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.
