If you are in the trucking industry, you may find lulls and slow periods that can affect your business. If you are struggling with making enough capital, earning income to stay afloat, and paying off vendors on time, you may find that getting increased cash flow is the way to stay afloat. But how do you do this?
We have one foolproof method that thousands of trucking companies use to pay vendors, pay employees, boost their reputation, increase their financial leverage, free working capital, and reduce operational costs – check it out here!
What is freight factoring?
Before you decide whether or not you should use a freight factoring business for your trucking company, like ezfreightfactoring.com, you need to know what freight factoring is. What are the benefits of this procedure? Will you benefit monetarily or just get a better reputation? Will you be able to easily communicate between yourself and your target market the new benefits of freight factoring?
Simply put, freight factoring is a method that allows trucking companies to gain cash on hand while they are in sort of a financial jam. When a carrier, the trucking company, sells an invoice to the company, the factoring company lets them get money on the spot for any unpaid invoices on the list.
Since the clients have not paid yet, the freight factoring business will pay the trucking company the unpaid invoice upfront to get cash on hand or money deposited into their business bank account without having to wait for their client to pay. This lets the business continue operations, as usual, earn new clients, and do further work without waiting for monetary reimbursement from clients.
This is especially a smart move if you find clients who take a long time to pay. For example, in a contract, if you give the limit of payment up to 3 months, you may find that some clients take the full 3 months to pay you – this can lead to bad blood between client and trucking company, along with an unsteady financial state for the trucking company.
If you are constantly waiting for payment, you are always toeing the line between in the red zone and making a profit. Trucking companies can benefit from using freight factoring, like from ezfreightfactoring.com, to ensure they have a constant and balanced financial state to continue working as usual.
Freight factoring involves the company taking a percentage of the unpaid invoices as a small fee for their services, but oftentimes you will find this percentage is relatively low, and the benefits of freight factoring outweigh the negatives. If you are unsure about this method, you should know that factoring is one of the most common ways that trucking companies can improve their profit, increase their financial state, increase their cash flow, and gain new clients.
How much does freight factoring cost?
There are different methods in which you can pay or reimburse the business for its factoring services. There are two different types of factoring services for your trucking company – non-recourse factoring vs. recourse factoring. Recourse factoring is the most common method of factoring since it means that you are responsible for paying any invoices your client has not paid.
Therefore, if you have an invoice and 5 of your clients have not paid during the agreed-upon time frame, you are in charge of paying the unpaid invoices to keep your business afloat. Unfortunately, this can require hefty payments if you find that your clients are untrustworthy or in a poor financial state.
However, if you are not worried about your client’s reputation and responsibility, choosing recourse factoring can be a good idea. If you have a list of trustworthy clients who always pay on time, this method is the least expensive for using freight factoring companies.
The other option is non-recourse factoring, where the tree factoring company pays for any unpaid invoices. In this case, you have to pay a higher fee to use the company’s services, but it could be suitable for businesses who are just starting or who have untrustworthy clients on their invoices.
5 benefits of freight factoring for trucking companies
If you have decided to use a freight factoring business to help you with your business, such as ezfreightfactoring.com, you need to know the best benefits of using this method to increase cash flow and retain clients.
Eliminates a slow cash flow
If you use freight factoring for your trucking company, you can eliminate the slow down of cash flow into your business. Like any other sector globally, the trucking company goes through downtime periods where you don’t earn a consistent income. In this case, you need to find ways to stay afloat, continue getting clients, keep paying employees, and improve your reputation.
One of the ways you can do this is by freight factoring. If you find your cash flow is low, freight factoring helps you increase your cash flow to pay investors, pay clients, pay employees, and pay new business partners without looking like your business is in a tough spot. Growing companies need consistent cash flow to meet daily needs, such as the operations of your business and daily salary, so having a freight factoring company lets you do just that.
In addition, new businesses in the trucking industry need to be able to pay customers on-site. If you don’t have cash, this can be awkward and ruin your reputation. Furthermore, new trucking companies need cash to make needed repairs on trucks or other equipment, which sometimes needs to be done on the spot.
Getting payment on customer invoices can create a massive advantage for your new trucking company in the competitive transportation industry. If you can pay your customer’s invoice immediately, within hours or days, then you facilitate greater competition within your niche industry.
Since clients or customers who pay invoices slowly, like taking the entire contract term to pay or not paying at all, can affect a business’s cash flow, you can use freight factoring to avoid this altogether. Instead of waiting for payment, you can include better payment terms to gain new clients, attract new business, and pay any unsettled debts in the past to improve your word-of-mouth reputation.
Frees up working capital
The third benefit of using freight factoring for your trucking company from a reputable business like ezfreightfactoring.com is to free up excess capital. Working capital is imperative for a business to continue growing and stay successful. Without this capital and income, there will be no business growth, and your trucking company will never get off the ground.
If working capital is stowed away in one spot, like customer receivables or daily operations, it can’t be put towards other things needed in your business. Without a fair balance of distribution when it comes to capital, other things will lack in your company and go unnoticed, like meeting payroll, paying operating expenses, adding new work to your trucking fleet, and gaining new clients.
Although lack of income can stall the growth of your business, access to working capital is the other piece of the puzzle. Without this part, you will not be able to reinvest in your business.
Trucking companies that use freight factoring business to improve capital and gain excess cash flow have greater access to the income that otherwise would be locked down or stowed away for weeks or months. If you don’t have capital that is rightfully yours, but you’re waiting on unpaid invoices, you are simply sitting and waiting to continue building your business – which is wasted time and energy.
One of the best ways to assert dominance and increase competition in the trucking industry is to increase your cash flow, boost your reputation, and affect your financial leverage. Not only does freight factoring invoices to pay unpaid invoices helps you become more attractive and reputable to the world as a whole, but it can also increase your leverage and standing with those in your industry.
When it comes to doing business with clients, you need them to trust you – the same goes for doing business with suppliers and vendors. You need to appear reliable, reputable, and trustworthy before they want to do business with you. One way to do this is with working capital, cash flow, and good client standings.
This type of cost savings improves your reputation in your niche industry and improves your profitability for your trucking business. The amount you save with paying off unpaid invoices can be put towards better use, like paying vendors on the spot.
Reduces operational costs
The final benefit of using a freight factoring business, like ezfreightfactoring.com, is to reduce operational costs. Saving money with vendors is one way you can save money, along with reducing the need for secretaries and bookkeeping staff who have previously looked over your finances. With a trucking freight factoring company, you can leave the data and bookkeeping to the professionals.
As you can see, using a freight factoring company to help benefit your trucking business is an absolute must – especially if you are trying to get your feet off the ground as a new business or stay afloat during challenging periods. With the ability to help improve cash flow, boost reputation, pay vendors, gain financial traction, reduce operational costs, and free working capital, you can enhance your reputation, increase income, and acquire new clients.
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