Finding the right freight factoring company can prove challenging, especially for smaller fleets. Freight factoring services can help with processes associated with trying to improve cash flow or mitigating financial risks that threaten the business. As billing for the freight industry becomes increasingly frustrating, many fleets and owner-operator carriers look to freight factoring for resolutions.
The drive to remain competitive is always present but has reached new heights, thanks to the overwhelming increase in online ordering and the propagation of ecommerce. In addition to e-commerce, the number of avenues for ordering — or omnichannel ordering — continues to drive this need. Companies must also assess various other factors that are influencing the business, including the credit risks of a commercial shipping company. Hiring a freight factoring company can mitigate these risks and many others for carriers.
What Does a Freight Factoring Company Do?
Many carriers and fleets do not know what to do when invoices become past due, rates continue to surge because of the pandemic and peak season, or they are faced with limited capacity issues. Factoring companies are dedicated to helping carriers navigate these difficult situations. To begin working with a freight factoring company, everything starts with a credit check and a commercial invoice.
Freight factoring businesses verify the credit of a shipper or carrier, and then they front the cash for the client so that they do not need to wait the typical 30-90 days for an invoice to be paid. This keeps cash flowing for those carriers or shippers, and in return, the company takes between 1% and 5%. Essentially, it is a win-win scenario. With the market trending upward, keeping payments flowing will be imperative for this season.
How a Freight Factoring Company Helps Shippers Find Capacity
To find more hauling contracts for carriers and more capacity for shippers requires expanding their network. Sure, shippers can search the databases, but that takes time they may not have. Freight factoring services have already consolidated the information and can help ease the stress of locating freight capacity in the following ways:
- Digitizing systems help centralize data. These services keep a database of their own, leaving shippers to do what matters most: keep their customers happy.
- Facilitating on-time payments, which will help prevent load rejection. At times carriers can reject loads based on a shipper’s ability to pay on time. Preventing that begins with finding the best freight factoring company.
- Providing services that give shippers the funds they need when they need them. Shippers can find themselves needing capacity but without the funds to secure it. Hiring a freight factoring business provides that freedom while offering a steady payment plan.
- Allowing shippers to see side-by-side rate comparisons and availability in real time. Some shippers need to see their options because they may only need a partial or LTL. Knowing where they can move their freight and their rates in real-time help save on costs in the long-term by pairing them with the suitable carrier for their load.
The Role of Factoring in Shortening the Payment Clock for Carriers
Like any worker in any industry, carriers would prefer to get paid sooner rather than later. The freight payment clock starts to tick the moment a carrier accepts a load. Although carriers need the payment to continue their businesses, sometimes shippers cannot provide payment until 30-90 days later. This seems like a short time, but consider the costs associated with freight transport do not stop while awaiting payment. According to Logistics Management, freight payment as a whole is in need of a major overhaul. From providing an invaluable service to using the services to prevent fraud, the role of factoring eliminates a lot of “what-if’s”. An overhaul of freight payment has been on the horizon, and many experts agree the most successful leaders in the industry embrace technology, states Supply Chain Dive. For them and others in the industry, driving down external costs may lie within freight payment.
Ways to Improve Factoring Through Digital Integration of Systems
For other ways to increase your hauling income and improvements for the supply chain industry, experts look to digital system integrations. The top freight factoring companies use a variety of components that look to improve system processes from back-office tasks to provide more cash flow to carriers and shippers. These factors look like:
1. Factoring Reduces the Delays Carriers Experience in Getting Paid. Freight factoring companies help shippers and carriers by giving them the majority, if not all, of the funds needed for their company. Shippers may experience a delay in freight payment or may just get behind with their accounting, but it directly affects the carrier. Carriers often must pay their up-front costs like fuel or repairs, leaving them in the red if they do not receive payment in time.
2. Working With a Digital System Eliminates Confusion in Payment Processing. A digital, centralized software platform will eliminate confusion. User-friendly application platforms help users pay their installments at the touch of a button. Most technology now has smartphone capabilities, which means everyone can use them as needed. This software also automates specific invoicing or paperwork, eliminating the hassle of filling it out manually.
3. Streamlined Document Management Allows for Faster Processing. Automating these processes also streamlines document management. Collaborative technology takes this software and allows users to process their items quicker by providing a centralized system to access documents.
4. Improved Service and Detail-Oriented Systems Lead to Fewer Complaints and Delays. Without the assistance of human error, digitized systems within the freight factoring company community help improve overall service. These systems are created with details in mind, which means they catch issues before they escalate. This means less delay and more happy carriers, shippers, and customers.
5. Next-Day Payment Processing Improves Working Capital to Help Carriers Stay Operational. For many carriers, faster is better. Keeping cash flowing for smaller fleets or owner-operators means keeping them on the roads. This gives way to more capacity for shippers. All in all, next-day payment processing keeps everyone operational faster.
6. Integration Further Allows for Better Reporting and Control Over Freight Spend, Whether That’s a Shippers Total Spend or a Carrier’s Overhead Costs. Cost reduction is the ultimate goal for shippers and carriers. Keeping data at hand and continuous freight auditing will lower costs for both parties.
Boost Finance in Your Network by Becoming a HaulPay User.
Shippers, carriers, and the ultimate customer all benefit when the right network comes to bat. Boosting finance has never been easier. By obtaining next-day payment and immediate processing, carriers and shippers receive the funds they need almost immediately. This keeps carriers on the road and shippers demanding capacity, everyone wins.
To experience the benefits and achieve overall business growth by using a freight factoring company, request a demo to see how the HaulPay platform works.