As you may have experienced, every budding business can face a situation that calls for financial backup. This backup may come in form of invoice factoring as explained by CommonwealthMN.com.
Here’s how it generally works: when you factor your freight, a freight factoring company pays a portion of the money owed to you. Typically, it may be 90% or so. They will send a new invoice to the company or client that owes you the money and then change the payer from your company to theirs.
Why should you, as a small business owner, apply for freight factoring?
1. It eliminates the cash flow slow-down. Small companies can guard their business operations against slow paying customers by having extra cash resource on hand.
2. Factoring invoices facilitates competitive advantages. If your customer pays fast, it can create an instant competitive advantage against other trucking businesses since slow paying customers with extended terms need no longer affect your financial resources and operations.
3. Factoring freight bills frees up working capital. No business grows without access to working capital. If this capital is locked down via customer receivables, it cannot be utilized for operating expenses, in payroll or in covering fuel cost, which is important in freight businesses. Trucking companies factoring invoices will get direct access to the working capital that could be locked down for weeks or longer while waiting for their customers to pay.
4. Factoring invoices provides a trucking company with financial advantage. With working capital available, you can negotiate terms that are more favorable and work on your savings. This type of cost savings means improved profitability and balanced expenditure.
5. Factoring freight bills reduces operational costs. Saving money with vendors and suppliers is only one way factoring is being cost-effective for a trucking company. In addition, operational costs associated with bookkeeping for accounts receivables and any associated collections activities may be reduced or even eliminated altogether.
Every successful business starts small and makes small moves. Maximize all the available resources around you, like the freight factoring, and you will surely be on your way to growth and stability.