of Accutrac Capital. ___Providing credit information on each of these companies and permitting free access to this information allows our clients to make informed decisions prior to taking on new customers. Mr. Sheppard explains further, ___Supplying valuable information, providing trusted advice and assisting with business decisions is in keeping with our overall philosophy; to make the lives of our customers easier.

Invoice Factoring Improves Cash Flow

It would be great to always have fast paying customers, but unfortunately that is not always the case. By utilizing a factoring company, you can factor your invoices to maintain steady cash flow. Your trucking company no longer needs to turn customers away who take 60 to 90+ days to pay in order to maintain healthy access to working capital. Factoring companies like Accutrac Capital provide funds within hours, or even in advance of issuing an invoice .

Invoice factoring improves cash flow and is now considered a common business practice to ensure steady reliable access to cash for trucking companies that work with slow paying customers. With the lowest advertised rates, excellent customer service, online monitoring of your accounts and convenient services, Accutrac Capital has quickly been established as a leading go-to factoring company for the trucking industry.

Ongoing Protection

Gathering information and tracking your customers credit rating is not just something you do at the onset of a relationship. Ongoing monitoring will alert you of potential problems that may affect your customers ability to pay and help you avoid getting burned. Accutrac Capital provides ongoing protection with dedicated Account Managers to maximize your cash flow and assist with credit risk management.

To learn more on how a factoring company can help improve your cash flow, contact Accutrac Capital today.


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