Solve Your Cash Flow Issues with Freight Bill Factoring

By: Kris Koonar

If you are in the trucking industry then you must be aware of how difficult it is to manage various expenses without enough cash in your hands. The payments that you are supposed to receive from your clients, government or non-government, usually come after a period of 30 to 90 days. In the meantime, you have to pay salaries to your drivers and other employees, pay rentals, repairs and maintenance of trucks. You might also have good proposals of bulk purchases with discounts but not enough cash to pay for them. In this scenario, a freight bill factoring company can come to your rescue.

The freight bill factoring company purchases your bills and pays you cash in return. The first installment that comes is usually 60% to 90% of your bills. This is done electronically and should not take more than 24 working hours to be transferred to your account after you have struck the deal and provided the factoring company with necessary details. Thus, you get a bulk payment for your invoices that help you meet all other expenses related to your business. The 2nd installment comes when your client has made the payment to the factoring company. This payment usually comes minus the fee of the factoring company.

This way, the money that would have otherwise been blocked during the cash period, flows into your business, making it easy for you to make payments. You can also make bulk purchases at discounted rates if you are able to provide cash money to the suppliers. This in turn, increases your sales and you are able to earn more by getting better and bigger offers from your clients. Therefore, the cash that comes from the factoring company helps you in the overall development of your business.

With ready cash in your hands you are also relieved of the tension you would otherwise have had, due to non-payment of bills. Additionally, you can also divert your employees in the collection division to some other productive work. Worries of collection and bad debts are transferred to the factoring company, to leave you to concentrate on other important aspects of your company like marketing, purchases and sales.

An advantage of obtaining cash from factoring companies rather than loans from banks is that you are saved from the ordeal of producing collaterals, showing your accounts and credit history and looking for guarantors. All you need to do in a factoring firm is to sign a deal and provide them with the bills and the very next day you have cash-in-hand to meet your business requirements. You are also saved from the high interest that a bank would charge and the EMI's that you would have to pay if you had borrowed a loan from a bank.

A very important aspect to be kept in mind is that you should keep your gross profit margin over 15% so that you are fully able to enjoy the benefit of factoring services. In factoring services, getting quick money is not the only criteria. You also have to keep in mind the fee you pay for such services, based on which your profits should be calculated. You should be able to capitalize on the sales that increase due to ready cash from factoring services.

Money Management
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