Freight Bill Factoring.
Introduction.
Freight bill factoring is a term used within the freight industry that describes a way in which freight companies can be paid money they’re owed by other companies they’ve been working for; without having to wait for an unduly long period of time. With fuel bills seeming to rise almost weekly these days; costing jobs at a particular rate today could mean the freight company loses money on the job if the client doesn’t pay promptly. Working with a reputable freight bill factoring company can save you money and reduce your stress - now!
Why do we need fright bill factoring?
It’s quite simple really - a job contracted when the price of diesel was $3.20 a gallon isn’t going to make much of a profit when the price of diesel rises to $3.40 before the contract is completed. If the customer then doesn’t pay for a further 2 or 3 months - who knows what the price of diesel might rise to; meaning that the freight company, relatively, makes even more of a loss. Of course, there’s not just the fuel bills to pay in a freight company. Apart from the drivers wages the amount of money tied up in vehicles, traction and trailer units, is enormous; all of which need insuring, repairing, cleaning etc. Companies that don’t pay their bills regularly, or more importantly quickly, can and do put other companies in jeopardy.
How does freight bill factoring work?
Freight bill factoring ensures the prompt payment of any bills due to a freight company from its customers, by a third party company paying them on their customer’s behalf. That third party company then becomes the one to whom the debt is owed and is entirely responsible for collecting the payment. The freight company gets its money quickly, helping it to keep operating in profit, whilst someone else has the worry of collecting the payment from the original customer. Whilst that might sound like the freight company is getting a sort of business loan in lieu of payment, it’s not. The freight company in effect sells the debt to the factoring company who will then immediately make payment against at least 90% of the debt. Then, when the factoring company is paid by the client the freight company receives the rest of the balance, minus the factoring companies handling fee.
Why should I pay someone else to collect my money?
It’s all well and good for the major trans-continental freight companies to that can afford in-house accountants to keep the money flowing through the company. The fact is that most freight companies in the USA are small or even one-man businesses. Quite simply they have neither the time nor resources to be constantly calling customers about outstanding bills or even worse outstanding debts - because they’re out there on the road hauling freight. Meanwhile it’s their cash-flow that’s suffering and they’re the ones having to take out loans to pay for bills. Now that has to be crazy! Surely you should get someone to sort out your money for you? By getting at least 90% of what you’re owed up front you can at least carry on operating knowing that you can cover your bills without going in to debt. Having someone else then chase up the remainder of what you’re owed is almost certainly worth paying them a small fee for doing so. Freight factoring companies can also arrange discounts on other services they, or their sister companies, offer.
What are typical freight factoring rates.
Freight factoring rates can vary according to the amounts of money involved and the customer/clients that you deal with. However, rates are typically between 1.5% and 3% of the gross outstanding amount; which is significantly below any interest rate you’d be offered if you needed to take out a loan to cover any bad debts from those customer/clients. Applying online for help from a freight factoring company has never been easier or faster; if your freight company or business is struggling because your customers are slow in paying you - don’t let it get out of hand and run your business into the ground - apply now!