Business owners in the trucking industry experience so much. Overcoming cash flow gaps is one of the things you’ll experience throughout the year, especially as there are peaks and slowdowns with work. Generally, spring crops kick off the busy season, and it lasts through the holidays. January, February, and March, however, are much slower.
In those slowdowns, you need to make sure that you’re able to pay the bills, employees, and yourself. If you can’t keep up with those regular business expenses, you’re not in good shape. It’s a leading reason that trucking companies end up in bankruptcy or high levels of debt. You need a strong cash flow, and that starts with making sure you get paid on time.
What Causes Payment Delays in the Trucking Industry?
What leads to these payment delays that impact your trucking company? One of them is tough to avoid. You have customers who simply delay as long as they can. They have too much debt of their own, and they’re juggling invoices to pay the one that’s the most overdue. Eventually, they’ll pay you, but it may be months.
Slow-paying customers are one issue, but it could be your billing and invoicing practices that make it difficult. They’re having a hard time making sense of your invoice abbreviations, structure, or payment options. If you haven’t made it clear who to make a check out to or don’t offer online payments, it’s going to take them time to get answers or figure it out.
You might expect that faxes and mailed checks are standard as they’re what you’re used to from past decades, but times have changed. Online payments like EBT or Xero and the immensely popular QuickPay Click & Pay API options are even more convenient.
As you determine what’s causing payment delays, you need to figure out the best ways to address them. Make sure the payment terms are clear and have simple invoices that are easy to understand and make it easy to submit payments.
Put contact information on the invoice that makes it easy for them to reach you if they have questions. If you give a phone number with an extension, make sure your automated system allows them to enter an extension. If the system doesn’t offer that option, they’re going to struggle to reach the right person.
Don’t just stick to one method for reaching you. Give multiple options, such as phone, email, and SMS. Once you’ve decided how your customer support team is reachable, make sure you have the team in place to answer questions. Add a company policy where messages must be answered within X hours. Keep your customers happy, and they’ll stick with you.
What Can You Do to Avoid Payment Delays?
Go over your invoice and contract and make sure payment terms are clear. Have a lawyer look everything over to ensure you’re not breaking any laws or making unethical demands. If there are area laws limiting the amount you can charge as a late fee, make sure you’re following the laws.
Have late fees set up and clearly laid out. If a client pays you more than 10 days late, clarify how much that late fee is and what happens if the payment becomes 20, 30, 60, etc. days late. The fees should accumulate to cover your financial strain.
Build up savings so that the lean periods are backed up by healthy bank accounts. Use that excess money only if it’s urgent and you can’t find another way. A small business line of credit might be a viable option if you need help in the lean times. Look for a company that specializes in low interest rates on a business line of credit. When business is booming again, pay off the amount you borrowed at that point. Not only does that get you through a cash flow issue, but it helps boost your business credit rating.
A business line of credit is a smarter move than relying on business credit cards. Credit card rates are much higher, so you pay more in interest. If you have to have business Visa cards, try to pay off everything that’s charged up by the due date to avoid interest charges.
Find ways to cut back on your expenses. If you’re finding a lot of your cash goes out to subscription fees on software, see if there is a free version that does what you need. Instead of paying for spreadsheet software, use a free version. You’ll save a lot of money by making small changes like this. But, know where you shouldn’t take shortcuts. Security software is important when it comes to avoiding malware, spyware, viruses, and even ransomware.
Before you accept a new client, run a credit check on them. Identify risky clients and avoid agreeing to haul their loads. If you decide to work with them, make sure you protect yourself by asking for an advance or only agreeing to their work if you have their invoices go through a freight factoring company.
When a payment is late, send a reminder that day. Even better, send an email or make a call and make sure they received your invoice. If an invoice was lost in the mail, you need to immediately send another and make sure they get that one. If you’re close enough, you could bring the invoice into their offices and hand deliver it. Get the name of the person you hand it to and take down the date and time with their name.
Make sure you’re flexible when it comes to payment terms. If they’re experiencing financial issues, accept smaller payments over a few months to make it easier for them. Some money received over time is better than nothing at all. A little leeway on late fees can go a long way towards ensuring you get paid and maintain a client who’s simply having a tough month.
Work With a Freight Factoring Expert
It does take work to ensure you don’t deal with cash flow gaps that impact your company’s financial health. With the benefits offered by freight factoring, you avoid late payments or unpaid bills. Saint John Capital works with you to ensure you have a steady cash flow throughout the year.
Freight factoring provides you with a cash advance on the money you’re owed, but the factoring company takes over the responsibility of chasing down the payment. You receive the money you’re owed the same day or a couple of days after the load was delivered in exchange for a small fee. It’s going to help out tremendously.
With your bills paid on time and cash coming in as you need it to, you’re able to build up savings to cover emergency expenses. Talk to Saint John Capital to learn more about the different freight factoring options, and the best one for your trucking company’s financial well-being.