3 Ways to Stay Ahead of Your Cash Flow
One of the biggest challenges transportation companies face is cash flow. They are constantly battling a vicious cycle that requires them to spend money they don’t have because they’ve sent out invoices that have yet to be paid.
There are several strategies transportation companies can use to manage their cash flow. Three of the most common strategies used are factoring receivables, mobile scan apps and automated trip processing.
Factoring allows companies to sell their invoices to a third party financial company (“factor”), and then have the factor collect the invoice payments. The benefit to this type of arrangement is that it provides stability to an otherwise unpredictable payment process. Instead of waiting 60+ days for shippers to pay their invoices, factoring gives you an opportunity to shorten that time down as low as two days.
While this is great for when you need quick cash, it isn’t a long-term accounts receivable strategy. For each invoice sold, factors take a percentage of the total worth. That percentage will vary based on the creditworthiness of the shipper, the date of last payment, the amount of the invoice and any other criteria determined by the factor. You have little control over the actual amount you will receive in the end.
Mobile scan apps allow drivers to submit trip documents from anywhere and at any time. This helps shorten the time between when a driver drops off a load at its destination and when a shipper receives the invoice for delivery. However, no matter how drivers send in their trip information, it still needs to be identified and indexed, so that it can be stored until it needs to be sent with an invoice. If you don’t have a department dedicated to this indexing, you have to rely on the accuracy of your drivers.
Automated Trip Processing
Automated Trip Processing allows drivers to capture documents remotely and send them to their home office for indexing and processing. Once sent, they are received by an indexing department that verifies documents are complete and legible before identifying and sending them for further processing. Documents are automatically routed to specific departments so that invoices and settlements can be processed quickly and accurately.
This strategy tends to cost more than either of the other two, but it also provides greater ROI in the long run. Because this process has accuracy checks in place, as well as the ability to send information remotely, invoices can be created and sent within hours of receiving documents from drivers.