The holiday season is the busiest season for the trucking business. Huge volumes of merchandise need to be moved in preparation for the biggest shopping season of the year. Weeks before the Black Friday sale and throughout the holiday season, truckers are busy moving supplies, finished goods, and other items from the suppliers to the manufacturers, from the manufacturers to the retailers’ warehouses, and from the warehouses to the stores. It is often a 24/7 operation for trucking companies.
The holiday season makes for good business and high profits for trucking companies, but there’s one problem that people outside of the trucking industry may not be aware of: cash flow. The busy trucking schedules entail higher expenses, in terms of fuel costs, truck maintenance and repair, and the salaries of drivers and other employees. While the overhead cost is rising during the busy days of operations, the receivables are pending because most freight is hauled on deferred payments. (Most trucking companies accept 30 to 90 days deferred payments from their customers.) This creates a cash flow problem that many trucking companies are not able to manage.
Freight Factoring
Freight factoring is an easy solution to trucking companies’ cash flow problems. Whenever a company is short on cash to maintain its operations, it can access cash from freight factoring companies. The mechanics are simple: The trucking company basically sells its unpaid invoices to the factoring company. The factoring company advances to the trucking company as much as 95 percent of the face amount of the invoices. The trucking company receives the cash and the factoring company does the work of collecting from the customers. The factoring company charges a fee on the advance, the amount of which depends on the credit worthiness of the customers and the performance of the receivables.
Cash Flow Solution
Factoring is a simple solution to the cash flow problem—and a much faster one than traditional bank loans. Companies can spend the cash advanced by the factoring companies to cover their operating expenses during the holiday season. This makes for happy employees, happy management, and happy customers.