Factoring invoices is useful for several reasons. It allows a trucking company to raise cash without obtaining brand-new financial obligation. While debt is occasionally required, the majority of trucking companies would choose to raise cash without obtaining cash. Debt is dangerous, and when it can't be paid back, possessions can be repossessed. If the debt is large enough, it may even require a trucking companies out of business.
Advice to Companies Whose Cash Flow is Troubling - Pick A Freight Bill�Factoring Company Instead Of A Traditional Bank Funding
How to Increase Money Flow Without Borrowing -Cash Money flow is one of the main reasons businesses fail.
At one time or another, every business, even successful ones, have actually experienced bad cash flow.
Cash flow does not have to be a problem any ever more. Do not be fooled -- banks are not the only locations you can get funding. Other options are offered and you do not have to borrow. Exactly what is trucking factoring ? One option is called truck factoring. Trucking Factoring is the procedure of selling invoices to an investor instead of waiting to collect the money from the customer. Oh, the Irony- Trucking factoring has an ironic difference:
It is the monetary
foundation of many of America's most successful businesses. Why is this paradoxical ? Since trucking factoring is not instructed in business colleges, is seldom discussed in business strategies and is relatively unknown to bulk of most of American business people.
Yet it is a financial procedure that releases up billions of dollars every year, allowing countless businesses to grow and succeed. FACTORING has actually been around for countless years. FACTORING Businesses are investors who pay money for the right to receive the future payments on your invoices. An unpaid receivable or invoice has value. It is a debt your customer has actually to pay in the near future. Factoring Principals--Although factoring
offers exclusively with business-to-business deals, a large portion of the retail business uses a factoring principal. MasterCard, Visa, and American Express all use a form of factoring in their retail transactions. Utilizing the purest meaning of the word, these big customer finance companies are truly just big FACTORING Businesses of customer paper. Think about it: You purchase at Sears and charge
it to your MasterCard. The store gets paid practically immediately, even though you do not make payment up until you are ready.
For this service, the credit card company charges Sears a charge (typical common normal fees range from 2 to 4 percent of the sale). The Benefits Truck factoring can offer numerous benefits to cash-hungry business. Rather than wait 30, 60, 90 days or longer for payment on an item that has already been delivered, a company can factor (sell) its receivables for cash at a small price cut
off the dollar value of
the invoice. Payroll, marketing efforts, and working capital are simply a few of the business requirements that can be satisfied with instant money.
Receivable Loan Financing offers the means for a producer to replenish stock and make even more products to sell: There is no longer a requirement to await for earlier sales to be paid. FACTORING is not simply a money management tool for producers: Almost any type company can take advantage of Receivable Loan Financing. Typically, a business that extends credit will have 10 to 20 percent
of its annual sales bound in accounts receivable at any given time. Think for a moment about how much is bound in 60 days' worth of invoices: You can not pay the power expense or this week s payroll with a customer s invoice, but you can sell that invoice for the cash to satisfy those responsibilities. Using truck factoring companies is a quick and simple process. The factoring company buys the invoice at a discount, typically a couple of percentage
points less than the face value of the invoice.
The United states Transportation Association mentions that there are about 195,000 employees with freight trucking companies and 276,000 personal providers trucking firms licensed to run in the U.S. that transferred, according to their latest listings of millions of products, supplies and standard materials . There are numerous typical carriers
or in teams on our nation roads carrying these important items to our shops, factories and harbors.
And truck factoring companies benefit many of them and offer their accounts receivablesfinancing facilities nationwide counting including the following states.
Alaska, Arizona, Arkansas,
California, Colorado, Connecticut, Delaware,
Florida, Georgia, Hawaii, Idaho State,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming
The state has invested in aerospace, education, health care, banking, and various heavy industries, including automobile manufacturing, mineral extraction, steel production and fabrication. By 2006, crop and animal production in Alabama was valued at $1.5 billion. In contrast to the primarily agricultural economy of the previous century, this was only about 1% of the state's gross domestic product. The number of private farms has declined at a steady rate since the 1960s, as land has been sold to developers, timber companies, and large farming conglomerates. Occupations outside of agriculture were widespread by 2008. Employment in that year was 121,800 in management occupations; 71,750 in business and financial operations; 36,790 in computer-related and mathematical occupation; 44,200 in architecture and engineering; 12,410 in life, physical, and social sciences; 32,260 in community and social services; 12,770 in legal occupations; 116,250 in education, training, and library services; 27,840 in art, design and media occupations; 121,110 in healthcare; 44,750 in fire fighting, law enforcement, and security; 154,040 in food preparation and serving; 76,650 in building and grounds cleaning and maintenance; 53,230 in personal care and services; 244,510 in sales; 338,760 in office and administration support; 20,510 in farming, fishing, and forestry; 120,155 in construction and mining, gas, and oil extraction; 106,280 in installation, maintenance, and repair; 224,110 in production; and 167,160 in transportation and material moving.[
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Trucking Factoring Situation Articles
Since the mid 1980s Lambert Truck & Haul have been successfully running their freight business. For more than twenty years they've been delivering goods for most major industries in the nation, with business booming as they traversed the country, in all kinds of weather, for all kinds of clients. During the heady times from 2002 to 2007, Lambert was a top rated accounts receivable mastermind of the trucking industry. Few customers were ever late on bills and those clients who were, were sure to turn in their late payments within a reasonable amount of time. Times were great for everyone, and the cash was flowing.
But a short year later, in the fall of 2008, when the United States economy took a nosedive and businesses both small and large began to feel the pinch on their pocketbooks, those that used to make their demands had suddenly and largely gone silent. Business slowed to a crawl. Worse still, it was noticed by Lambert in early 2008 that even though most of their loyal customers were on time with their payments, there were a few late bloomers who were starting to spread the disease. Spring changed to summer, summer changed to fall, and the CEO of Lambert, John Rondstadt, was beginning to feel very uncomfortable indeed whenever he looked at their weekly Accounts Receivable reports. The numbers of clients who owed him back debt were growing.
He had already been to the administrators to ask what the actual problem was. Were they doing things different, or wrong, when it came to collecting overdue accounts? By his bookkeepers records, this wasn't the case. Perhaps he was losing his customers to his competitor, who seemed to offer very low prices with no guarantee of quality or performance, and these clients who were in debt to his company had possibly disappeared leaving him stranded. Perhaps they were unable to pay their debt to him, but were able to meet the costs of a lesser service. But after doing the cursory research for this and talking to friends in the field, he found that alas, no, customers of Lambert hadn't gone elsewhere. The had just gone!.
To John Rondstadt the situation looked desperate. John was very concerned, because there were constant overheads, goods to ship, employees to pay, and trucks which needed to be maintained, but there just wasn't the money coming back into the business. After work he would confide in his wife, Linda, and neither were unable to stop the constant worry over the lack of funds.""Lin, I have a really bad feeling,"" he'd sadly say to his wife.""What could you do differently?"" she would say.John would stare off for a moment and then close eyes. He could see the fleet of trucks he had purchased over the years. He could see them traveling, bringing goods to all of his clients. But somewhere, a haze would form over his fleet and the vast number of vehicles would disappear to but a few. Why couldn�t he work out how to resolve this financial problem with his business?
""I know what it is,"" said John. ""I've relied too long on the profits I receive from invoices alone. For too long I've been allowing our clients to let their accounts become overdue."" Linda would look at her husband lovingly, and holding his hand would say 'It's such a harsh economy these days and our clients must be having difficulty meeting their responsibilities'.""Linda was trying so hard to support her husband in these worrying times, while John was weighed down with the worry of how he was going to handle this situation he found himself in.
The next day John strolled into his office and was determined to sit down and make every phone call to every client who had owed Lambert money. Now, it wasn't the most efficient way to spend a day as a chief executive, what he really needed to be doing was to be overseeing all of the other intricacies of shipment and delivery and reaching out to prospective clients or retraining his sales team to do the same. Even though he was doing something to help his company, he knew he had folks on salary to do just this thing. A waste of time - a waste of money - he had the best intentions, but all the while John was realising just how much trouble he was in.
Poor John spent the whole morning trying in vain to contact his debtors: they promised to call back, dodged his calls, or made small interest-only payments. He was beginning to feel quite despaired when his secretary knocked on his door.
""Can I have a word with you John?"" she asked standing in the doorway.""Of course Bev, please come in."" John relaxed back into his chair and looked up at Beverley.""Well John, this afternoon I did some research, trying to work out how we're going to get out of this mess."" She opened up a folder she had been carrying and pulled out a small wad of papers, placing them on the desk in front of him.""Have you ever heard of factoring?"" she asked.""It does sound vaguely familiar. What is it?"" he said.""Well,"" she began, ""It�s actually quite simple really. Basically, factoring invoices means that we would get paid immediately for the loads we haul.""John interrupted ""Immediately?"".
""Immediately, yes"" she added, ""In a nutshell, it's pretty easy. We start by having a professional account manager review our figures and help us set up a company profile. That profile will also include investigating our accounts receivable aging reports, our existing customer credit limits and so on. In addition, factoring will assist in determining our customers' creditworthiness, independent from their credit relationship with our company. It provides a very broad view.�
�John replied cautiously ""I see - and what happens then?��Well, after their review, and we�re approved for a factoring contract, we can negotiate terms and conditions. You'll be surprised at the amount of flexibility, all dependent upon the credit histories and business volume. The company will advise us the cost to purchase factoring for our company's accounts receivable. Once we arrive at a mutual agreement, the funding begins.�John was still a little concerned. He leaned forward in his chair and studied the paperwork very closely.
""It sounds too good to be true, Bev,"" he said.""Yes, I know; that's exactly what I thought at the beginning. But think about it, John: they've guaranteed that experts will do all the paperwork, and that will free us up to do what we should be doing - focusing on our customers in good standing, and that kind of stuff. They appear to be very flexible, John,"" she drew a circle around a paragraph on the document before him.""How flexible?"" he asked.""They personalize the factoring rates so that the amount they are willing to take on is commensurate with our needs and our client�s debt. It only takes 2 to 4 days for this to be figured out. ""
""It does all sound pretty good, remembering that we're all tapped out now with loans from the bank last year to repair vehicles, and we all know just how tight money is. It's imperative that we keep the business rolling as usual, and every day we go unpaid we're getting closer and closer to dealing with some serious issues in both the short term and the long term,"" said John.John took in a long slow breath, then looked at his secretary with something like hope in his eyes.""Precisely�. I think this might just be a way out of the trouble we're in with these folks who owe us money.""John thought about this and agreed with Beverley. The customers who were in debt to Lambert Truck & Haul were professional resources of the company, but they were also long-standing friends. John wasn't prepared to lose these relationships just because they were having financial issues at the moment. John knew that the economy had taken a hit and he knew that it would probably be a long time before things started to look up again. That unknown amount of time, if he handled these debtors incorrectly, could spell disaster for both of them. He didn't want to lose business but he also didn't want to lose any more money.
""Let me go over this tonight Bev, and thankyou."" Bev nodded, satisfied with her work, and she left the office feeling quite content in the knowledge that she had helped John keep the shirt on his back, and possibly hers too.John stayed at his desk for a long time, looking over the details they hadn't discussed during their meeting. What other issues could freight factoring help Lambert with? Running his pencil down the sheet, he noted that the freight factoring company could assist with fuel costs, fuel advances, and fuel discount cards. In fact, Lambert could receive up to fifty-percent cash advances upon load pick-ups. As a man who hated binding contracts with no room to breathe, he was pleased to see that this factoring company would not make him sign a long term contract, would not make him pay any sign up fees and there was no minimum volume required.
""Well, I'll have to tell Billy about this,"" John muttered to himself.His son-in-law Billy had liked the idea of Lambert so much and revered his father in law for having such business acumen that only two years before, he had gathered the venture capital to begin his own transportation service company. At that time John knew the struggles Billy would face, but he still encouraged him to follow his dream. With the economy the way it was, if an established company such as Lambert was struggling then the little guys, like Billy, were going to be in even more trouble. But, an antidote may have been found in freight factoring and John was soon to find out.
A few months later after going through the entire application process and having the experts review his accounts receivable, credit history and statements, John found himself beginning to dig his way out of the hole his delinquent account holders had created for him.They took on reasonable factoring purchase contracts and stopped spending their precious man hours scrambling to collect debt. They used that time to refocus their efforts in being competitive in new territories. John looked back on the dismal months of life before freight factoring and almost shuddered at the thought. Had he missed the boat on this one, he probably wouldn't be in business today.
More Trucking Factoring Company Situation Articles
A thick smoke came out and Jim Burton felt a sense of deep disappointment. His truck�s engine was done. He couldn't help but to slap the hood of his truck in disappointment especially because he had a set of new crew of welders that needed extra supervision. He had foreseen this happening, the engine of his truck dying but he thought it was okay to keep repairing it and was expecting it to last a bit longer.
His company the Burton Oilfield Services just could not afford to purchase a new truck. Everything had gone into buying the pneumatic trailers so they could jump into the thriving frac sand hauling business. They brought good for the company however they were also quite a bit expensive.Burton kept the company small and easy to maintain and handled welding services alone but just like a baby, the company also had to show growth. All over their area the frac business was booming so he spent his savings to feed his growing child because you can�t feed any family on the white paper that invoices are printed on. Now he is problematic because he has new workers and if he opted for buying a new truck he might have difficulty paying these workers when the month ends.
His crews couldn�t pay their bills with an invoice or wait out the 90 days for the hard cash from customers to come either.
His friend named Dan had given him advice to utilize a factoring company so he could buy new trailers for the company during an Elks Lodge meeting. Dan had also utilized the aid of a factoring company and bought a pneumatic trailer from the factoring cash flow.
There was always the fire of competition between the two men but Jim had to admit Dan had got onto something big before him.He thought perhaps the factoring thing could also work for him and his company and maybe he could finally found something to brag about to Dan at the next Elks Lodge meeting.Jim hitched a ride back to this office on one of his crews cars. He heard a good report back about the new guys and then began researching factoring companies online. There were so many companies offering factoring services. Some factoring companies were huge and also handled factoring for other industries. Some were small and only focused on oilfield services. He went for half and half. He contacted some of the big factoring firms and at the same time also got in touch with some of the small ones.
What he learned about factoring amazed him. He almost couldn't believe its true. There was no interest, therefore he wouldn't have to spend even 1 cent above the amount of the invoice just to get the money he needed. It was certainly a more attractive deal than a bank loan which was always the amount of money you needed and then the amount you had to pay in interest. He was also not investigated regarding his credit and the factoring company did not do any background check on him or on his company's credit report. The factoring company was only concerned whether his clients were reliable enough and the good thing is that he already thoroughly checked it.
Jim loved nothing else than being out there doing work with his guys.He disliked it whenever he had to be in the office to do all the paperwork and he would rather be with his workers laughing while working instead of sit in the chair to be in meetings.So it was a big bonus for him to have a large section of his office work taken over by the factoring company who offered credit analysis of potential customers, accounts receivable management, and much of his overall billing. He also had the choice of which accounts he would allow the factoring company to handle so he can keep those accounts which are in close business with the company. Jim had a sense of confidence since he knew that the factoring company has already started a great working relationship with most of his most important clients, therefore it was an easy move to put all of them in the accounts receivables to be handled by the factoring company.
Once he had chosen a factoring company, all he had to do was to fill out an application that required having his secretary fax documentation and an accounts receivable report.Then after that the factoring company already sent him the contract that he needed to sign and more importantly the price for the invoices was already paid promptly to Burton Oilfield Services. He received an amount that was almost 85% of the amount of the invoice. The remaining amount was saved by the factoring company and will be refunded back to his company when the clients are able to make full payments of the accounts receivables and Jim did not worry a bit about this. He trusted the customers that he had brought on board and knew he would be able to get that reserve back later. The big bulk of the cash flow is already in his company hands and therefore can already be used for anything that had to be done for the company.Jim and his company are now able to expand to more work. He just had to keep the receivables coming so that money would be ready and so he is able to bid for twice as much jobs as compared to before when he didn't use factoring yet. Now, he can stop worrying about where to get the money for tools, payroll and gasoline to keep up with new projects. Also he could hire more journeymen pipe layers and skilled welders for big automated welding projects or to become the leader in hand weelding. At the next Elks Lodge meeting, he would feel good telling Dan about the new cold bending machines he added on. One thing Jim really had longed for was to give his crews raises. They hadn�t had one in nearly a year and half. He believed that his workers were deserving of a higher paycheck as compared to the union men who had been on him.
Factoring was giving him opportunities that he had never thought possible. A freed up cash flow would allow his to continue his dream of growing his business and seeing it mature into the powerhouse that he knew it could be.