Is Transportation Factoring for Flatbed Carriers?
Should motor carriers utilize factoring in their day to day operations as a necessary cash flow solution? Factoring allows for immediate payment which can be handled without factoring if a carrier has a good relationship with their shippers. This can be handled in a viable network without the aid of brokers. I suppose the risk of nonpayment from some Black Hat shippers would convince a carrier to always use factoring, but just what is it doing to their bottom line?
Factoring or accounts receivable financing in the transportation business helps with piece of mind for the carrier. “Once bitten twice shy!” Carriers just want relationships with shippers and brokers that are dependable.
Factoring can help the carrier alleviate chasing down their own accounts receivables from slow payors. Administration cost savings from factoring companies for some carriers far outweigh the percentage of cost charged from the factoring company.
I think in good practice every carrier should have a dependable factoring company to use, albeit on a limited basis. It is far better for the carrier if the broker and shipper relationships are dependable.
One expensive practice known as “QuickPay”, can be highly leveraged against the truck drivers and take as much as 5% to give them the ability to be paid on the spot.
Long story short solid relationships contribute to higher ROI’s.
DOWN THE ROAD: Software will eventually replace brokerages and this software will have the ability to sync harmoniously with the shippers’ TMS. Load boards, paper documents, empty routes and idle trucks will become a thing of the past.