How To Handle Slow Paying Clients Even During COVID-19
Cash flow is the diesel fuel of your operation, without it, the company can grind to a halt. What can be done to improve your cash flow situation especially during COVID-19?
Let’s assume for a moment I am the Accounting Manager for one of your larger clients. One of my tasks is to hold on to my company’s cash for as long as possible. That means stalling payment to vendors like your trucking company.
I would ignore “past due” and “final” notices and wouldn’t even process payment until receiving a telephone call. Even then I would have a string of reasons to delay payment further. These reasons include your invoice was never received, the bookkeeper is out sick, our accounting software program crashed, the check signer is out of town, the check went out last week so will have to put a stop-payment on it, the check is being processed, payment is going out next week, or my dog ate the check! You’ve probably heard them all and then a few more. I know I have!
We hear from our trucking clients that one common stalling “reason” brokers use is “The customer hasn’t paid us… so we can’t pay you yet…!” This excuse would have more validity if the shipper was YOUR customer, but they’re not. Your customer is the broker and should be responsible for paying their bills on time.
It’s interesting that, for the very same shipper, the broker is willing to make payment to you within a few days, by using Quick Pay, but you must discount your freight bills. Nothing suspicious there!
As the Accounting Manager you and I both know these are not valid reasons but lame excuses to keep YOUR cash in my pocket.
The COVID-19 pandemic has given me even more ready made excuses to add to my delay tactic portfolio. Excuses like, we’re working on a skeleton staff or the check signer is in self isolation. These stalling tactics work because COVID-19 is everywhere and makes it easy for you to accept because you would appear insensitive if you didn’t.
Still with my accounting hat on, for a trucking company that is overly persistent about getting paid before I am ready to cut a check I would play my ace card. That ace would be a threat to change trucking companies. That’s usually enough to stop chasing payment because nobody in the trucking company accounting department wants to be responsible for losing a valuable client.
The bottom line is you know the client is financially stable and will pay….eventually even though it may take up to 90 days. Unfortunately while your money still resides in their bank account your current trucking company bills are mounting up.
Some of your vendors, such as credit cards, charge interest for late or minimum payments. Now slow paying clients are costing you money.
In this scenario what choices do you have? With sufficient capital on hand you can wait it out, perhaps 3 months, for freight bills to be paid. Many smaller trucking companies and owner operators can’t afford this option. The better alternative is to factor your freight bills and get paid within 12 hours!
Factoring is a very common, reputable financial transaction conducted by companies of all sizes and in numerous industries worldwide.
You sell freight invoices or accounts receivables at a small discount, to a third-party financial company, somebody like us, known as a “factor.” The discount is a small fee typically around 3% and could be considerable less based on the amount of invoices factored.
Unlike other factoring companies there are NO LONG TERM CONTRACTS. We specialize in factoring for trucking companies working with owner operators and trucking companies that operate larger fleets of vehicles.
Spoiler Alert! Here’s comes the shameless plug…..we are good at what we do and therefore don’t have to lock clients into annual contracts. Our agreements are month to month, it’s that simple. If we don’t perform to your standards every day you are free to move on without hidden fees.
Factoring converts your freight bills to immediate cash. After your account is established (less than 48 hours) funds are deposited directly into your bank account within 12 hours.
This immediately improves your cash flow and eliminates worry and eliminates any waiting for client payment.
By factoring your freight bills, you will not be chasing payment and having to tolerate shippers or brokers using COVID-19 or any other excuse to delay payment.
YOUR money is in YOUR bank account within 12 hours.
If you have any questions please call 209-225-2852 for a no obligation discussion on your specific situation. Prefer to email us, please complete Contact Form Here.