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Faster Fleet Payment Through Factoring

Posted August 19, 2019


When it comes to doing business these days, speed seems to matter most. With Amazon business practices paving the way for one-button ordering and same-day delivering, efficiencies and streamlined operations have become the focus of industries across the globe. That is very much true for the trucking industry, which is studying these practices not only to keep up with consumer expectations but also to generate revenue. If handled with care, speed can be the smartest tool a trucking company can deploy, especially when it comes to fleet payments.

Clearly trucking is in demand. The age of consumerism with mega companies like Amazon and Walmart has seen to that. However, not all trucking companies have the resources they need in the short term. Small to medium-size fleets operate within slim margins. So when payments on invoices stretch out to 90 days, cash-flow can become critical. Speedy fleet payment is required to keep operations running and trucks on the road. While the trend in real-time payment is hitting many industries, it is slow to become standard practice in the trucking industry. The good news is that there are resources to guarantee speed in fleet payment and they are found in fleet factoring.

delivery truck outside building

Companies like Fleet One Factoring offer a variety of services other than immediate invoice payment but it is the faster fleet payment that is making these factoring relationships so important. When cash-flow is available, fleet managers are better able to provide the resources they need to keep operations running and drivers paid. In many cases drivers have elected to receive ACH payroll transfers, which deposit funds directly to their bank accounts. Many fleet factoring companies, including Fleet One, offer fleet cards that provide access to funds for fuel and more. Funds can also be allocated to these cards in real-time to enable fast payment to drivers at fuel stops and in some cases for hotels and food.

Fuel Savings and Fast Fleet Payment

Fleet cards offer fuel savings as well, invaluable in an industry that literally relies on fuel to operate. Specifically the Fleet One EDGE card gives access to the largest fuel discount network available, with average savings of 12 cents per gallon*. That kind of savings can contribute to the success of the company in remarkable ways. The benefits also include:

  • Largest nationwide fuel discount network, with more than 3,600 sites
  • No fuel transaction fees in the Fleet One EDGE network**
  • Universal acceptance at more than 8,000 truck stops nationwide
  • Free fuel card funding with Fleet One Factoring

Mobile Technology Means Faster Fleet Payment

Fleet factoring has given the industry its own real-time payment solutions, but that is just one of the ways small to medium-sized fleets are balancing financials to make operations more efficient and payment faster. Technology is helping to streamline supply chain function through mobile apps as well. This recent example from CCJ Digital makes that clear.

Tribe Transportation, a transporter of high-end, high-security pharmaceuticals, fresh foods, and other fragile cargo, implemented a document-scanning app from Vector in November 2017 and found the results to be outstanding.

The image quality is amazing. The reliability is 100% better than what we were getting with the old scanners we used. Since converting to the Vector app, Tribe has seen a seven-day decrease in days sales outstanding (DSO) or accounts receivable. Driver communications and payroll processes also improved. We’re able to get our bills of lading in, we’re able to invoice quicker, which speeds up our cash flow. That’s really the game changer for us.
— Todd Gooch, vice president of Tribe

The trucking industry is a mobile operation, so providing tools drivers can use on the road is critical. Technology continues to enable fast fleet payments directly to the driver or vendor, by bolstering fleet factoring capabilities resulting in next day or, in some cases, same day cash-flow.

Unfortunately, not all trucking companies understand the real benefits of fleet factoring because of some common misconceptions.

1. My 3% rate is 36% APR

Some factoring companies that specialize in transportation have recently developed technology that streamlines transactions to lower the costs and risks of funding.

Fee structures are now as low as 3% of the invoice amounts. Even so, a 3% fee for non-recourse factoring may appear too expensive to gain access to funds for invoices with 30-day payment terms. After all, financing a 30-day invoice at 3% would be equal to a 36% annualized rate.

In practice, freight bills with 30-day payment terms are typically paid out in 35 to 40 days from when the invoice is sent. Tack on another five days to receive the payment by paper check, and the APR of a 3% factoring fee is closer to 24% (3%*360/45).

Furthermore, APRs depend heavily on volume and term. Short-term rates will always be higher than long-term interest rates. For instance, a credit card (~18%) that has a 30-day billing cycle is more expensive than a bank line of credit (~9-13%) or a mortgage (~5%). Factoring is not just about speeding cash flow.

For a 3% fee, a factor includes back-office services and insurance that saves carriers time and money. The factor takes over invoicing and collections and protects the carrier from insolvency of its shipper or broker customers.

2. Factoring is all-or-nothing

Factoring companies have traditionally required monthly volume commitments from carriers. This model has changed now that some companies allow carriers to select which customers and invoices they want to factor.

3. My factor will lock me into a contract

While most factoring companies do require a contract for a certain volume of invoices over a specified time period, some companies do not require term commitments and instead allow their clients the flexibility to stop at any time as their business needs and preferences change. Another distinguishing feature of some factoring companies is no hidden charges. Setting up new customers, electronic fund transfers, and other transactions are included as part of a vendor’s flat fee.

It is clear that in an industry on the move, faster payment is critical, but with a comprehensive strategy that includes fleet factoring, mobile apps, and streamlined operations, the speed of fleet payment is on the rise, enabling confidence and growth for fleets nationwide.







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