You’re already having success finding work, but you’re finding the back-office and bill collection on loads delivered is taking too long or your communicating with the customer only after the bill is past due. At that point, cash flow is non-existent and you’re either dipping into your reserves, borrowing for operating expenses, or even worse, using consumer credit for operating expenses. You’re not alone, and neither is the trucking industry. According to a study performed by the National Federation of Independent Business, in 2011 alone up to 64% of small businesses surveyed reported invoices unpaid for at least 60 days. According to the data, the trend is worsening. How can you buck the trend?
Choose A Book-Keeping Solution and Stick With It
While it’s cheap and easy to manage your revenue and expenses in a spreadsheet, you’re missing out on some fantastic time-saving features found in popular expense tracking solutions. Generate your own Profit/Loss (P & L) statements, quickly see the age of open invoices, even set up alerts to be notified when a particular invoice is past due or aged a particular amount. Many solutions will connect to your bank so you can quickly reconcile your billing and receiving and are subscription-based with mobile apps included, allowing on-the-go accounting access.
Clearly Communicate And Enforce A Late Payment Policy
When you’re just starting out, the goal is to simply earn business as an unproven carrier, but as you become established, it becomes increasingly important to set up structure and policies on late payments. It can be a painful step to take, however if you’re borrowing for operating expenses to cover the gap, your overhead just increased. It’s important that any policy change be communicated in a manner that is compliant with any agreement in place with the customer, and that the change is reinforced on invoices. Popular book-keeping software often provide an area on the invoice for payment terms.
Conduct Customer Credit Checks
A customer’s ability to pay will determine whether you’re a volunteer or a vendor. When you sign on a new client, do a thorough background and credit check on the paying party. This can get tricky if it’s a new business, in which case you approach the owner or financial backer of the business as the guarantor of the terms. While it may seem a bit overreaching to seek personal credit worthiness in a B2B transaction, but a new business owner should be used to the drill as they’ve certainly been asked for this information several times while their new business establishes it’s own credit.
Consider Incentives In Your Payment Terms
30-45 day pay may seem reasonable, however when customers habitually extend payment beyond the agreed term, consider incentivizing on-time or early payment by creating a built-in discount for early payment. If you’re on a Net 30, offer the client a percentage-based discount on the transport whenever paying Net 15. Everyone’s looking at their own cash flow, which is why they’ll extend payments beyond agreed terms, but the prospect of saving money by paying early just might be the incentive they need to get the check in the mail on time.
The goal of a successful business is to earn revenue and turn profit, late or non-payment from customers diminishes the opportunity for success. Taking these small steps to become a better biller will help you build and maintain better relationships with customers and do wonders to keep your business on the road to success.
As your trucking business grows your need for new equipment is sure to become a priority. We look forward to becoming your truck and trailer financing company of choice in the months and years to come.