Common Freight Factoring Mistakes to Avoid
Updated: a day ago
If you have never worked with a freight factoring company before then you may not know all the benefits that it provides you with, and you certainly won't know the mistakes to avoid. Freight factoring provides trucking companies with a way to manage their cash flow effectively, spend more time on the road hauling loads and less time doing back-office paperwork, and have access to fast payments and industry connections. Getting paid in 24 hours on every load is worth the small factoring fee that a factor charges for their services. There are so many benefits of working with a freight factor for a trucking company, but avoiding common mistakes and choosing the right one is key in your company's success. We have compiled the most common freight factoring mistakes to avoid to help you out:
Failure in reading and understand the fine print
This, hands down, can get you in a big deal of trouble. You may think you are getting a 2% factoring fee, but then you are charged more because there were "hidden fees" in the fine print that you didn't read. This is one of the most common mistakes that occurs and results in horror stories that you don't want to be involved in. There's an easy solution to avoiding this - read EVERYTHING. We have nothing to hide in our contract and will read it through with you so that you understand it all. We are here to help you succeed; NOT mislead you in the process.
Not doing your homework on a freight factoring company
When you are shopping around to pick a freight factor to work with, it is important to keep in mind that not all of them have your best interest at heart. Go back to the first point - read the fine print. Freight factoring companies that want to help you grow your business will not trip you up or mislead you on contract terms. What you hear from a salesperson might be very different from what you get with their daily operations. So, check their online reviews, compare their contract terms to the sales pitch, and do your research!
Know your trucking company's specific needs
You don't want to be stuck in a year-long contract with a freight factoring company that you don't like to work with or who isn't helping your company. It is important to make sure that you understand what you want for your company before signing a contract. Every company is unique and has different needs. Knowing your business needs will help you choose criteria that you are looking for in a freight factor. Here are some key questions to ask yourself when deciding what you want for your company:
Are you willing to take on the credit risk (the risk of not getting paid) for the broker or do you want extra protection in case the broker goes out of business?
Do you want all your money up front or do you want to keep some in reserve?
Is getting funded quickly important to you or are you comfortable with getting paid once per week or every couple of days?
Are you comfortable being locked into a contract for an extended period of time or do you want the flexibility to switch factors if you're unhappy?
Do you want to bill and invoice each of your loads yourself or do you want that included in your factoring services?
Is it important to know who takes care of your account or are you okay with calling a general customer service line with your questions and concerns?
Failure to have invoice payments sent to your factor
If you're new to factoring this is an easy mishap. Your freight factor buys your invoices so that the shipper/broker can pay them directly, instead of sending you the money. However, sometimes the shipper/broker will accidentally send you the invoice. The money from the invoice is no longer yours, as the factor has already paid you, and you need to contact both the factor and the shipper/broker to correct this mistake.
Working with the wrong customers
An advantage of working with a freight factoring company is that they credit check customers before they will purchase the accounts receivable from them. Chances are if a factor denies a customer, they have bad debts and there is a high chance they won't pay the invoice. This is good news for you as it helps you avoid working with bad customers.
Avoiding these mistakes will help you have access to immediate cashflow. This all may sound quite intimidating, but it's nothing to worry about. Once you know what you want for your business and what you want from a freight factor, the rest is easy. Porter Billing Services has been helping trucking companies have access to immediate cash and grow their company for over 30 years.
Let's see if we can help you out. Leave you information below and a specialist will be in touch!