One most straightforward way to evade unreliable customers is to run credit checks on all of the clients along with the long-term clients.
FREMONT, CA: Being a freight broker is not an easy job. Customers may take over 30 to 60 days to settle their freight bills; however, brokers have to pay their drivers quickly. Sometimes trucking companies or will even require payment upfront for maintenance and gas. The occurrence forces brokers to tap into their cash capitals.
To stay in business, one needs to plan, avoid errors and consider alternative methods to get paid faster.
1. Do Not Take Unreliable Customers
One most straightforward way to evade unreliable customers is to run credit checks on all of the clients along with the long-term clients. A commercial credit check can offer with information like the company’s existing payment trends, prior bankruptcies, past payment record, and any legal issues they are facing. Upon discovering issues, a broker can request partial payment upfront, get collateral like a personal guaranty, or avoid the risk.
Brokers who find themselves working with an unreliable customer should ensure to handle payment problems quickly. The longer an enterprise goes without paying their invoice, the less likely agents will be able to collect on it. So, one should ensure to follow up on any overdue invoices swiftly and politely, and consider consulting a collection agency on any invoices over 30 days late.
2. Quick Pays
Most shippers will agree to a quick pay, which is a statement with a shorter due date than the usual 30 to 60 days. Shippers usually agree to an immediate payment if the broker can provide them with a discount for paying quickly. Even though agents earn less profit with a quick pay, the amount is less than they would have to pay in interest to borrow the amount of the statement.
It might be better to invoice the full sum with standard net-30 terms and then specify that if they pay early (within 10 to 15 days); they will get the discounted amount. If shippers do not pay soon but only pay the discounted amount, brokers need to act immediately to collect the remaining balance.
Solving cash flow problems are imperative in any business, but particularly so for freight brokers. Being a broker guarantees that one will have money going out before it comes in. Thus, strategies such as invoice factoring and assembling quick pays can assist ease the difficulties.
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