![]() To choose which loads to factor, a carrier is able to print and scan a select group of freight bills from its accounting system, or scan the load paperwork directly using its vendor’s mobile app. This model has changed now that some companies allow carriers to select which customers and invoices they want to factor. “For example, large fleets with a high volume of shipments can more easily obtain debt financing, if needed, and run their back-office functions more efficiently in-house but smaller fleets don’t have those advantages.”įactoring companies have traditionally required monthly volume commitments from carriers. “To be fair, factoring doesn’t make sense to everyone,” explains Sam Bokher, director of operations for InstaPay, a factoring company that provides carriers with financing alternatives to grow their businesses. Tribe Transportation began using a document scanning app from Vector in Nov. Including these services in the fee helps carriers focus their resources on finding better loads and negotiating higher freight rates, for example. The factor takes over invoicing, collections and protects the carrier from insolvency of its shipper or broker customers. For a 3% fee, a factor includes back-office services and insurance that saves carriers time and money. For instance, a credit card (~18%) that has a 30-day billing cycle is higher than a bank line of credit (~9-13%) or a mortgage (~5%).įactoring is not just about speeding cash flow. ![]() Short-term rates will always be higher than long-term interest rates. Tack on another 5 days to receive the payment by paper check, and the APR of a 3% factoring fee is closer to 24% (3%*360/45).įurthermore, APRs heavily depend on volume and term. In practice, freight bills with 30-day payment terms are typically paid out in 35 to 40 days from sending the invoice. After all, financing a 30-day invoice at 3% would be equal to a 36% annualized rate. Going for a lower rate may not protect the carrier from the insolvency risks of their customers.Įven so, a 3% fee for non-recourse factoring may appear too expensive to gain access to funds for invoices with 30-day payment terms. Rates for factoring with recourse - an arrangement where the carrier buys back the receivables that a factor does not collect payment on - may be even lower. Some factoring companies that specialize in transportation have recently developed technology that streamlines transactions to lower the costs and risks of funding.įee structures are now as low as 3% of the invoice amounts. Below are three common myths of factoring that have been dispelled by modern solutions. Technology has also helped factoring become more of a viable option for fleets to receive same- and next-day access to funds while increasing back-office efficiencies. The Gainsville, Ga.-based carrier is growing its fleet from 400 to 500 trucks, but has not grown its staff of five payment and accounting staffers. “That’s really the game changer for us.” Carriers and brokers use the InstaPay web portal to upload their invoices for same-day payment. “We’re able to get our bills of lading in, we’re able to invoice quicker, which speeds up our cash flow,” he says. Driver communications and payroll processes also improved. Since converting to the Vector app, Tribe has seen a seven-day decrease in days sales outstanding (DSO) or accounts receivable, Gooch says. Tribe previously used portable scanners that plugged into an onboard communications system. “The reliability is 100% better than what we were getting with the old scanners we used.” “The image quality is amazing,” says Todd Gooch, vice president of Tribe, a transporter of high-end, high-security pharmaceuticals, fresh foods and other fragile cargo. When Tribe Transportation implemented a document scanning app from Vector in November 2017, the results were immediately clear. As the bedrock of trucking capacity, small fleets generally need access to working capital within a few days of completing a load to keep their wheels turning.Ĭarriers of all sizes are using technology to speed their billing cycles. “If you don’t mind waiting, you can get paid in 30 days, but as a small trucking company we need it quicker,” says Lexi Howard, manager of Buffalo Trucking, a five-truck refrigerated and dry-van fleet based in Memphis, Mo.įleets like Buffalo Trucking that operate five trucks or less make up 86 percent of Federal Motor Carrier Safety Administration registrants. Vector’s mobile app has a back office system that can instantly read and transcribe information from printed documents and handwritten notes.Ĭash flow is the lifeblood of any business, especially motor carriers who must cover their fuel, payroll and other operating expenses long before shippers and brokers pay freight bills.
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