Make a plan for accounts that don't pay on time so you don't get stuck holding the bill
The very best accounts receivable (A/R) financing is to have your trucking business fully capitalized so you can afford to do your own financing. Following are some ideas on financing your receivables:
You may think that if you have cash in the bank to operate while waiting for receivables to be paid, you're not financing A/R. That's not true. What you are doing is extending credit to customers who wait beyond the point their shipments are delivered to pay for your services.
Any time a customer doesn't pay FOB or at least COD, even for a single day, you've become his banker by extending him credit. And if you aren't charging him interest for using your money, you'll be fighting constantly to have operating cash — plus your profit margin will drop.
Instead, when you price your loads, include in your hauling rate the cost of the money you'll be lending that customer for his usual period of delayed payment. Base this cost on what you could make on that money had it been available during the same period.
If you're not capitalized, get a line of credit from a bank to finance the shippers who take their time paying their shipping invoices. Give a discount to shippers who pay within 15 days of delivery. You can give them a discount off their shipping invoice that is priced at a rate covering the interest for 60 days. The sooner a customer pays, the lower their total bill.
Moreover, if shippers wait to pay more than 60 days, tack on additional interest for each day payment is late. If they are consistently late in paying their freight bills, then charge a fee for being their banker.
Use a factor to do both financing methods mentioned above, and design the program the same way: If a shipper pays his invoice in under 15 days, rebate back a discount. Increase rates based on the factoring costs, then discount when they pay early.
In other words, if you're going to act like a banker, charge for the service.
The best part about factoring and using a system of discounting from a higher hauling rate is that customers who pay quickly are rewarded. And to be honest, if a customer pays in less than 15 days, don't factor that customer's invoices. A customer who pays COD or FOB will get the highest rate discount because they aren't using any of your money.
That's the long-term solution. Charge the customer an additional amount if they want you to play banker for them. In addition, if you're factoring, charge the shipper 1% above what the factor is charging you.
It takes guts to stand up to your shippers and price your freight high enough to cover A/R costs. But giving a discount to shippers who pay makes them happy — quickly moving them onto the ‘Regular Shippers’ list.