Workflow AI for Factors

Factoring companies can be especially valuable for new or growing trucking businesses where bank loans or traditional lines of credit may not be an option, and for any business that wants to reduce the time and costs involved in managing invoices and receivables. With steady income, carriers, brokers, and 3PLs can focus on filling trucks instead of running credit checks and chasing down payments.

Factoring is the purchasing of account receivables (invoices) at a discount. After entering an agreement with the factor, a trucking company sells its invoices for loads they delivered and then gets an advance payment, typically from 75-90%. The factoring company then collects payment for that invoice from the broker. After the factoring company gets paid by the broker, it will take its factoring fee and remit the balance of the invoice to the trucking company.

As a carrier, instead of billing a shipper or broker yourself, you might sell your accounts receivable to a factoring company for a fee based on a percentage of the value of the invoice. The factoring company pays you immediately—by check or electronic funds transfer—and then takes responsibility for collecting from your customers.

For example, a small carrier or owner-operator with up to ten (10) trucks might engage a factoring operation and happily accept a 3 to 7 percent fee to maintain positive cash flow. The carrier and drivers can simply send load documents through the mobile app or email. Using Transflo Workflow AI for Factors, a factoring operation might offer to process your documents automatically or manually verify rules and approve documents before submitting them to one or more brokers.

Whether you have one truck or a thousand, it is important to develop a factoring strategy that makes sense for you—and to use the latest digital tools to manage it.

As a factoring company, you set your fees based on the credit risk associated with each customer, as well as the volume of factoring you’ll be doing. You typically offer two types of arrangements for your clients: recourse and non-recourse. With recourse factoring, the carrier agrees to buy back the invoice from the factoring company if their mutual customer fails to pay their debt. Because you’re sharing the risk of an unpaid invoice, the fees associated with recourse factoring are lower.

With non-recourse factoring, a factoring company assumes all responsibility for collecting on the invoice. As a factor company handling non-recourse arrangements, your fees are going to be higher, and you might be more selective about which invoices you will buy. Many smaller trucking companies and owner-operators tell us these are worthwhile tradeoffs for more secure cash flow.

Some factoring companies require that all freight bills for a given carrier, broker, or shipper be factored, while others let carriers control which ones to factor and when. As a carrier, after you decide to factor one of your accounts, it is a good practice to factor all the invoices for that customer in order to reduce the potential for billing confusion for you and your customer.

As a carrier, you might be wondering how to identify a qualified factoring business. You might start by asking if your broker, shipper, 3PL, or factor company uses Transflo technologies.

As a factoring company, be prepared to communicate all of the following value you offer to your clients:

• Explain how you manage your billings.

• Describe how you perform credit checks, take on the work involved with collections, and communicate with your customer and their accounts payable department.

• Do you have accounting management and reporting systems that can integrate with another carrier, broker, or 3PL?

• Do you leverage plug-ins, APIs, or integrations that streamline the flow of shipping documents, supporting data, invoice distribution, and carrier settlements?

• Can you serve as an extension of the carrier, broker, or 3PL operation? Are you prepared to communicate directly with mutual customers?

• What special skills or experience does your organization have with transportation? Do your staff understand the pressures of moving certain types of freight or providing specific add-on services?

• Do your rates and advance percentages change based on load specifications or do they remain fixed for the term of the factoring contract?

• Are you committing to factoring eligible accounts receivable over a given period of time or based on a certain volume?

• What criteria do you apply for establishing the creditworthiness of your customers?

• Are you extremely selective? For example, are your factoring rates low strictly because you refuse to take on any risk.

• Can you provide a detailed list showing which services are included at no charge and which transactions require additional fees such as direct deposit, wire transfers, and credit checks.

Instead of signing a contract and selling your invoices directly to a factoring company, you may be able to take advantage of Quick Pay, an accelerated payment program offered by freight brokers. Like factoring, the broker will guarantee payment within a set number of business days following receipt of your shipping documents in exchange for a percentage of the invoice. Large brokerage operations may offer cash advances and other service discounts to offset your out-of-pocket expenses.

Quick Pay is convenient because the dispatched load and payment come from the same source, and there’s no contract or minimum volume because the factoring arrangement is between the broker and factoring company. You have the flexibility to pick and choose the loads you select for Quick Pay.

Many freight brokers will indicate that a load is credit-approved and available for Quick Pay when they post it to a load board. Think of it as cash flow without the fine print—but also without the support or additional services that a direct relationship with a factor can provide.

Providing a factoring company with clear, complete, and accurate invoices, bills of ladings, lumper receipts, detention time, and other records is essential to making sure funds can be issued when you need them and without hang-ups. Your payment may be delayed if information is missing from your documentation or you submit a poor-quality scan. That’s why it’s important to put your Transflo-powered digital tools to work.

Transflo allows you to scan and send documents to your broker or factoring company using Transflo Express scanning stations at more than 2,000 truck stop locations, including Pilot Flying J, Love’s Travel Centers, TA, and Wilco-Hess. You can also scan from your computer or mobile device. With Transflo document imaging solutions, factors receive electronic files in a consistent format from one consolidated repository. It reduces the time and errors that come with manual data entry at the time of submission. Instead of manually collecting and handling paperwork, Transflo automates it for you using the most advanced digital document processing technology. With Transflo, you get funded faster, and that’s money in the bank.