Opinion: Solutions to Help Eliminate Late Payments

This Opinion piece appears in the April 24 print edition of Transport Topics. Click here to subscribe today.

By Matt Moore

Executive Vice President

Tetra Capital

There is nothing fun about not getting paid for the loads you have hauled. But unfortunately, every small trucking company and owner-operator will encounter clients who sometimes take 45 to 60 days — or longer — to pay.

Matt Moore

When this happens, it can create a strain on cash flow, especially since items such as fuel and insurance are pre-paid. Then add in the time spent on the unpleasant task of following up with your clients trying to get them to pay — it is always hard to beg for funds you are rightfully owed. Lastly, there is the possibility and fear you will hurt your relationship with your clients by having to ask for the payment more than once. This all adds up to something you would love to avoid.

Fortunately, there are a few solutions to help you eliminate or lessen the need to chase late payments. They range from things you can do quickly and easily yourself to things for which you will need a partner who is willing to help.

Have clear payment terms

It helps to set expectations with your clients from the start. Make sure you clearly define if payment is due on receipt, within 30 days or whatever terms work best for your business.

Know your clients and brokers before you haul the load

What if you had a crystal ball and could predict when your clients were going to pay? When you conduct credit checks on prospective clients and brokers before you haul the first load, you get the next best thing: You can obtain a sense for how long they have taken to pay other suppliers. This is no guarantee for how they will handle your payment, but it can provide some insight and allow you to reject the load if their history does not match with your business needs.

With this you might be thinking, “But there will be a cost to doing a credit check.” The good news is, partners are out there who offer low- to no-cost credit checks to their clients. So that may be a good question to ask prospective financial partners in the future.

Automate your system

Some accounting systems such as Wave Accounting allow you to set up follow-up payment reminders. This can save you the time spent otherwise doing it yourself. Your clients also may not be as bothered by an automated reminder from an accounting system since it can be seen as less personal.

Partner with a reputable factoring company

The fastest and easiest way to eliminate late payments and having to chase your clients for payment is to partner with a freight bill factoring company that will provide immediate funds for your freight bills and manage collections for you. Additionally, some factoring companies will manage your invoicing, processing, mailing and collections. So all you have to worry about is delivering the load.

Don’t delay in sending out invoices

You won’t get paid if you don’t submit your freight bill. The sooner you send out your invoice, the more likely it is you will be paid quickly. The faster you get paid, the more quickly you can close out the load and move on, making it much easier to keep track of paperwork and loads in addition to improving your cash flow.

Additionally, shippers and brokers prefer to receive the paperwork as soon as possible, with some even adding penalties for delays. By speeding up your invoicing process, you also could improve your relationship with the shippers and brokers.

It can be especially hard for trucking owner-operators to submit their freight bills right away since they spend most of the time on the road, so it can be helpful to find a partner that will help. The good news is, several options are available, including some factoring companies that will handle your invoicing at no additional cost.

Accept credit cards

It has been proved that when you accept credit cards or give your clients different options for payment you could see an increase in the collection times. The downside to accepting credit cards is the fee taken for doing so. The upside is you can get paid more quickly, eliminating time spent on collections.

While there may be no one way to get all your clients to pay when you want them to, these options should help ease the financial challenge tied to late payments.

Tetra Capital is, an independent company offering quick and easy freight bill factoring services to trucking companies of all sizes. For more information, Moore can be reached at matt@tetracapital.com or visit www.tetracapital.com.