Trucking businesses have a lot of challenges when it comes to maintaining cash flow. You need to buy fuel, maintain equipment, and make payroll, all while trying to collect payments from customers – which doesn’t always happen on time. Finding ways to increase your cash flow isn’t easy, but there are several ways you can help keep it consistent.

Keep an Eye on Expenses

Whether you use accounting software or outsource to an accountant or bookkeeper, keeping a watchful eye on your financials can help you stay on top of your cash flow situation. The more accurate and up-to-date your accounting is, the more knowledge you’ll have of where money is being spent. You should be able to look at the numbers anytime – through your system or your accountant – and get an accurate picture of your financial situation. That knowledge can help you make the necessary adjustments to spending whenever needed.

Boost Your Income

Positive cash flow means your income exceeds expenditures at any given time. Aside from spending less, it obviously helps to have more money coming in. Consider what you can do to boost your numbers. For example, when was the last time you increased your prices? Are they comparable to what your competitors are charging? Consistent evaluation of your income and expenditures is the best way to find more cash flow.

Evaluate Your Equipment

Owning a single truck or a small fleet can be costly. Take time to audit the costs of your current vehicle situation. Are you able to pay a little more on your truck loans and pay them off faster? Are you thinking of expanding your fleet or purchasing new equipment? Weigh the cost of new equipment against what you’re paying to maintain what you have. Which is going to cost you less in the long run?

Use Non-Recourse Factoring

Most trucking companies have a similar pain – invoices not being collected in a timely manner – or sometimes not at all. Non-recourse invoice factoring means you get cash for invoices right away, giving you quicker access to the funds you need to pay for things like fuel and payroll, without worrying about collecting on invoices that may go unpaid. This can help ensure positive cash flow while you pay monthly bills and work on future growth.

Practicing sound cash flow fundamentals, your trucking business can meet its commitments both now and in the future.

One of the worst things that can happen to your trucking company is to get scammed. Whether it’s a vendor, customer, or strategic partner, scams can bite you and your business right where it hurts – in the pocket book.

What is Double Brokering?

Double brokering is exactly what the phrase implies – a load that has been brokered twice. One of the most common fraudulent activities being perpetrated on truckers today is Fuel Advance Fraud, which is a form of ‘double brokering.’ This is when a fraudulent broker passes themselves off as a legitimate carrier, accepting freight from an unsuspecting broker or agent.

In many cases, the fraudulent broker signs up for a load that another broker has posted on a load board. Then, they re-post that load at a higher amount and hire a carrier to take the load – and take a fuel advance from the original broker. The fraudulent broker never pays the carrier, and the legitimate carrier who signed up to take the load ends up getting ripped off, while the scammer takes off with the fuel advance.

So, how do you avoid being double-crossed by a double broker?

1. Perform due diligence on all brokers. Call to check the credit of brokers. Look for variations in broker name, location, contact information, and billing information. Often these fraudulent brokers alter the documents they receive from actual carriers to convince victims that they are a part of a legitimate company.
2. Verify a carrier’s information with their Department of Transportation registration. If the phone number and address don’t match the information you’re given, that’s a big red flag.
3. Double check the broker’s rate. Use common sense and apply the old adage, “if it sounds too good to be true, it probably is.” A scammer posing as a carrier may accept a load for much less than the going rate to entice a broker into taking the deal. Or, a scammer may offer a carrier more money than originally offered by a broker to take advantage of someone who needs a quick payday.
4. Be aware of timing. Deals posted late in the week or at the end of the day are frequently made by fraudulent brokers. Why? Because they’re preying on truckers’ worries over not being able to schedule a load by a certain time. And anytime a broker seems in a rush to get you to agree, you should also be wary.
5. Check their Authority to Operate. Search FMCSA’s Safer and Fitness Electronic Records system website, https://safer.fmcsa.dot.gov/ to make sure the DOT/MC authority to operate number matches with what the carrier has submitted.

Spending time to validate and research necessary information about a broker is important to ensure that you’re not being scammed. Avoid becoming a victim of swindlers who are just looking to make money off a quick con.

‘Low rates!’ ‘Risk-free!’ ‘Fast cash!’ ‘No upfront fees!’ These are just a few of the phrases you see when you search for invoice factoring options. You might find a number of deals from factoring companies advertising low rates and quick cash flow. This sounds good on the surface, but there are often many details that aren’t disclosed up front.

All too often, factoring rates and deals that sound great at first end up being too good to be true.  Many recourse factoring contracts come with fine print attached, putting you and your business on the hook for future risks. For example, when you sign a contract for recourse factoring, you assume the credit risk of the broker or shipper you are hauling for. This means you’re essentially gambling on the reliability of the factoring company, with no guarantees they’ll collect on your invoice. But because you’re locked into a contract on their terms, those unpaid invoices will again become your responsibility after the terms of the agreement expire (usually 60 to 90 days).

Understanding the Nitty Gritty Details

A lot of factoring companies advertise super low rates to get more customers, but they don’t always clarify the details. For example, did you know there are many ways for those ‘lower rates’ to change? Typically, the lower rate is introductory and only good for a certain number of days. After that, the rate will rise incrementally, sometimes even daily – yikes! Also, after an additional number of days, you must use your hard-earned cash and buy the delinquent invoice back from the factoring company. Talk about an unpleasant surprise!

And there’s more. With some of these ‘low rate’ deals, you’re also locked into a contract of one or two years. These contracts are very difficult and sometimes very expensive to get out of. Unfortunately, such long-term agreements are hard to detect up front, because the contracts are so extensive and filled with confusing terms. As a result, you may not realize the full extent of what you’re accountable for.

Knowing the Bottom Line

When it comes to maintaining cash flow, factoring invoices at a good rate is a useful financial tool. However, since your main concern is the long-term health of your business, you want to avoid taking on unnecessary risk. To avoid damaging your business over time, consider non-recourse factoring with clear and reasonable rates, where you don’t become responsible for invoices that go unpaid. While non-recourse rates may be a bit higher up front, you’ll avoid a lot of headaches, hidden fees and long-standing contracts – and that saves you money and hassle over the long haul.

As of December 18, 2017, trucking companies will be required to use E-logs. With an average cost of $495 per year, that’s an expense that will now need to be part of your budget. All commercial motor vehicle drivers will need to comply with the Federal Motor Carrier Safety Administration’s ELD rule.

What is the ELD Rule?

This rule was established to improve commercial vehicle safety and reduce overall paperwork for both motor carriers and drivers. Annually, the FMCSA estimates 1,844 crashes could be avoided, with 26 lives saved after the new E-log devices are in place. E-logs are also designed to prevent driver harassment by employers, deterring carriers from attempting to force ill or fatigued drivers out on the road.

Basic E-log Requirements

• ELDs must be used by commercial drivers who are required to prepare hours-of-service (HOS) records of duty status (RODS).
• ELDs must be certified and registered with FMCSA.
• Drivers and carriers must keep specific supporting documents.
• Drivers are not to be harassed over ELD data – this data may actually back up claims of drivers who believe they have been harassed.

Limited Exceptions

• If you’re a driver who operates under the short-haul exceptions, you may continue using timecards. Because you aren’t required to keep RODS, you won’t need to use ELDs.
• If you’re a driver who uses paper RODS for not more than 8 days out of every 30-day period, you won’t need an ELD.
• If you’re a driver who conducts drive-away-tow-away operations, an ELD isn’t required.
• If you drive vehicles manufactured before 2000, an ELD isn’t needed (it requires synchronization with the electronic control module, which isn’t possible in older trucks).

Your ELD is Required to:

Automatically record date, time, location information, engine hours, vehicle miles and identification information for you, the carrier, and your vehicle.

• Record all information at least hourly when the vehicle is in motion.
• Record all of the elements changes in duty status
• Record changes to a special driving category, such as a yard move.

Drawbacks to the ELD Requirement

The major drawback to the ELD requirement is the anticipated loss of productivity for drivers. Being micromanaged by the FMCSA will most likely result in less miles being driven by each driver, which will drive up costs and slow down delivery times. Additionally, small trucking companies with fewer resources will get hit hard with the upfront cost of the ELD as well as the monthly subscription cost that comes along with it. Furthermore, as the regulations are currently written, drivers have very little flexibility in bending the hours of service rules without being penalized. Many trucking companies are claiming that this rule may actually cause more accidents, since drivers will be forced to stay off the road even if they are not tired. This may result in truckers driving at other times when they actually may be fatigued.

The new regulations can be confusing, but if you stay informed, you can stay on top of the requirements and avoid complications. For more information, visit the FMCSA’s FAQ at: https://www.fmcsa.dot.gov/hours-service/elds/faqs

We know how difficult it can be to keep your trucking business running while waiting for customers to pay you. Your business needs cash flow for fuel, truck maintenance, insurance, and more, but getting timely payments from customers is often a real thorn in your side. For a trucking company of any size, cash flow problems can put a huge weight on your shoulders.

When customers don’t pay you on time – or at all —it can put your business in jeopardy. This is why invoice factoring is a common practice in our industry. When you factor an invoice, you essentially sell it to the factoring company at a discounted rate in exchange for immediate payment. Hopefully that’s where the story ends, but as you have probably experienced, that’s not always the case.

Sorting Out Factoring

When people talk about factoring, they could mean one of two types:  recourse or non-recourse. Most factoring companies focus on recourse factoring, where truckers are liable for invoices when customers don’t pay. If factored invoices get paid on time, you can breathe a sigh of relief. However, when an invoice doesn’t get paid within a certain number of days, the factoring company will charge you back for full payment…sometimes even months later.

The other type of factoring is non-recourse. This means that the factoring company who purchased the invoice from you assumes the risk if it goes unpaid due to customer bankruptcy, fraud, or delinquency. So if the customer takes a long time to pay – or doesn’t pay at all – those invoices won’t come back to bite you. The factoring company assumes all the risk.

What About Rates and Collections?

Non-recourse factoring gets you off the hook for collections. Rather than spending resources trying to collect payment for factored invoices, you simply let the factoring company take care of it. And while the rates for non-recourse factoring might be a little higher upfront, the reduced risk, combined with no need for collections could make non-recourse factoring well worth the cost.

Managing your cash flow in the trucking business is no easy task. But understanding the difference between recourse and non-recourse factoring can help you make the right decision for your needs, so you can get back on the road and focus on what you do best…managing your trucking business.