Companies with freight factoring options can convert your business invoices into cash. Factoring invoices is a process in which you sell your invoices to a factoring company, which pays you a percentage of the invoices back rapidly, such as with cash. Working with factoring companies provides you access to money much faster than shipping companies and brokerages, which may pay you back much slower. With this cash, you can pay for necessary fuel, repairs, and other overhead costs.
When choosing a factoring company to handle your invoices is time, remember to choose carefully. It will help if you are looking for a company with a good reputation, ethical track record, and knowledge about your business requirements and operations. Here are five tips for selecting the best freight factoring company for your invoice management needs.
1. Flexibility
Be sure to ask the factoring company if you have any choice about which invoices you want to factor in. Not all factoring companies allow you to pick and choose; some companies require that some minimum number of invoices be factored in every month. Sometimes you’d prefer to only factor in customers who tend to pay slower than average, so it’s a good idea to inquire about this with factoring companies from the outset.
2. Relevant Industry Knowledge
What does the factoring company you’re considering know about the trucking industry? Your chosen company should know your industry and the specific demands your business must meet and find solutions. Do Trucking Associations publicly endorse the factoring company you’re considering at any level? The ideal factoring company will know how your business runs and offer effective solutions and special discounts to exceed your needs.
3. Fuel Card Services
Any factoring company you’re seriously considering should offer free fuel cards. Fuel will be the highest cost in the trucking business. Saving on each fuel refill is imperative in this business, and any good factoring company should help you save costs with a free fuel card when you do business with them.
4. Customer Service Management
Finding a factoring company that can provide around-the-clock customer service is important. At a minimum, they should offer online, 24-hour account accessibility that allows you to track your funds within their factoring system. Inquire how to access your account, and note their typical hours of operation. Find out if they are open on nights, weekends, and even on which holidays they will still provide.
5. Recourse or Non-Recourse
Who manages the risk of buying and selling invoices, the factoring company or you? Within fleet factoring, there are two main ways to handle Accounts Receivable: recourse and non-recourse factoring. With recourse factoring, you have to repurchase invoices from the factoring companies if they are not fully paid for in a pre-determined amount.
Whereas in non-recourse factoring, the factoring company shoulders the risk of any invoices not being paid on time. Check whether your preferred company will provide a Non-Recourse Agreement on any invoices purchased from you. Protecting your funds is always a good idea, and a Non-Recourse Agreement shows that the factoring company trusts you enough to take a monetary chance with your business.
