Solving Supply Chain Issues in the Transportation Industry

Recent, heavy demands on the supply chain have caused issues that are affecting almost everyone, especially members of the supply chain itself. Transportation companies, freight businesses, and commercial fleets are being hit hardest and may be taking serious financial hits as a result. At J D Factors, we can show you how to roll with the punches without the debt.

Increase Financial Stability

The key to financial stability is maintaining a steady inflow of working capital. So that even if interest rates or loan payments continue rising, you’ll be able to sustain your business operations. One way to increase your working capital involves the payment schedules of your invoices. The typical payment windows for an invoice issued by a transportation company is 30 or 60 days. Sometimes businesses even offer 90-day payment windows. These lengthy waiting periods mean that you’re not generating revenue as quickly as you’re actually able to.

During the current supply chain crisis, you want to receive your revenue as soon as possible by removing these wait times. That’s why many transportation companies are using accounts receivable factoring to gain access to their revenue more quickly.

With factoring, any unpaid invoices are turned into cash and quickly made available. This is a fast, simple process that lets you access unpaid receivables while increasing cash flow. Factoring also eliminates long payment windows! The consistent working capital received from factoring will help you survive the uncertainty of the supply chain and other economic factors. With over 30 years of experience J D Factors understands the needs of those in the transportation industry and we’re prepared to walk you through the type of receivable factoring that will make you feel confident in the face of today’s economic environment.

Promote Growth and Efficiency

This doesn’t mean that factoring is only for struggling businesses, rather, factoring is utilized by many flourishing organizations to promote growth and increase operational efficiency. The stable cash flow stimulated by factoring further increases your control as you can spend less time worrying about invoices and more time making the critical decisions that separate you from your competitors.

If you’re still hesitant to pursue factoring, you should know that not all of your invoices need to be factored! Together, we can decide how many invoices you’d like factored and the priority of each. With heavy supply chain demands, invoice factoring offers a lifeline of stability to companies within the transportation industry. Give our team a call to learn more.

Are These Factoring Myths Hurting Your Business?

 Some of the businesses which would most benefit from invoice factoring avoid it as a funding source because of common misnomers. The result is that these business owners turn to more expensive and less advantageous funding sources. 

It could be very important for your business to consider factoring! We'll assess the most common myths about invoice factoring so that you can make a better assessment as to whether it is a strong option for your business.

1. You Have to Factor All of Your Invoices

When you work with a factoring company, you agree upfront which of your invoices you’d like to factor and which you do not. While some factoring companies will only agree to work with you if you factor all of your invoices, others are more flexible. This is a term that is up for negotiation, and not set in stone.

2. You Have to Pay Factoring Fees Upfront

You pay a fee for factoring, and it is usually a percentage of the total invoice. You don’t need to pay this fee before you submit an invoice. Instead, the factoring company takes their fee out when they send you the money for your invoice. This means that you only pay it when you have cash or, more accurately, when you get cash.  Indeed, the factoring company doesn’t make any money until they actually collect payment on the invoice.

3. Factoring is More Expensive than Bank Financing

While some bank financing options could be more affordable than factoring, you shouldn’t assume that factoring is necessarily more expensive. Bank financing could end up costing you more down the road, especially if you’re getting large loans with long terms and/or high interest rates. The potential that factoring can limitlessly grow alongside you also trumps the potentially crippling wait for bank financing increases. With factoring, you don’t have to miss out on opportunities waylaid by bank financing because factoring focuses on the credit of your customers rather than your own personal credit. Most factoring companies also work much more quickly than banks, so you'll get the financing and related paperwork approved much faster. This is critical because we all know that time is money! Work out the numbers for yourself to discover which is the more affordable option for you.

4. Your Business/You Probably Won’t Qualify

Your personal credit might matter much less than you think when you’re applying for factoring. Your business’ financial state may also matter less than you think. Most incorporated businesses and especially most B2B companies will qualify for invoice factoring. That’s no guarantee, but it is certainly worth looking into instead of assuming you will not qualify.  

5. You Can No Longer Choose Your Clients

You worked hard to make a business where you’re in control, and you don’t want to make any decisions to undermine that. Many business owners worry that the factoring company will have undue influence in their business. The most control a factoring company can exert is saying that they are unwilling to factor invoices from a certain client. You can still work with that client.

In fact, most business owners find that with a stable cash flow from factoring, they actually feel more control in their business and better positioned to make the critical decisions that they need to.

6. Factoring is Only for Struggling Businesses

It’s true that many struggling businesses turn to factoring to bolster their business and survive hard times. It's also true that many successful businesses also turn to factoring to help them grow, function more efficiently, and achieve their goals.

Do you want more factoring facts? Reach out to JD Factors today to discuss if invoice factoring is the right option for your business. 

Tips to Hire and Keep the Right Drivers

Businesses in the transportation industry and those that operate fleet vehicles are struggling to find qualified drivers. Keeping the qualified drivers that you do employ can also be a challenge, but it's an important one to manage. Low driver turnover will lower your hiring and training costs which helps reduce your operating costs. 

Even in the face of a labour shortage there are things you can do to hire more drivers and keep them, too. Here are our tips:

Offer Referral Bonuses

Your current drivers likely know other drivers. Plus, the connection between them means they may both be more likely to stay with the company. Motivate your employees to refer friends and family with a bonus.

Post to Multiple Platforms

Most people find jobs online, but you can’t be sure which platform your perfect driver is looking at. To increase your odds of success post to all of the online job platforms that people use in your area – LinkedIn and Indeed are good starts.

Offer Training Support

Sometimes your ideal truck driver isn’t a driver yet. You may have much more success when bringing people into the job and covering some or all of their costs for any government-mandated licensing or training programs.

Of course, you should also be conducting your own training for new drivers. Ensure this training is designed to create bonds within the company, which will help your new truck drivers transition to work more effectively.

On-Boarding Clarity

Different businesses have different policies for compensation, scheduling, and routes, all things drivers care a lot about. You can keep more drivers if they understand all of the relevant details of their job up front and agree to them, rather than being surprised and discouraged later on. Things you should be very clear about include:

• Routes, scheduling, and time at home
• Compensation including paid time off and benefits
• Specific relationship, as an employee not a contractor
• Specific vehicle or other equipment they will operate

·       You may find a few people do not agree to the employment after a very frank conversation about the position, but these are people who would not have stayed with your company anyway. Now you avoid the cost of losing them and can pick another candidate.

Work Quality

A few different factors of a driver’s work can encourage them to sign on with your company and to stay. Offering them more guaranteed “at home” time is a great way to ensure they stay motivated when they are driving. Ensuring that dispatchers cultivate a good relationship with the drivers can also help them have a positive attitude about work.

Compensation

One of the best ways to attract better drivers and keep them is simply to offer them more financial compensation. This includes a larger hurly rate or salary, as well as other financial benefits such as more paid vacation and sick time and better health benefits. You can also motivate drivers with bonuses for safe driving or for bonuses for being with the company for a certain period of time. 

Payroll Tips

For transportation companies, cash flow can be a problem and it can impact your ability to keep the best employees. Inconsistent and poor pay will reduce your ability to hire and keep the best drivers. You can use invoice factoring to get healthier cash flow and thereby provide better compensation to your drivers. Reach out to the team at J D Factors today to discuss how invoice factoring can improve your payroll and cashflow and reduce employee turnover.  

Tax Considerations for the Transportation Industry

The transportation industry works on thin margins, so every little tax break that owners and operators can get will help. For owners, consider making your drivers aware of the tax deductions they can receive just by driving. Helping your team make the most of their pay will be appreciated and will help you retain the best drivers. 

There are also decisions you can make as the owner of a transportation company to help your business get through tax time with strong cash flow. That is, if you are an independent business and not a PSB. Discover our tax tips for the 2021 tax year below.

Tax Deductions for Drivers

Those who are employees driving a truck for a company, or those who work in the transportation industry and do the transportation (like a crewmate on a ship or a stewardess on a plane) can deduct a large portion of their work expenses from their taxes. Those expenses may include:

• Up to 50% of meal expenses
• Up to 50% of hotel or lodging expenses
• Up to 50% of showering services (even if you're sleeping in your cab)
• Some of the tools or supplies that you purchase
• A portion of a business phone bill.

Part of your pandemic tax advice to employees could be a list of the relevant expenses they should be deducting.

Are you a PSB?

Drivers who are incorporated may not necessarily need to file as an incorporated business. According to the Canada Revenue Agency, those drivers who have incorporated, but who actually act as an employee of one business, must file as a Personal Services Business (PSB).

You may be a PSB/employee and not an independent business if you:

• Work for only one "client" company
• Do not own your truck or other tools
• Do not choose your own hauls or hours.

It is very important to get tax advice about whether you are a PSB or not as there are many tax implications to this nuance.

Tips for Owner-Operators

For owner-operators, tax season may be very stressful as a large bill comes due. Especially during the volatility of a pandemic year, you may not have been able to set aside the funds you need to cover your tax burden.

Factoring is a great solution for those who find their business struggles to afford tax time. With invoice factoring, you receive the money for your invoices as soon as you send them, from your factoring company, which handles getting the payments from your clients.

Some factoring companies may even set aside some of that money on your behalf, for taxes. J D Factors can assist you in this regard and if you would like us to start holding funds in trust to make sure you can a monthly tax payment, we are happy to do this in order to keep you on track.

Invoice factoring is a huge benefit at tax time because it allows you to have a much stronger cash flow, so you can afford to invest where you need and put aside funds too. It can be challenging for your cash flow to absorb quarterly estimated payments that you have to remit in advance. You can change that with factoring for SMEs. Reach out to J D Factors today to discuss if your transportation business is right for invoice factoring.

Cash Flow Tips in Times of Inflation

In Canada, inflation is creating some instability for businesses. Your suppliers may be set to raise prices, your clients or customers may be intent on spending less, and you may not be sure how to handle your own pricing scheme. One way to better ensure you weather an inflation storm is to focus on your cash flow. 

Between increased costs and lowered sales, some businesses will find themselves remarkably low on cash, potentially to the point of significantly impacting their ability to meet operating costs and stay afloat. How do you protect your working capital? Here are some cash flow tips specifically for times of high inflation.

1. Stop Extending Credit

Extending credit to your customers when inflation is minimal may make financial sense. However, as inflation rises steeply, the cost of that credit is amplified. What might have cost you $100 to deliver this month may cost you $120 to deliver the next. The money your customer is giving you a few months down the road is dramatically less valuable than the money you could get from them at the time you rendered your services. Of course, you’ll always have some delay between fulfillment and payment, but this delay is more disadvantageous during times of high inflation. Stop extending credit and create new policies or invest in new technologies that can encourage clients to pay you as quickly as possible.

In addition, you also should consider the possibility that your clients will be overwhelmed by inflation themselves and may not be able to pay you. Avoid bad debt and stress on your business by denying credit moving forward.

2. Increase Inventory - Wisely

Your supplies and inventory cost less today than they will tomorrow. Where your supplies or goods are shelf stable, you may consider purchasing and storing more, especially if you expect inflation to continue to rise. It is most wise to do this for core products or supplies that you are sure you will be able to sell. Stocking up on products that may decline in demand can leave you with inventory you can’t sell and further undermine the stability of your business. Stocking up on solid inventory can be a hit to your cash flow now but can make it much healthier down the road.

3. Understand the Risks of Loans

When you’re struggling to keep your cash flow healthy, a loan may seem like a good option. And, it can be, but the value of a loan is diminished during times of high inflation. By and large, loan rates increase during periods of inflation. If you have fixed rates for any loans or lines of credit you have then you don’t have to rush to pay them off. However, taking on new or having variable rate loans can be detrimental to your business.

4. Explore Invoice Factoring Options

Invoice factoring is a wiser way to achieve a healthier cash flow. In this arrangement, you send your invoices to a factoring company which pays them immediately, and then secures payment from your clients or customers. You get the benefit of your cash right away, which is essential as any delay in time means the value of your money is reduced. Your factoring company can even shield you from bad debt in what is known as non-recourse factoring, which is highly beneficial in times of high inflation. Whether you're looking for cash to increase inventory, hire, or otherwise invest in your business, factoring is an option worth considering.

Reach out to J D Factors to discuss how invoice factoring can help your business have healthier cash flow.

 

Invoice Factoring for Fleets: How to Grow in the Transportation Industry

The transportation industry can be tough, even in times of great demand. There are so many variables, a large financial commitment for growth, and changing economic conditions to throw a wrench in the best laid growth plans. One of the top things you can do to make your fleet more successful is to use factoring for at least some of your invoices. If this comes as a surprise to you, you’ll be interested in the data from RigDig Business Intelligence, which shows that since 2017, and especially during the Covid-19 pandemic, fleets that use at least some factoring have been outpacing those that don’t. 

Here’s the data, and why we think invoice factoring plays such a pivotal role in supporting the transportation industry specifically.

Fleet Growth Over Time

From 2016 to 2020, the size of fleets that use some form of invoice factoring has grown by 90%. In the same time period, the size of fleets that do not use any factoring has only grown by 30%. This is on average, so individual companies will have grown more or less depending on their circumstances. Still, the overall impact of factoring is clear. Transport companies that use at least some invoice factoring can better leverage opportunities to grow.

Why Is Invoice Factoring Successful?

Transportation is one of the industries that can benefit from invoice factoring the most. You have small margins and very long lead times. Potentially, your clients may take 30 or even 90 days to pay you, and that is after the delivery is completed.

When you’re trying to complete a new order, you may need to make investments and then wait for the cash to reach your pocket for even six months from the time you first wrote an estimate. In the meantime, you need fuel, payroll, and the cash to cover your other operating expenses. Putting business from more reliable customers on hold to handle large new accounts can jeopardize the stability of your business overall.

With all of these challenges to growth, and even day-to-day stability, invoice factoring is an excellent solution. After the delivery is complete, you send out your invoice to a factoring company like J D Factors. We pay you within 24 hours, meaning that you immediately have the cash to cover expenses incurred in the delivery, and keep investing for the next ones. That cuts you down from 90 days to one and keeps your business running smoothly.

Invoice factoring gives you better cash flow, which means that you can take advantage of opportunities that pop up, whether it’s a new fuel card, an order from a new client, or making new investments in quality trucks.

Cash flow isn’t the only benefit. Your factoring company will deal with invoicing your client and receiving payment. That means you spend no time chasing accounts receivables, reminding people about payments, or sending out ignored emails and calls. In fact, with non-recourse factoring, you are protected further against clients who don't pay because of credit issues, stop answering your calls, continuously break promises, or even file formal bankruptcy or bankruptcy protection. You reduce your burden of bad debt and have a significantly more stable business. Looking for an advantage this year? Discuss invoice factoring options for your transportation company with the team at J D Factors.

Negotiating Terms? Avoid These 4 Common Mistakes

The biggest mistake a small business owner can make when they are working with a bank is to think that the terms the bank presents are non-negotiable. The truth is that you can and should ask for a better interest rate or other more favorable credit terms. However, small business owners who are not used to negotiating these important financial arrangements often make mistakes. 

Here are the common mistakes you need to avoid in order to get the best terms when negotiating credit with a bank.  

1. Avoid Being Intimidated 

It can feel daunting to negotiate with such a large organization, and one that has so much power over the future of your business. But remember that there is more than one bank out there and the others want your business too. There is no reason to be intimidated by the bank or the people you speak to there. The person negotiating for the bank is not all-powerful and is a person, just like you.

2. Do Your Homework

Why do you deserve better terms? Just wanting them will not be a compelling enough reason. You should demonstrate the reasons that your business is more likely than average to pay back your loans or to be a good customer to the bank over the long term. Arrive to the meeting aware of all the information that may be important to bring up. Discuss your credit rating, the future prospects of your business, or the kind of investment you’re making with the credit the bank is offering you, if any of those facts would be compelling.

Whatever your argument, preparing it ahead of time will give you the opportunity to pull the numbers and make it more appealing to the bank’s representative. 

3. Listen to Build Trust

The bank will have its own reasons that the initial terms they offered you are acceptable. By listening to the representative’s counter arguments and perspective you gain valuable insight about which terms the bank might be more open to negotiating and what they would need to see in order to offer you better terms where they currently cannot.

Perhaps the bank is inflexible on the interest rate, but more flexible on monthly payments or overall credit amount. By listening you can find opportunities. You’ll also build more trust with the bank’s representative, who will realize that you understand their perspective and will therefore be more willing to work with you.

4. Know What's Good Enough

It’s rare in any negotiation to get precisely what you ask for. You’ll walk into the negotiation knowing what you want, but you should also know where to settle. What terms would be good enough to get your business the credit it needs? When you know the bare minimum you’d be willing to accept you will know when you should walk away and pursue other options.  

If the negotiation doesn't go well, keep in mind that you have other financial options available to your business. Invoicing factoring is a great option, particularly if your negotiations with the bank don’t fare well. Reach out to J D Factors to learn more about this alternative option.