Cash flow is the movement of money in and out of a business. Trucking businesses are especially susceptible to cash flow challenges with constantly recurring expenses like fuel and less-than-ideal payment terms. Getting paid sooner is crucial to running a successful trucking business. Let’s explore a few different practices that any trucking business can use to get paid quicker.
Send Proof of Delivery (POD) and Invoice Promptly:
One of the most crucial invoicing best practices is to send the Proof of Delivery (POD) and invoice promptly after completing a delivery. Providing customers with proof of delivery and accurate billing information in a timely manner not only demonstrates professionalism but also expedites the payment process.
Adhere to Shipper or Broker Documentation Specifications:
Different shippers or brokers may have specific requirements for documentation, including invoices, bills of lading, and delivery receipts. Trucking businesses need to understand and adhere to these specifications to ensure compliance and avoid delays in payment processing. Keeping track of each customer's documentation preferences and where to deliver them to can help streamline invoicing and strengthen business relationships.
Maintain Accurate Accounts Payable Contact Information:
Having the correct accounts payable contact information on file is crucial for effective communication and resolution of invoicing issues. Ensure that invoices are sent to the appropriate contact within the customer's organization to expedite processing and facilitate prompt payment. Regularly update contact information to prevent communication breakdowns and minimize delays.
Follow Up on Invoices:
Proactive follow-up on outstanding invoices is essential for ensuring timely payment and addressing any billing discrepancies or issues promptly. Implement a systematic approach to invoice follow-up, including regular reminders and escalation procedures for overdue payments. Clear and courteous communication with customers can help resolve payment issues efficiently while maintaining positive relationships.
Offer Payment Discounts for Early Payment:
Consider offering payment discounts, such as early payment incentives, to encourage prompt payment from customers. You can read more about payment terms and early payment incentives here. Offering a small discount for early payment can incentivize customers to settle their invoices more quickly, improving cash flow for your trucking business. Be sure to clearly communicate payment terms and discount options on invoices.
Utilize Technology for Invoicing Automation:
Take advantage of technology, such as invoicing software, like QuickBooks, or transportation management systems (TMS), to automate invoicing processes and administrative tasks. Automation can help reduce manual errors, save time on data entry, and improve overall efficiency in managing invoices and billing activities.
Quicker Payment Terms and QuickPay Terms with Shippers and Brokers:
There's simply asking to get paid quicker, which comes at no cost, and then there's QuickPay which comes at a cost. So, the first thing to do is ask for quicker payment terms (15 days vs 30 days). Your request might be accommodated as a professional courtesy and at no cost to you. Another option is using a QuickPay program that expedites payment processing and can improve cash flow for your trucking business. QuickPay terms typically involve accepting a slightly reduced payment in exchange for receiving payment within a shorter timeframe, such as immediately after delivery or less than 7-15 days. While QuickPay terms may result in a slightly lower payment, the benefits of faster payment and improved cash flow may outweigh the cost.
Work With a Factoring Company:
Another option for improving cash flow and accelerating payment processing is to work with a factoring company. Factoring companies purchase your accounts receivable invoices at a discounted rate, providing you with immediate cash. This can help alleviate cash flow constraints and reduce the need to wait for customers to pay invoices. While factoring services come at a cost, they can be a valuable resource for trucking businesses, especially during periods of slow payment or rapid growth. We recommend working with a heavily vetted and trusted provider like OTR Solutions. You can learn more about their services here.
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Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC does not assume responsibility for any omissions, errors, or ambiguity contained herein. Contents may not be relied upon as a substitute for the FMCSA's published regulations. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.
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