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The Logistics and Transportation Industry in the United States
The logistics and transportation industry in the United States is highly competitive. By investing in this sector, multinational firms position themselves to better facilitate the flow of goods throughout the largest consumer market in the world.. International and domestic companies in this industry benefit from a highly skilled workforce and relatively low costs and regulatory burdens.
Spending in the U.S. logistics and transportation industry totaled $1.33 trillion in 2012, and represented 8.5 percent of annual gross domestic product (GDP). Analysts expect industry investment to correlate with growth in the U.S. economy.
A highly integrated supply chain network in the United States links producers and consumers through multiple transportation modes, including air and express delivery services, freight rail, maritime transport, and truck transport. To serve customers efficiently, multinational and domestic firms provide tailored logistics and transportation solutions that ensure coordinated goods movement from origin to end user through each supply chain network segment.
This subsector includes inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management, supply and demand planning, third-party logistics management, and other support services. Logistics services are involved at all levels in the planning and execution of the movement of goods.
Air and express delivery services (EDS):
Firms offer expedited, time-sensitive, and end-to-end services for documents, small parcels, and high-value items. EDS firms also provide the export infrastructure for many exporters, particularly small and medium-sized businesses that cannot afford to operate their own supply chain.
High volumes of heavy cargo and products are transported long distances via the U.S. rail tracking network. Freight rail moves more than 70 percent of the coal, 58 percent of its raw metal ores, and more than 30 percent of its grain for the nation. This subsector accounted for approximately one third of all U.S. exports.
This subsector includes carriers, seaports, terminals, and labor involved in the movement of cargo and passengers by water. Water transportation carries about 78 percent of U.S. exports by tonnage, via both foreign-flag and U.S.-flag carriers.
Trucking: Over-the-road transportation of cargo is provided by motor vehicles over short and medium distances. The American Trucking Associations reports that in 2012, trucks moved 9.4 billion tons of freight, or about 68.5 percent of all freight tonnage transported domestically. Motor carriers collected $642 billion in revenues, or about 81 percent of total revenue earned by all domestic transport modes.
American Association of Port Authorities
American Society of Transportation and Logistics
American Trucking Associations
Association of American Railroads
Council of Supply Chain Management Professionals
Express Delivery and Logistics Association Industry Publications:
Journal of Commerce
Material Handling & Logistics
North American Industry Classification System For Transportation
The Transportation and Warehousing sector includes industries providing transportation of passengers and cargo, warehousing and storage for goods, scenic and sightseeing transportation, and support activities related to modes of transportation. Establishments in these industries use transportation equipment or transportation related facilities as a productive asset. The type of equipment depends on the mode of transportation. The modes of transportation are air, rail, water, road, and pipeline.
The Transportation and Warehousing sector distinguishes three basic types of activities: subsectors for each mode of transportation, a subsector for warehousing and storage, and a subsector for establishments providing support activities for transportation. In addition, there are subsectors for establishments that provide passenger transportation for scenic and sightseeing purposes, postal services, and courier services.
A separate subsector for support activities is established in the sector because, first, support activities for transportation are inherently multimodal, such as freight transportation arrangement, or have multimodal aspects. Secondly, there are production process similarities among the support activity industries.
One of the support activities identified in the support activity subsector is the routine repair and maintenance of transportation equipment (e.g., aircraft at an airport, railroad rolling stock at a railroad terminal, or ships at a harbor or port facility). Such establishments do not perform complete overhauling or rebuilding of transportation equipment (i.e., periodic restoration of transportation equipment to original design specifications) or transportation equipment conversion (i.e., major modification tosystems). An establishment that primarily performs factory (or shipyard) overhauls, rebuilding, or conversions of aircraft, railroad rolling stock, or a ship is classified in Subsector 336, Transportation Equipment Manufacturing according to the type of equipment.
Many of the establishments in this sector often operate on networks, with physical facilities, labor forces, and equipment spread over an extensive geographic area.
Industries in the Truck Transportation subsector provide over-the-road transportation of cargo using motor vehicles, such as trucks and tractor trailers. The subsector is subdivided into general freight trucking and specialized freight trucking. This distinction reflects differences in equipment used, type of load carried, scheduling, terminal, and other networking services. General freight transportation establishments handle a wide variety of general commodities, generally palletized, and transported in a containeror van trailer. Specialized freight transportation is the transportation of cargo that, because of size, weight, shape, or other inherent characteristics require specialized equipment for transportation.
Each of these industry groups is further subdivided based on distance traveled. Local trucking establishments primarily carry goods within a single metropolitan area and its adjacent nonurban areas. Long distance trucking establishments carry goods between metropolitan areas.
The Specialized Freight Trucking industry group includes a separate industry for Used Household and Office Goods Moving. The household and office goods movers are separated because of the substantial network of establishments that has developed to deal with local and long-distance moving and the associated storage. In this area, the same establishment provides both local and long-distance services, while other specialized freight establishments generally limit their services to either local or long-distance hauling.
General Freight Trucking
This industry group comprises establishments primarily engaged in providing general freight trucking. General freight establishments handle a wide variety of commodities, generally palletized, and transported in a container or van trailer. The establishments of this industry group provide a combination of the following network activities: local pickup, local sorting and terminal operations, line-haul, destination sorting and terminal operations, and local delivery.
General Freight Trucking, Local
This industry comprises establishments primarily engaged in providing local general freight trucking. General freight establishments handle a wide variety of commodities, generally palletized and transported in a container or van trailer. Local general freight trucking establishments usually provide trucking within a metropolitan area which may cross state lines. Generally the trips are same-day return.
General Freight Trucking, Long-Distance
This industry comprises establishments primarily engaged in providing long-distance general freight trucking. General freight establishments handle a wide variety of commodities, generally palletized and transported in a container or van trailer. Long-distance general freight trucking establishments usually provide trucking between metropolitan areas which may cross North American country borders. Included in this industry are establishments operating as truckload (TL) or less than truckload (LTL) carriers.
General Freight Trucking, Long-Distance, Truckload
This U.S. industry comprises establishments primarily engaged in providing long-distance general freight truckload (TL) trucking. These long-distance general freight truckload carrier establishments provide full truck movement of freight from origin to destination. The shipment of freight on a truck is characterized as a full single load not combined with other shipments.
General Freight Trucking, Long-Distance, Less Than Truckload
This U.S. industry comprises establishments primarily engaged in providing long-distance, general freight, less than truckload (LTL) trucking. LTL carriage is characterized as multiple shipments combined onto a single truck for multiple deliveries within a network. These establishments are generally characterized by the following network activities: local pickup, local sorting and terminal operations, line-haul, destination sorting and terminal operations, and local delivery.
Specialized Freight Trucking
This industry group comprises establishments primarily engaged in providing local or long-distance specialized freight trucking. The establishments of this industry are primarily engaged in the transportation of freight which, because of size, weight, shape, or other inherent characteristics, requires specialized equipment, such as flatbeds, tankers, or refrigerated trailers. This industry includes the transportation of used household, institutional, and commercial furniture and equipment.
Used Household and Office Goods Moving
This industry comprises establishments primarily engaged in providing local or long-distance trucking of used household, used institutional, or used commercial furniture and equipment. Incidental packing and storage activities are often provided by these establishments. Specialized Freight (except Used Goods) Trucking, Local
Specialized Freight (except Used Goods) Trucking, Long-Distance
This industry comprises establishments primarily engaged in providing long-distance specialized trucking. These establishments provide trucking between metropolitan areas that may cross North American country borders.
A freight broker is an individual or company that serves as a liaison between another individual or company that needs shipping services and an authorized motor carrier. Though a freight broker plays an important role in the movement of cargo, the broker doesn't function as a shipper or a carrier.To operate as a freight broker, a business or individual must obtain a license from the Federal Motor Carrier Safety Administration (FMCSA). Freight brokers are required to carry surety bonds as well.
Freight broker services are valuable to both shippers and motor carriers. Freight brokers help shippers find reliable carriers that might otherwise be difficult to locate. They assist motor carriers in filling their trucks and earning money for transporting a wide variety of items. For their efforts, freight brokers earn commissions.
Freight brokers use their knowledge of the shipping industry and technological resources to help shippers and carriers accomplish their goals. Many companies find the services provided by freight brokers indispensable. In fact, some companies hire brokers to coordinate all of their shipping needs.
Often, freight brokers are confused with forwarders. Though a freight forwarder performs some of the same tasks as a freight broker, the two are not the same. A forwarder takes possession of the items being shipped, consolidates smaller shipments, and arranges for the transportation of the consolidated shipments. By contrast, a freight broker never takes possession of items being shipped thus in the absence of negligent entrustment, a freight broker is not normally involved as a party litigant in a cargo claimdispute, although as an accommodation, the freight broker may assist the shipper at their request and expense with filing freight claims.
NAICS Index Description
Bulk mail truck transportation, contract, local 484110
Container trucking services, local 484110
General freight trucking, local 484110
Motor freight carrier, general, local 484110
Transfer (trucking) services, general freight, local 484110
Trucking, general freight, local 484121
Bulk mail truck transportation, contract, long-distance (TL) 484121
Container trucking services, long-distance (TL) 484121
General freight trucking, long-distance, truckload (TL) 484121
Motor freight carrier, general, long-distance, truckload (TL) 484121
Trucking, general freight, long-distance, truckload (TL) 484122
General freight trucking, long-distance, less-than-truckload (LTL) 484122
LTL (less-than-truckload) long-distance freight trucking 484122
Motor freight carrier, general, long-distance, less-than-truckload (LTL) 484122
Trucking, general freight, long-distance, less-than-truckload (LTL) 484210
Furniture moving, used 484210
Motor freight carrier, used household goods 484210
Trucking used household, office, or institutional furniture and equipment 484210
Used household and office goods moving 484210
Van lines, moving and storage services 484220
Agricultural products trucking, local 484220
Automobile carrier trucking, local 484220
Boat hauling, truck, local 484220
Bulk liquids trucking, local 484220
Coal hauling, truck, local 484220
Dry bulk trucking (except garbage collection, garbage hauling), local 484220
Dump trucking (e.g., gravel, sand, top soil) 484220
Farm products hauling, local 484220
Flatbed trucking, local 484220
Grain hauling, local 484220
Gravel hauling, local 484220
Livestock trucking, local 484220
Log hauling, local 484220
Milk hauling, local 484220
Mobile home towing services, local 484220
Refrigerated products trucking, local 484220
Rubbish hauling without collection or disposal, truck, local 484220
Sand hauling, local 484220
Tanker trucking (e.g., chemical, juice, milk, petroleum), local 484220
Top-soil hauling, local 484220
Tracked vehicle freight transportation, local 484220
Trucking, specialized freight (except used goods), local 484230
Automobile carrier trucking, long-distance 484230
Boat hauling, truck, long-distance 484230
Bulk liquids trucking, long-distance 484230
Dry bulk carrier, truck, long-distance 484230
Farm products trucking, long-distance 484230
Flatbed trucking, long-distance 484230
Forest products trucking, long-distance 484230
Grain hauling, long-distance 484230
Gravel hauling, long-distance 484230
Livestock trucking, long-distance 484230
Log hauling, long-distance 484230
Mobile home towing services, long-distance 484230
Radioactive waste hauling, long-distance 484230
Recyclable material hauling, long-distance 484230
Refrigerated products trucking, long-distance 484230
Refuse hauling, long-distance 484230
Rubbish hauling without collection or disposal, truck, long-distance 484230
Sand hauling, long-distance 484230
Tanker trucking (e.g., chemical, juice, milk, petroleum), long-distance 484230
Tracked vehicle freight transportation, long-distance 484230
Trash hauling, long-distance 484230
Trucking, specialized freight (except used goods), long-distance 484230
Waste hauling, hazardous, long-distance 484230
Waste hauling, nonhazardous, long-distance
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FAST MONEY FOR BUSINESSES THAT NEED IT. Don't wait long periods for a loan
Freight Factoring Companies For Brokers
Before making your final decision and entering into a Truck Factoring agreement, check out the fees applicable and the terms of the contract. Both of these can vary a lot, depending on the Truck Factoring company and the industry it is serving. -Freight Factoring Companies For Brokers
Trucking Factoring FOR BUSINESS OWNERS
Freight Factoring Companies For Brokers Articles
The Best Kept Secret in Financial Services: Freight Bill Factoring!
If you're an existing owner of a trucking business, or perhaps you're planning on starting a trucking business, then you may be interested in Freight Bill Factoring. Freight Bill Factoring helps trucking businesses, both large and small, achieve their overall business goals; but before making any final decision you must fully understand how Factoring works.
Freight Bill Factoring has become very popular with trucking businesses and is often referred to as the financial backbone of the trucking business. If you're not familiar with Freight Bill Factoring, you may not know that factoring is a financing alternative for business owners: it gives them immediate access to additional financing capital they may otherwise not have access to. The process of Freight Bill Factoring is actually quite straightforward: it involves a factoring company purchasing bill of ladings at a discounted rate. This process is a win-win situation for both the trucking company who receives immediate funds and for the broker who pays for the invoices.
Freight Bill Factoring Is Not New!
Freight bill factoring is not a new idea; in fact, it has a long, rich tradition. Most civilizations that have engaged in commerce have also engaged in factoring in one form or another. For example, business relationships during the colonial period in North America were required to make cash payments in advance against Accounts Receivable in order for the business to continue with its commercial operations, prior to their users being paid for their goods. So, they were engaged in factoring!
Factoring Specialists Have Many Services to Offer
Of course, factoring has become a lot more sophisticated over the years, and today it's focused on financial management, credit worthiness, and on collections. However, the basic concept of purchasing Accounts Receivable has stayed the same. In addition, the modern factoring company of today can do a lot more than just funding: a factoring specialist can assist clients by evaluating and setting credit limits, verifying customer's credit worthiness, and professionally managing Accounts Receivable collections. Right across North America we see factoring companies existing in all forms and serving business sectors and industries of all types; and today, many large financial institutions even have their own factoring divisions. Generally, though, factoring companies are smaller, independently owned enterprises.
Banks Step Out as Factoring Steps In
Factoring has become very popular with trucking businesses because, as most business owners can verify, commercial lenders have become increasingly inflexible, with stricter regulations and ever-changing lending criteria. This inflexibility has forced both small and medium sized businesses to search for alternative financing sources, and this is where factoring has stepped in. Factoring is a simple, workable, solution-based process, providing an alternative for trucking businesses when traditional means of financing are not available. Factoring is proving to be a great financial remedy, particularly as banks and other lenders are becoming less friendly to small business owners.
Factoring Companies Operate Worldwide
The volume of factoring around the world has today exceeded the trillion-dollar mark! Factoring companies operate on every continent and, in the last four years, worldwide factoring transactions have increased by 60%. And that's why we say that Freight Bill Factoring is the best kept secret in financial services!
FAST MONEY FOR BUSINESSES THAT NEED IT. Don't wait long periods for a loan
Freight Factoring Companies For Brokers Articles
Invoice Factoring: Helping Temp Staffing Agencies Grow
When a temp agency is experiencing a cash flow problem, they generally have two options: the first option is to apply to a bank or other lender for a business loan, and the second is to use Invoice Factoring. In this article we'll take a look at why Invoice Factoring may be the best option.
Many companies who bill their clients have discovered that Invoice Factoring is a very effective way of addressing cash flow issues, and this is also true for temp staffing agencies. Typically, temp agencies don't get paid by their clients until such time as their job vacancy has been filled and the employee hired has actually commenced work, which means that it's very common for temp agencies to experience cash flow problems.
Any advertising required to successfully place job candidates is paid for by the temp staffing agency, meaning that they're not able to invoice their client until they've found a suitable candidate and the candidate has actually started work. So, the temp staffing agency must wait to get paid.
Why Invoice Factoring Works Well for Temp Staffing Agencies
Temp staffing agencies are typically paid per hour, with the amount due being based on the number of hours their placement has worked. Of course, during this time they still have to pay their own bills, and these might include rent, payroll, advertising costs, utilities, and so on. So, it's easy to see that this can put a big strain on a temp agency's cash flow.
Many expenses incurred by a temp staffing agency can't be put off, so the agency must be able to access cash straight away: their employees need to be paid on time, as do their rent and utility bills. All businesses require office supplies, so money must be available to keep the business running smoothly. In addition, temp agencies must have money on hand for advertising job openings. For all of these reasons, it's not either feasible or practical for a temp staffing agency to apply for a business loan, then sit, wait, and hope to be approved.
These businesses need money and they need it now; and that's why Invoice Factoring may be the perfect solution to their cash flow problem.
Explaining Invoice Factoring
When a business makes the decision to use Invoice Factoring in order to generate cash, their cash-flow problem can be resolved almost immediately. In many cases, the business can secure up to 92% of the value of their invoice within 24 hours! A word of caution though: if this is the first time the temp agency has worked with a factor it could take longer - somewhere between four and seven days.
Any temp staffing agency that's experiencing a cash flow crisis, or even agencies that only occasionally experience cash flow problems, should do as much research as they can to learn about factoring and how it might help their business grow. With this knowledge they can then consider Invoice Factoring as and when the need arises. Factoring really is the perfect way for a business to access cash money when it's most needed. In many cases, once a relationship has been established with the factor, the money will be delivered within 24 hours.
Cash When You Need It!
Of course one of the major bonuses of invoice factoring is that temp staffing agencies no longer need to worry about whether they will or won't qualify for a bank loan, because factoring will take care of their cash flow crisis. All they need to do is provide their chosen factor with the invoices they wish to sell, complete with the time-sheets for each employee, and the cash that's due and payable to them can be deposited into their bank account within 24 hours. Now, temp agencies will have no problems meeting their monthly obligations, and best of all, there'll be no need to take on new debt.
Freight Factoring Companies For Brokers Articles
Business Is Booming but Your Company's Cash Strapped!
A business needs good cash flow for many reasons, and many businesses have learned the hard way that business can be booming but they can still suffer from cash flow problems. There are many scenarios where a business might urgently require access to cash: it could be due to the sudden growth or expansion of a business, a major transaction may need to be expanded, perhaps there's a need to purchase equipment or even to employ more personnel.
Interestingly, research shows that many businesses (both small and medium-size) fail, not because business is bad, but because they experience difficulties when trying to meet short-term financial responsibilities. So how can a growing and profitable business get into serious financial trouble, or even go broke? It seems so contradictory, but on closer examination you'll see that it's not surprising at all.
Many Businesses Experience a Cash Flow Dilemma
It's so easy for a business to get into a situation where they have a cash flow problem: you only need one or two larger accounts to default on payment, or to take an additional 60 or 90 days to pay, and now you've got a cash flow problem!
Traditionally, business owners have depended on conventional lending sources for a business Line of Credit, and this often includes short-term Bridging Finance. But there are also many people in business who've used their personal credit cards for business-related expenses. Once business owners have exhausted traditional means of funding, the process of acquiring extended financing can become a time-consuming, trying, and often impossible task.
Fortunately, today, we have a viable and effective alternative for business owners to get through cash strapped periods, particularly during periods of expansion and business growth. This innovative form of financing is known as Factoring; it's also sometimes referred to as Asset Based Lending or Accounts Receivable Financing.
Factoring has become a workable and realistic solution for many businesses, particularly when cash flow is uncertain and threatens the viability, or even survival, of the business.
How Does Factoring Work?
Basically, when a business has credit-worthy accounts receivables, the factoring process provides the business with an instant cash injection on those receivables. So, sometimes, when a lender says 'no' to a business, a factoring company may say 'yes', thus offering the much needed cash injection that so many businesses require to move forward.
Factoring companies understand the financial needs of their trucking clients and react very quickly to provide them with the professional, personalized, hands-on attention that they require. Freight Bill Factoring is actually a very simple process: it provides a business with instant cash flow in order to satisfy its cash needs, which in turn enables the business to grow and prosper.
It works like this! Your company has quality accounts receivables, and needs a cash boost. A factoring company may purchase just one, or a group of your receivables, and in return will immediately give you up to 100% (less fees applicable) of the face value of these accounts. Once the customer invoice has been paid in full the balance is forwarded on. Yes, factoring costs more than other means of lending, but factoring clients believe the benefits far outweigh the costs.
The Benefits of Factoring
Possibly the greatest benefit of factoring is the short turnaround time, because factoring companies don't have a lengthy loan approval process, unlike banks and other lenders. This means that, with factoring, trucking business owners can have money in-hand by the end of the same working day!
In order to receive approval as a factoring customer, a trucking business must first-of-all be a reputable trucking business, and secondly, it must have credit-worthy customers. Once a business has been approved for factoring, funding will be provided on the same day. It's important to note, also, that ongoing financing is only limited by the amount of receivables available for purchase.
In the last decade we've seen factoring grow very quickly, and today it's become a financially feasible alternative for many trucking companies. Many trucking companies have stated that Freight Bill Factoring has made it possible for them to process orders and undertake loads from brokers that would otherwise have been impossible because of a lack of financing. Freight Bill Factoring is here to stay, and it clearly has a place in today's business environment. Because of factoring, a trucking company can expand its customer base, increase loads, and even survive a seasonal slump. Thanks to Freight Bill Factoring, many businesses have been able to expand and grow, and easily survive in what has become a very competitive industry.
Freight Factoring Companies For Brokers Articles
Everything You Need to Know about Invoice Factoring
You've probably heard about invoice factoring, but like many business owners you may not be entirely sure how it works or whether it could help your own business. In this article we'll try to answer all your questions about what invoice factoring is, how it works, and whether it could help you grow your business.The following definition of invoice factoring may sound too good to be true, but let's look anyway! "Invoice factoring is a viable alternative to bank financing and other traditional types of financing, but it's not a debt, and there are no strings attached." For anyone who's approached traditional lending sources for financing and been refused or left hanging for weeks or months, yes, this probably does sound too good to be true, but it's actually not! Invoice factoring can provide the working capital you need to help your business grow and prosper, so read on then decide for yourself.
How Invoice Factoring Works
With invoice factoring you no longer need to wait 60, 90, or even 120 days to receive payment from your customers, because invoice factoring converts these invoices into immediate cash in-hand. It's up to you to determine which invoices, and how many invoices, you wish to factor, following this simple process -
- Once you've been accepted for invoice factoring by your factoring company, you can begin submitting your unpaid invoices. These invoices must be for products that have been delivered or work that's been completed. The process to follow is to fax or email a copy of the invoice directly to the factor, while at the same time invoicing your customer as usual.- Within 24 hours you'll receive a cash advance from your factoring company. Your invoices will be verified by the factor and you'll receive a cash advance of up to 95% of the invoice, which will be paid directly into your bank account.- Now that you've received this cash advance, you continue on with your work while the factoring company works to collect on the invoice on your behalf. Your factor will be highly experienced in collecting on invoices, thus allowing you to do what you do best, which is to continue providing excellent customer service and focusing on other important aspects of growing your business.- It's entirely up to you how many invoices you factor and how many clients you choose for the factoring process. You may decide to factor all your invoices, or it may be that you have one client that's always late in paying and you'd prefer the factoring company to only collect on that one invoice. It's your decision!
The Benefits of Invoice Factoring
The major benefit of invoice factoring is that, as the business owner, you're controlling your cash flow. Of course, there are other advantages of using a factoring company which can help your business grow and prosper.
No. 1: Your Factoring Company Will Provide Background and Credit Verification
It's very important to the viability of your business that you work with reliable customers in fact, it's the only way to turn your sales into revenues and to develop a solid payment history. But, we all know just how expensive it can be to run background and credit checks, and this simple exercise can dig deep into your working capital.
No problem! These checks will be provided to you by your invoice factoring company at no additional charge to you, which will provide reassurance that you are in fact working with quality customers. It also means that any issues that may arise can be addressed before they negatively affect your company.
No. 2: Your Factoring Company Can Assist with Credit Building and Repair
Perhaps your business credit is not ideal, but the good news is that you could still qualify for an invoice factoring program. The benefit of invoice factoring for a business with less-than-perfect credit is that, not only will you have available cash to meet your daily operating costs, you'll also be able to rebuild your credit rating by paying down current debt. Factoring companies are also well-equipped to assist start-ups, so if you're just getting your business up-and-running, invoice factoring is the perfect way to maintain regular cash flow.
No. 3: Invoice Factoring Opens Your Business to Great Money-Saving Opportunities
With invoice factoring, your business can utilize this rejuvenated cash flow to not only save money by offering competitive rates, but you'll now be able to negotiate early pay discounts and other incentives with your suppliers. And, depending on how many invoices you decide to factor, you could eventually qualify for a reduction in rates by receiving a volume discount.
No. 4: Invoice Factoring Provides Steady Cash Flow
In order for any business to grow and prosper it's vitally important to have a steady cash flow. And that's the beauty of invoice factoring: instead of late-paying customers controlling cash flow, the business owner regains control of the working capital. Perhaps you're simply tired of waiting for invoices to be paid, or maybe you're in an industry with seasonal fluctuations; whatever the reason you're struggling with cash flow, invoice factoring can help you regulate and take control of your business once again.
No. 5: Invoice Factoring Allows You to Dream Big Again!
Having a steady business is one thing, but having a growing business is what every business owner dreams of. Now that you've been accepted for invoice factoring and you have a steady cash flow, there are many ways you can use this cash to grow your business.
- You can increase your marketing efforts and get your name out there;
- You can negotiate bigger and better contracts with bigger clients;
- You can invest in technology upgrades;
- You can employ experienced personnel, or provide training programs for existing staff;
- You can upgrade or replace outdated equipment; and
- You can relocate your business or invest in expansion.
No. 6: Invoice Factoring Is Not a Debt to Your Business
It's very important to note that invoice factoring is not a debt, so there will be no more debt added to your balance sheet. In fact, it's exactly the opposite, because invoice factoring provides cash in-hand, so you can pay off old debts. The money is already yours, so there's no money to pay back or interest to add on. All invoice factoring does is get money that's owed to you into your bank account - faster.
I've Never Heard of Invoice Factoring
Many businesses know very little, or nothing at all, about invoice factoring, which is strange because invoice factoring is certainly not new. Perhaps it's because we typically think of bank loans and other traditional types of lending when looking to grow our business; however, factoring goes right back to the Roman Empire. Back then, businessmen, particularly farmers, used factors to grow their business, and in more modern times factoring was used to finance transactions in the clothing and textile industry, helping businesses accept larger purchase orders and pay for raw materials. Today, invoice factoring is used by almost every industry you can think of, like -- Construction
- Staffing, HR
- Media and Marketing.
Understanding the Language of Invoice Factoring
Invoice factoring does appear to have its own language, so let's clarify some of the terminology -
- Your customers are known as Account Debtors.
- The report showing the total amount of unpaid receivables in addition to the amount of time they've remained unpaid is known as an Accounts Receivable Ageing Report.
- The two terms Invoice Factoring and Accounts Receivable Factoring can be used interchangeably because they mean the same thing.
- The percentage of the invoice charged by the factor as a fee for advancing funds is known as the Discount Rate.
- When your factor conducts background research to assess potential customers this is known as Due Diligence.
- The cash that's advanced to the business, typically within 24 hours and usually ranging between 80% and 95% of the total invoice amount, is known as the Factoring Advance Rate.
- The third party who connects a business with the right factoring company, to meet their business goals and needs is known as a Factoring Broker.
- The right to maintain possession of property until such time as a debt has been discharged is known as a Lien.
- It can occur that a customer fails to pay their invoice on time, or they may never pay their invoice. Non-Recourse Funding is where the factor assumes full responsibility for funds lost. Because the factoring company accepts this responsibility, non-recourse funding is therefore more expensive.- With Recourse Funding, your business will be required to buy back the receivables if your client fails to pay within the agreed-upon terms.
- The amount of money withheld by the factor until full payment has been received from your customer is known as the Reserve.
- Staffing companies may choose to enter a one-time agreement in order to factor a single invoice. This is known as Spot Factoring.
How Does Invoice Factoring Affect Your Customers?
It's important to point out here that your factoring company is not a collection agency and that factoring is not a bad thing. The aim of your factoring company is to maintain a good working relationship with both you and your customers, which means that your customers will receive great customer service. Both you and your factoring company have one common goal, and that is to ensure the payment process of your invoices is as seamless as possible. See below for how factoring typically works -
- You've decided to start factoring, so the first step is for your Account Manager to verify with your debtors that they are indeed your customers and to inform them of a change of address for remittances.
- Your customers must pay their invoices anyway, so a change of remittance address should not affect them in any way.
- Your account manager is a professional when it comes to collecting on invoices, so they will simply advise your clients that they will be managing your invoices in future and taking over your accounts receivable.
- And that's all there is to it! Nothing should change between you and your customers. They'll still receive an invoice from you; but their payment will now be sent to a new Post Office box. Your Account Manager will always be on hand to resolve any issues that may arise.
How Do I Choose the Right Invoice Factoring Company for My Business?
When you start looking for factoring companies you'll discover that there are many different companies out there, but they're certainly not all the same.
When making comparisons we suggest you consider the following points -
1: Factoring Fees
It's true that factoring fees can be more expensive than traditional bank loans, but sometimes the decision businesses are faced with is to simply have access to some working capital or have no working capital at all. What should you be aware of? You need to know the overall factoring cost, in addition to any smaller (or hidden) fees your factor may charge. These fees might include -
- Account Setup Fees
- Application Costs
- Credit Reports
- Costs to Research Liens
- Money Transfer Fees, or
- Last-Minute Funding.
Choose a factor that you believe you can trust and one that you feel completely comfortable with; because you're also looking for great customer service. Remember also that factors may charge for different things, and there may be hidden fees.
2: You Need Flexibility, so Carefully Check Your Proposed Contract
It's very important that you carefully read the fine print of your contract, prior to signing on the dotted line. It would be so disappointing to sign a factoring contract only to realize that you didn't completely understand the terms and now you're locked into a contract that's not clear on how the factoring company charges or how many invoices you can factor per month - or even worse - that you're now legally bound to this factoring company for the long term. Yes, long-term factoring contracts do exist, but be prepared to pay a lot of money if you try and break the contract. Make sure you know exactly how long you're signing up for, which of your clients are eligible for factoring, and how much per month you can factor.
3: With Invoice Factoring, Communication Is Key
Great customer service is very important with any business, and the most important part of great customer service is good and easy communication. And now we're talking about dealing with a company that's handling your money, so you can see how important good communication is! The last thing you need from a factoring company who's handling your money is being forced to wait for days for someone to respond to your phone call or email communication. Any factoring company you talk to is going to say their communication and customer service is really great - but be very cautious. How well did your potential factoring company respond to your initial queries? Then ask yourself: is that how you'd want them to deal with your customers? Remember there are plenty of factoring companies out there, so if the answer to these questions is not an unequivocal â€˜yes', then find someone else.
4: Look for a Factoring Company That Has Industry Expertise
Yes, there are factoring companies out there that cover general factoring, but ideally, you'll choose someone who specializes in your own industry; someone who has a good working knowledge of the type of business you're running. Once you start looking for the right factoring company for your business you'll see that there are many factoring companies that specialize in specific industries, which means they already know a lot about your business model. And, if they have a lot of expertise, they'll probably be able to offer specific programs that relate to your industry, like fuel cards, or back-office support. These little extras can be just what you need when deciding whether or not to factor your invoices.
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Why Trucking Companies Use Factoring Companies.
As the owner of your own business, you may be more than aware already of the difficulty in making sure that cash flow issues do not become a problem down the line. After all, the worst thing that can possibly happen for your business is to find yourself embroiled in a long and difficult situation that leaves you forever trying to find the cash you need on an ongoing basis.
For any business in this situation, the problem can come for waiting for work to clear up and actually be paid into your account. Invoices, checks, and the like can take some time to actually to be processed which can leave you with short-term cash flow issues. Thankfully, there are options out there for businesses to look into - and one of these is factoring companies.
Factoring companies will, in exchange for your invoices, provide you with the cash today so that you don't need to worry about the waiting period that could make paying the bills and getting materials more difficult. With this type of setup, invoice factoring can become incredibly useful for many businesses who need to get out of a cash trap which they have found themselves in.
Because, depending on the size of the job, it can take up to 60 days for some businesses to get paid then it's important to cover your own back and not leave yourself cash short to pay the bills. After all, how many businesses have two months revenue just lying there to cover all their expenses until they get paid?
This is especially true of trucking companies. They tend to deal with lots of invoices which means a significant amount of collection time involves business owner themselves. Trying to get paid in time can become an incredible hassle and this is why you use trucking factoring companies who are happy to help out truckers specifically.
As we all know, trucking is an incredibly large industry with many companies out there employing hundreds of drivers. Unfortunately, many of these drivers end up in money troubles because they are still waiting for work from six weeks ago to actually pay them. When this is the situation for a trucking company, turning to factoring companies for assistance might be the best choice left.
This means that a trucking company can pay the wages of the staff, keep all the trucks topped off with fuel and continue to scale, grow and expand without always waiting for the money which is taking too long to come in. Trucking Businesses running without a factoring program put in place are leaving themselves at significant risk, as competitors cash out fast and continue to expand.
There's genuinely nothing to be worried about when it comes to using a Factoring company - they aren't like a bank or somebody who is going to leave you with a huge pile of debt to pay back. You give them genuine invoices from work you have already finished, you are merely speeding up the payment process.In the United States, where trucking companies thrive, factoring companies are not considered borrowing in any capacity. This confidential agreement then allows both parties to profit and enjoy a comfortable future - it gives the factoring company a guaranteed asset of income to add to the list and it gives the trucking firm the needed cash that they worked hard to earn.
The trucking company provides their invoices to the factoring company. The trucking factoring company then receive the payments from the trucking company's customers. Factoring has been around for hundreds of years and has been used for many years by many different industries - but none more so than truckers. While you may miss out on a small part of the money, something like 1-3% depending on who you work with, it means that you are getting the money today and can actually start putting the money to work.
After all, an IOU or an invoice is not going to pay for expenses, is it? For trucking companies when the money can be good one day and gone the next, it's up to the drivers to work sensibly and to ensure they are leaving themselves with a significant amount of time and finance to get through the week until they are paid again.
So the next time your trucking business is having some short-term cash flow issues and you are spending too much time chasing slow paying clients, why not start considering using a factoring businesses as a way to get your money and give yourself a more comfortable future in the eyes of your trucking staff and your bank balance?
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Medical Factoring: Healthcare Professionals Choose Medical Factoring As Their Preferred Financing Option
Healthcare professionals are finding that business loans and commercial lines-of-credit are becoming more difficult to qualify for, so today we're seeing more healthcare professionals looking to medical factoring to alleviate cash flow problems. All types of medical and healthcare practices can benefit greatly by choosing to factor their receivables and thus receive immediate cash payments.
In the past, healthcare has typically been a resilient industry, but today we see this industry facing financial challenges that leave practices struggling to meet their own financial commitments. Cash flow was virtually a non-issue for medical facilities, professionals, and their suppliers, but today with Medicaid, Medicare, and private insurance companies working with strict reimbursement guidelines, professionals are forced to wait much longer than they previously waited to receive payment on their invoices. In addition, complicated documentation and billing requirements are resulting in fewer dollars and longer waiting periods.
Financial Difficulties Experienced by Healthcare Professionals
The above issues are creating serious problems for a large number of medical providers who not only must wait longer to get paid less money, but who are also forced to deal with growing operating expenses, including salaries and other benefits. Operating under these unsure conditions means that the viability of these businesses is being threatened and it's become almost impossible for them to pursue new growth opportunities. Today, a medical practitioner operating a relatively small practice could have receivables of up to $1 million tied up!
Any business that's confronted with cash flow problems will typically look to banks or other lenders for a loan. Offering the business a loan or line-of-credit can certainly be very helpful in the short term, but unfortunately neither of these products are an ideal financing solution because neither will permanently solve the real problem.
A business loan may be ideal for fixed capital purchases, but it's no solution at all for handling recurring business expenses. A line-of-credit can certainly be very helpful, but because it will have a credit limit and a fixed term it won't provide a renewable source of business capital. Once the credit limit has been reached or the term of the line-of-credit expires, the lender may either increase the credit limit or perhaps not renew it at all. It's a sad fact that, today, many healthcare professionals are finding themselves in this unfortunate situation.
Finding the Ideal Medical Financing Solution
The perfect financing solution would be one that's flexible and one that would provide a steady and reliable source of working capital. It would grow with the healthcare business, without the need to re-apply or having to approach a bank for an increase in the credit limit. In short, this perfect financing solution would provide working capital to finance both the current and future growth of the business. So, is there such a solution? Fortunately, yes there is! It's called medical factoring.
Explaining Medical Factoring
Medical factoring is a receivables factoring program designed exclusively for medical invoices. Because factoring medical receivables can be quite challenging, many factoring companies today are specializing only in the healthcare industry. It does require a certain amount of expertise to manage the medical claims process; plus, it becomes even more challenging when many healthcare receivables are either reduced or denied altogether by insurance providers.
What Types of Business Can Use Medical Factoring?
Many business owners are surprised to learn that factoring in general has been around for a long time. Medical service providers, in particular, seem to be completely unaware of the existence of factoring. The truth is that invoice factoring has become one of the most flexible and powerful business financing tools available today.
Many healthcare providers can benefit greatly from choosing medical factoring. Below we've listed just some of the healthcare service providers who can achieve huge benefits from a medical factoring program.
- Medical Centers
- Physicians: Both Specialists and General Practitioners
- Outpatient Clinics and Facilities
- Medical Staffing Services
- Medical Labs
- Dialysis Facilities
- Home Healthcare Providers
- Physical Therapy Clinics and Groups
- Rehabilitation Centers
- Medical Equipment Providers
- Medical Labs, and
- Many More
What Are the Benefits of Factoring Medical Receivables
The benefits to healthcare professionals are very similar to the benefits enjoyed by many businesses in many other industries. They include -
- Faster (almost immediate) payment;
- Increased percentage of billings collected;
- Consistent cash flow;
- Access to debt-free working capital;
- Stress-free outsourced accounting and collection; and
- Being able to improve your business credit.
Medical Practices Can Depend on Factoring for Reliable Cash Flow
Medical factoring is an excellent financing alternative for medical practices because practices receive consistent and flexible financing which is directly tied to their insurance claims. This means that the financing will increase as more claims are filed. It's highly desirable for all medical practices to achieve a scalable and reliable cash flow, thus ensuring sufficient liquid business capital to cover operating expenses.
And with medical supply companies the situation is very similar. Depending on the volume of sales these companies can achieve fast and predictable business financing by signing up for a medical factoring program. And, as sales continue to grow so does the amount of financing, providing the much-needed working capital required to both grow and maintain business operations.
Medical Receivables Factoring for Smaller Medical Offices
Medical factoring is especially beneficial for smaller medical offices. Office overheads and staffing expenses can be dramatically reduced because the factoring company will take control of the more tedious and time-consuming administrative work involved in collections and processing claims. This frees up remaining staff members to concentrate on delivering excellent medical care. If you're a small medical practice and you have good growth prospects but a slow cash flow, receivables factoring could well be the ideal tool to assist in financing the growth of your business. You'll find that many factoring companies have minimums, and there are factoring companies prepared to finance a medical office billing just $50,000 per month.
Explaining How Medical Factoring Works
In simple terms, if a healthcare business is dependent on third-party payors, those payments will be accelerated with medical factoring. Within just days of the initial billing, the majority of the amount billed will be deposited directly to the business's bank account. The instant rewards are a dramatic shortening of the collection cycle and the elimination of cash flow problems for the business concerned.
Importantly, receivables factoring is not a loan, so there are no credit or financial requirements; there will be no impact to your balance sheet and there are no arbitrary limits. Medical factoring is the ideal financing tool for business growth because you can factor as much billing as your business is capable of generating.
How Long before My Business Is Accepted for Factoring?
With medical factoring there are no lengthy delays, certainly not like when applying for bank finance! A medical factoring program will usually take around two weeks to set up. This timeframe allows the factor to determine the stability of the medical practice and to ensure the reliability of its third-party payors. Then, once a medical factoring program is in operation, the financing will be predictable and constant. Once claims have been submitted to the medical factoring company, claims are typically funded within 48 hours.
The process of medical factoring is very simple, as follows -
- Your medical practice periodically submits billings to Medicaid, Medicare, and insurance companies. At the same time, copies of these billings should be forwarded to your factor.
- Within 48 hours of receiving a copy of these billings, the factor will deposit an advance of up to 85% of net collectables into your bank account. The balance will be held by the factor until such time as the account has been paid in full.
- Once the factoring company has received payment in full, the balance of the billings - less the agreed-upon factoring fee - will be remitted to you.
Medical Factoring Fees
Medical factoring fees vary depending upon the size and types of claims generated by the medical practice. It's not known why medical factoring today is not as widely known as it is in other industries; however, interest in this type of financing is now becoming more popular and widespread as business owners are beginning to understand the many financial and other benefits of medical factoring.
Medical factoring in the healthcare industry is fast becoming a widely accepted tool to resolve shortfalls in working capital financing and as a long-term solution for patient accounting support and medical financing. It's certainly a tool that healthcare businesses should give careful consideration to because cash flow problems can stall growth and prosperity in businesses of all sizes and types.
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About Invoice Factoring
Perhaps you've heard about Invoice Factoring but you're not sure how it works or how it might help your business. The purpose of this post is to provide a clear explanation of what Invoice Factoring is and how it works.Basically, Invoice Factoring is a viable alternative to traditional financing methods, providing your company with fast access to working capital. There's no large debt to repay and there are no strings attached. It probably sounds too good to be true, but we can assure you it's not! Invoice Factoring has become a lifesaver to many businesses, so let's go into this a little further to see how Invoice Factoring might help your business go from just so-so to really great!
How Invoice Factoring Works
A very brief definition of invoice factoring is that it converts your open invoices into immediate cash, which of course sounds perfect if you're experiencing a cash flow problem. Factoring saves you from having to wait the 60 or 90 days (sometimes even more) for payment by your customers. With invoice factoring you have the flexibility to factor whichever invoices you want and however many invoices you need, to ensure you have enough cash on hand to grow your business.
The following is a short description of how the process works -
Once you and your chosen factoring company have reached an agreement and set up your account, you're now free to begin submitting copies of your unpaid invoices to the factoring company. These invoices must be for products that have been delivered or for work that's been completed. With invoice factoring you simply continue invoicing your customers as usual, then fax or email a copy of the invoice directly to your factoring company.
Now here's the good part! You'll receive a cash advance within 24 hours! Once the factor has verified your invoices, a deposit of as much as 95% of the value of the invoices will be deposited directly into your bank account.
You continue working as per usual, and the factoring company works to collect on your accounts. It's now your factor's responsibility to engage in the active collection of these accounts, thus allowing you more time to focus on the big stuff, like providing your customers with excellent service and continuing to grow your business.
As a customer of the factoring company you can repeat this process with as many different clients as you want and as many times as you want. You may choose to factor all of your clients, or just the clients that are known for being slow-paying clients. The choice is yours!
The Benefits of Invoice Factoring
Once you're working with an invoice factoring company you'll have control over your cash flow, and more importantly, you'll have a working relationship with your factor that will help your business grow in lots more ways. Let's take a closer look at some of the ways a factoring company can help you grow your business -Credit Checks and Background Verification
It's important to all businesses that they work with honest, reliable customers; customers who have a solid payment history. Sales must be turned into revenue as quickly as possible. However, we know that credit checks and background verifications can be very expensive and these costs very quickly eat away at your working capital. Now, it will be your invoice factoring company who provides these checks for you, at no additional charge. This means that any issues will be addressed before they affect your business, thus ensuring that you're working with top-quality customers.
Credit Repair and Credit Building
Even if your business credit is less than perfect, you can still apply for a competitive invoice factoring program. The benefit of this to the business owner is that, not only will factoring your open invoices cover your daily operating costs, it will also help pay down any current debt in order to rebuild your credit rating. The good news is that start-ups also qualify for invoice factoring so, if you're just getting your business off the ground, factoring is the ideal financing alternative to help you hit the ground running.
Other Money Saving Opportunities
Invoice factoring can certainly save your company money, and it's not only with competitive rates. By negotiating with your suppliers for early-pay discounts or other payment incentives, you'll soon discover new ways of putting your rejuvenated cash flow to good use. And don't forget that, depending on how much you factor, you could well qualify for a volume discount, and this will further reduce your rates.
Steady and Consistent Cash Flow
When you begin factoring your invoices you'll be able to regain complete control of your working capital. Whether you're simply tired of waiting up to 90 days for money that's owed to you, or perhaps your business is subject to seasonal fluctuations, either way, invoice factoring is the ideal method for regulating your cash flow.
Now You Can Start Dreaming Big!
You may have become used to business being steady, but with invoice factoring you'll have the opportunity for business growth in many new ways .
o You'll be able to attract larger clients, with better contracts;
o Increased business marketing efforts;
o New technology investments, or upgrades;
o The ability to employ more staff;
o Training and further education programs for existing staff;
o Relocation of your business, or site expansion.
Finally, No More Debt!
One of the most attractive things about invoice factoring is that it's not like a traditional loan: it won't add additional debt to your balance sheet. In fact, it's actually the opposite; because Invoice Factoring provides you with the extra cash you need to be able to settle old debts. With factoring, it's already your money so there's no money to pay back and no interest to pay. All factoring does is help you get your money into your bank account - quicker!
Why Haven't I Heard of Invoice Factoring Before?
This is a question a lot of business owners ask. Invoice factoring certainly isn't new, but maybe it's just been overshadowed in the past by bank loans and other types of business investments. The fact is that factoring goes right back to the days of the Roman Empire, where factors assisted businessmen (usually farmers) in growing their business. Then, later, it was used in the textile and clothing industry to help pay for raw materials, to finance transactions, and accept larger purchase orders. Today, invoice factoring is used by many different types of industries, such as:
' Staffing, HR
Becoming Familiar with Factoring Terminology
Don't be discouraged because you don't understand factoring terminology. See below for an explanation of general factoring terms :
' Account Debtor:
An account debt or is your customer.
' Accounts Receivable Ageing Report:
This is the name given to a report which shows the financial figure of unpaid receivables, in addition to how long they've remained unpaid.
' Accounts Receivable Factoring; also known as Invoice Factoring:
These two terms can be used interchangeably because they mean exactly the same thing.
' Discount Rate:
This refers to the percentage of the invoice charged by the factor as a fee for advancing funds.
' Due Diligence:
This refers to the background research carried out by the factor to determine potential customers.
' Factoring Advance Rate:
This rate is a percentage of the invoice that's advanced within 24 hours to the client - this figure is generally between 80 and 95% of the total amount of the invoice.
' Factoring Broker:
A factoring broker is a third party whose position is to connect business owners with appropriate factoring companies in order to meet the business's goals and needs.
The right to retain possession of property until a debt has been discharged.
' Non-Recourse Funding:
Most businesses have experienced customers who fail to pay their invoices within the agreed payment terms, or worse, the invoice is never paid at all! Non-Recourse Funding is when the factor assumes all responsibility for unpaid invoices. Because the factoring company is accepting the risk, Non-Recourse Funding is more expensive than Recourse Funding.
' Recourse Funding:
With Recourse Funding, your company must buy back the receivables if your client fails to pay within the agreed payment terms.
This is the amount of the Accounts Receivable retained by the factor until such time as full payment has been made by the customer.
' Spot Factoring:
This refers to a one-off agreement that offers staffing companies the ability to factor just one single invoice.
Your Customers, and Factoring
It's important that we point out here that factoring is not a negative thing, and your factoring company is definitely not a collections agency. In fact, it's important to your factoring company that they maintain good relationships with both you and your customers, and it's their aim to provide the best customer service possible. It's in your factoring company's best interests that the factoring process works as smoothly as possible.
The following will give you a general idea of how factoring works :
' Once you've made the decision to start invoice factoring, your dedicated account manager will start by verifying that your debtors are indeed customers, in addition to advising them of your new remittance address. It's important to remember that it makes no difference to your clients where they send their payment: they know their invoice must be paid, so this is simply a change of address for payments.
' Your factoring account manager will be very experienced and will assure your clients that they'll be well taken care of, and that the factoring company will be managing your invoices in future by taking over your accounts receivable. And that's all there is to it! Nothing will change between your company and your customers: you'll still invoice them as usual, and they'll simply forward their payment to a new Post Office box. Your account manager will be available to help if any problems should arise.
What You Should Look For in a Factoring Company
Once you start doing your own research you'll discover that there are many factoring companies out there, but they're definitely not all equal. The following are points to consider when comparing factoring companies:
As we've explained, factoring is a little more expensive than a traditional bank loan, but some small businesses don't qualify for a bank loan, so being able to achieve some working capital is better than none at all. Do your research, and make sure you understand the overall cost of factoring, in addition to the extra smaller fees that may be charged by your factor. These extra fees may include account set-up fees, application fees, credit reports, costs to research any liens, charges for last-minute funding, or for money transfers. Not all factors charge these extra fees, and not all factors have hidden fees, which means that it's very important that you choose a factor you're comfortable with and one that you can trust.
This is a very important aspect of factoring, and one we can't stress enough. Make sure you very carefully read the fine print of your factoring contract! If you start working with a factoring company and then realize that you're locked into terms that don't suit your own particular circumstances, you're going to be extremely unhappy. These unsatisfactory terms might include how much you're able to factor each month, or being tied to a specific factoring company for the life of your business. If you sign up for a long-term contract, then change your mind, it's going to be a very expensive exercise trying to get out of the contract. Don't let this happen to you! Be very clear on how much you can factor each month, which clients are eligible for factoring, and how long you're signing up for.
At one point or another we've all had to deal with a business with poor communication skills, and we probably all agree that it's extremely frustrating. So, imagine a business with poor communication skills that's also handling your money! Naturally, when it comes to your business and your money, you need someone that's going to immediately respond to your inquiries. All factoring companies are going to say their customer service is second-to-none, but be very cautious here. Pay close attention to when and how your potential factoring company responds to your calls and emails, because this is how they'll be responding to your customers. If you're not 100% happy then move on to another factoring company, because there are certainly plenty to choose from!
' Industry Expertise
Remember that there are many factoring companies out there servicing many industries, so you should be looking for one that services your own industry. Ideally, you'll choose a factoring company that specializes in your niche, which means that they'll already understand a lot about your business. The bonus of using a factoring company with industry expertise is that they may also offer programs specific to your industry, such as fuel cards and back-office support. It's these extras that may prove very beneficial when making your final decision on a factoring company.
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Healthcare Staffing Factoring
The healthcare field is arguably one of the most rapidly growing industries in the United States. With the baby boomers, the largest section of our population, reaching retirement age the need for expanding healthcare services has never been more pronounced.
At the center of this growth are healthcare staffing agencies that hire for hospitals, clinics, doctor's offices and a wide range of medical facilities. However, while business is booming the ability for these staffing agencies to expand is inhibited by the customer invoice system. Fortunately, there are healthcare staffing factoring companies around to help them in their time of need.
We asked the owner of a local healthcare staffing agency, Joy Reed, to talk to us about how factoring companies helped expand her business and provide a much needed boost at a critical time for her company.
"Hello Joy and welcome. I was hoping you would tell us a little about how healthcare staffing factoring companies helped your business, but I suppose we should begin by how you got started in this business?"
Joy Reed (JR), "Thanks for having me. I actually have been a part of several start-up businesses in my recent career and was looking for a field that would show a lot of promise. It was pretty clear to me that medical staffing was a big need in the healthcare field so I set about to start my own business. I had experience in starting up businesses before, so I drew up a business plan, took out a loan, rented the offices and hired a staff to get started."
"So, you did what most people do in starting up a business. How did it do?"JR: "I actually got off to a pretty good start. I had made a few contacts and managed to get some business right away. This was really helpful because as you might know our clients use invoices for payments and it can take up to 90 days before we actually get the cash in hand. Around four months in we were facing a real crossroads as new opportunities opened up for our business, but we didn't have the cash on hand to take advantage."
"I'm a little confused. You say you were doing well, but you didn't have the ability to expand your business?"
JR: "That's right. The problem was back to the invoices that were making up wait up to 3 months before we had the cash. I really wanted to expand my staffing business to handle the new opportunities I was being presented, but I couldn't because I was still waiting on the invoices to finally turn to cash. So I was asking my accountant about what could be done when the suggestion of a healthcare staffing factoring company was introduced."
"Tell us a bit more about factoring companies."
JR: "Basically, factoring companies purchase the invoices right on the spot so you can have cash on hand immediately instead of waiting up to three months. For healthcare staffing factoring companies, they will then collect the money from the business when the invoice is read to be fully paid. It really worked out for me because I was able to get cash quickly to add new personnel and even expand my offices to include another section of the building I was renting in."
"I understand that factoring companies are there for many different kinds of businesses, including medical staffing. Was it difficult to get set up with a factoring company?"
JR: Actually, it was pretty easy once we found a company that met our needs. I just filled out a short form and they looked over a few of the invoices I had to see what companies that I worked with. It really didn't take long at all before they agreed to cash some of the invoices and I got the money I needed to expand."
"Could you tell me a little more about the advantages of using a factoring company like this?"
JR: "Sure, I was not only able to hire a couple of new people and rent additional space, I've been able to cash my invoices when unexpected bills come up or if I need to make a purchase quickly for a new piece of equipment. This has come in really handy recently when I decided to move to a new location and needed some cash on hand to make the transition. The factoring services are really quite good with reasonable rates and fast service."
"What's the differences in using factoring companies over getting a new loan?"
JR: "It is frankly much better than getting a loan because with factoring there is nothing to pay back. We are basically getting our own money from the invoices we've earned up front and paying only a small fee. With a loan, I would not only have to pay it back but with interest as well. Factoring for us has really been a godsend when it comes to making decisions about how to expand my business. I'm no longer tied down to waiting 2 to 3 months to get paid when I can take what my business has earned and get cash immediately."
"I take it that you are happy with how healthcare staffing factoring has worked out for you?"
JR: "You would be correct. I cannot imagine how my business would have expanded at that critical time without factoring companies to buy my invoices. This is a great service that has helped me in my time of need and now my medical staffing business is bigger than ever. I'd recommend factoring companies to anyone running a business that relies on invoices if they need to get cash quickly."
There is little doubt that Joy Reed has been quite happy about the services she received working with a factoring company. Perhaps factoring is right for you and your needs, be sure to search for the type of factoring business that works in your field so that you can get the right services in helping your company to succeed.
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Bookkeeping Mistakes Commonly Made by Freight Brokers
It's true that freight brokers shoulder a lot of responsibility; from matching shippers and carriers, to ensuring that each and every piece of cargo arrives at its proper destination. Freight brokers also have the added responsibility of accurate bookkeeping, because failure to prioritize bookkeeping can result in the loss of money.
Below we've listed some common bookkeeping mistakes made by freight brokers, and how to avoid them-
Handling the Accounting In-House
Many business owners try to save money by handling the books themselves, or perhaps delegating this very important task to a family member or an inexperienced employee. Sure, you may save time and money initially, but errors can be costly: when you attempt DIY accounting you could well end up with more expensive financing terms, higher bond premiums, or a number of other unforeseen expenses. It's very important that you hire a competent bookkeeper because, not only will you save money, but you'll know that the job will be done accurately, quicker, and more efficiently.
We understand only too well that running any business is time-consuming and hard work, and many freight brokers are simply too busy doing their day-to-day tasks to focus on bookkeeping tasks, such as the monthly reconciliation of credit card accounts and bank accounts. It's through reconciling statements that you get a clear idea of how much credit or cash you actually have, and you can also pick up on any errors that may have occurred.
It can be so tempting to postpone this rather tedious task, but the truth is that your credit card statements and bank statements must be reconciled every month, preferably the moment each statement becomes available. In this way you'll be able to identify any potential problems in a timely manner; problems such as lost checks, missing deposits, fraudulent charges, and so on.
Failing to Track Invoices and Receivables
You're not going to get paid if you're using poor accounting practices with your accounts receivable. Let's face it, getting paid equals cash, and cash is the lifeblood of every business. An experienced freight broker understands that your cash flow can be strained by the delay between when you pay your carriers and when you receive payment from your customers. If you're finding that tracking and collecting invoices is taking too long, why not consider invoice factoring? An invoice factoring company will purchase your invoices for a small fee, with the bonus being that you get paid immediately, plus you're spared the time and expense of having to deal with collections.
Don't Forget Liabilities
One of the major considerations a surety has when looking at your business financials in order to underwrite a bond is whether you have sufficient assets to cover your liabilities. Many times we see an inexperienced bookkeeper recording a liability, but when the payment is made they forget to reverse the liability. This is a serious error because it results in liabilities being overstated and net income being understated, which makes your business appear to be less financially secure than it really is. These serious errors can be avoided by employing the services of an experienced bookkeeper. We also recommend that you have another set of eyes (which may be an owner or a CPA) regularly review the balance sheet to check for unusual account balances
Too Many Expense Categories
Another common error we often see with inexperienced bookkeepers is creating too many expense categories, or miscategorizing expenses. Generally, most industries and businesses have a standard set of expense categories, and when a loan underwriter or surety sees too many categories, or the miscategorizing of expenses, it stands out like a big red flag. It tells them that your books are not well prepared. Use an accountant or experienced bookkeeper to correctly set up your accounting software right from the beginning, and don't automatically add new expense categories unless careful consideration has been made. Remember to ask your accountant or CPA for advice, because they'll be able to guide you on how to classify expenses.
Incomplete Information on Invoices
It's very important that, when you invoice your customers, you provide sufficient detail on each line item. Do you invoice by weight, per piece, or per mile? Or is the charge a flat fee? If there are additional charges to invoice, such as reimbursements for fuel or fees, these should be listed as separate line items. In addition, these charges must be clearly and accurately detailed in order to avoid any confusion. When you send invoices to your customers that include clear and concise details, it prevents pushback from your clients. If there's missing information on your invoices and your customers are confused by unrecognizable charges, it could well cause a delay in payment, which is the very last thing business owners need.
Not Understanding the Functionality of Accounting Software
Many freight brokers purchase an accounting software package because they're anxious to get their business up and running, but they fail to learn how to use it correctly. This is probably not an issue if you're already outsourcing your accounting and bookkeeping tasks; but if you're using this software in any way at all, perhaps to enter checks and run reports, it's important that you spend some time learning how to use all the available functions. When used correctly, the right accounting software can save you a lot of time, in addition to providing real-time information on the state of your business. It's this information that helps you make important business decisions!
Freight Factoring Companies For Brokers Articles
How Factoring Saved A Staffing Agency
The Bellosa Temporary & Permanent Hiring Agency has been experiencing a major uptick in business since the unemployment crisis began. The unemployed and underemployed workers have been keeping the phones ringing. The staffing agency is also fielding a lot of calls from employers too, looking for just the right hire. Company President and Vice President, Laurie Bell and Ted Stevens, have not experienced a boom in business since they first opened the doors in 2009, during the recession. They had an idea then that this would be a profitable venture.
The mantra that Laurie and Ted live by is that there "s always going to be people searching for work and of course employers will always be on the lookout for good workers. This is especially true in healthcare staffing, the industry they specialize in. This seemed to be a safe bet for them as they embarked on this venture, but with any small business, the only way to keep the doors open is to keep pressing forward and out perform the competition.
In a relatively short period of time Laurie and Ted had built a nice sized business, they were able to hit the ground running with some brilliant marketing programs and a number of contracts from insiders. They grew rapidly, the timing couldn "t have been better and they were very lucky in this aspect. By the fall of 2011 Laurie and Ted had weathered some ups and downs but they did have some solid clients like a few big insurance companies and a university hospital close by. These clients always paid their invoices on time. But they did start to notice a decrease in accounts receivables from some smaller clients such as rehab centers and private practices.
As winter approached they recalled previous winters and holiday seasons and realized that accounts receivables usually did slow down during this time. Laurie and Ted made the decision to delay their late payments until after the New Year. This plan didn "t really appeal to them as it "s no way to start a New Year, but they seemed to have no other options.
When New Year "s had come and gone they realized that their Accounts Receivables had gone from 30 days past due to 60 days past due. Before meeting with their accountant Scott, they "d decided something had to be done, but they didn "t know what.
Sitting in the conference room with Scott they listened as pulled all the figures up on his iPad saying,â€œOkay you two, I "ve been looking over the files you sent over and I can certainly see why you "re worried about your late A/Rs but there may be a way to fix this. Do either of you know what factoring is?â€ Scott inquired.
Laurie and Ted looked at each other quizzically, and then Laurie said â€œI think it rings a bell, but I "m not really sure. Can you explain it?â€
Scott began laying out the details, â€œYou are sitting on a pile of invoices that are past due. The more time that goes by without them being paid, the bigger the bind this puts your business in. It makes it very difficult for you to grow, much less hire anyone new. If you don "t have enough cash coming in . â€
Ted interrupted with, â€œThen it could make it difficult to take on any new business because we wouldn "t be able to hire the additional personnel we need and meet our weekly payroll. We need an inflow of cash and we really can "t wait. If we have to wait any longer on these invoices we "ll be in trouble.â€
Scott jumped in saying, â€œAnd this is precisely why I wanted to discuss factoring with you. The factoring company will purchase the invoices you are sitting on that are up to 3 months late, which gives you the cash you need now.â€ He then showed him a chart on a piece of paper he placed in front of them.
Laurie began to carefully scrutinize it asking, â€œIs this the fee schedule?â€
Scott answered, â€œYes it "s all right there. The factoring company makes 1% to 3% of the total amount of each invoice they purchase.â€
â€œThat "s sounds like a good deal to meâ€, Ted said.
The three of them sat there and talked this over for a while and then Laurie and Ted made the decision to go forward realizing this was the best way to keep them afloat. They knew if they couldn "t accommodate all the new clients they were acquiring the competition would get them and they would go down, they could just not afford to turn any business away.
They now needed to fill out an application and submit it to the factoring company and they also needed to show them a few back invoices, undergo a credit check for their company. Credit checks would also need to be done on the companies owing the debts that the factoring company would be purchasing.
It didn "t take long for Bellosa "s credit to be approved and the creditors " as well. Before long the factoring company purchased the overdue invoices and Laurie and Ted got the influx of cash they needed to cover things and allow them to continue growing their business.
The next time Laurie and Ted met with their accountant Scott, there were smiles all around.Scott said, â€œI "ve taken a look at your books so I know that factoring was the right solution for you.â€
â€œIt worked perfectlyâ€, Laurie stated and went on to say, â€œThe tiny amount we paid out for this influx of cash was certainly worth it.â€
Ted chimed in with, â€œWithout a doubt! Whatever the fees were we made back and more since we were now able to hire more personnel so we could take on more business. It worked out for us and for them I would say!â€
â€œThat "s what "s great about factoring!â€ Scott exclaimed with a look of satisfaction on his face.
Freight Factoring Companies For Brokers Articles
The Basics of Trucking Factoring
Whether you're the owner of a 50-truck fleet or an independent owner/operator, we all know that controlling your cash flow is vitally important to growing your business. Perhaps like many business owners you've become pretty clever at making creative use of your credit cards, because it's certainly preferable to going to your banker and begging for a business Line of Credit! Fortunately, there is another viable option for owner-operator businesses and small trucking fleets. The answer to the age-old cash flow problem is Freight Bill Factoring!
If Freight Bill Factoring is an unfamiliar term to you, then here's a brief explanation:
Freight Bill Factoring is the simple process of assigning your unpaid freight invoices to a third-party company (factoring company) for an amount that's less than you would receive if you were to bill your customer direct. The bonus of Freight Bill Factoring is that it enables you to get paid almost immediately upon completion of a run, thus giving you access to much-needed cash required for the day-to-day running of your business operations.
Here's a step-by-step explanation of how Freight Bill Factoring, or Trucking Factoring, works :
Once you've booked a load, you immediately email or fax details about the load, your customer, and your rate confirmation to the factoring company;
The factoring company will quickly respond by advising if that particular customer has been approved for load factoring;
You pull the load;
When the load has been delivered, you email or fax your load-related documents, including the Bills of Lading, to the factoring company;
Within 24 hours the factoring company will make a direct deposit into your Comdata account or your bank account for the amount of approved charges: this could be anywhere between 60 and 90% of your billing;
Once the invoice has been paid by your customer, you'll receive the balance.
It's true that Freight Bill Factoring is not for everyone, but it is an ideal way of accessing the cash you need to provide stability to your trucking business and keep your wheels turning whilst you wait for your customers to pay their accounts.
Obviously, the best option for any business is to invoice your customers directly and wait to receive payment, but unfortunately many customers are painfully slow when it comes to paying their invoices. If you're experiencing a cash flow problem, then working with a factoring company could well provide the financial cushion you need to keep your trucks on the road. It's up to you to do your own research and determine whether factoring makes sense for your business. We trust that the information we're providing here will provide you with enough knowledge to help you make a wise decision.
The Cost of Freight Bill Factoring
As explained above, there's a cost involved with Freight Bill Factoring, and it's up to you as the business owner to determine whether it's worth the cost. The cost of Trucking Factoring can vary from as little as 1.5% up to around 5% of the line haul revenue.
You also need to be aware that there could be a number of fees, charges, and other expenses if you employ the services of a Freight Bill Factoring company. Generally, when you've assigned your Bills of Lading to a Trucking Factoring company, you'll receive an immediate advance of between 60 and 90% of the anticipated revenue: of course, this figure will depend upon the factoring company you use. Once your customer has paid their invoice, the balance will be remitted to you.
It's also important to note that all Freight Factoring companies are not equal, so here are some key questions a business owner should ask when considering hiring the services of a Trucking Factoring company:
Recourse or Non-Recourse: Which Freight Factoring Service Do You Provide?
You may not be familiar with these terms, but you need to be, because the ramifications of not understanding these terms could seriously affect the profitability of your business.
means that, should your customer fail to pay the factoring company, the factoring service can come back to you for reimbursement; while
means that you have your money whether the invoice does or doesn't get paid.
Will You Bill My Customer for All Future Loads or Can Factoring Be Done on a Load-by-Load Basis?
Let's say you have a temporary cash shortfall problem that you're trying to resolve by hiring the services of a Freight Factoring company: many businesses require that the factor handle all future collections owed to you by that specific customer. However, depending upon the customer, this may not be the path you wish to take. You should be aware, though, that some factoring companies are very rigid with this requirement.
There are Freight Bill Factoring services out there that allow you to choose on a load-by-load basis as to whether you'd like them to handle the collection on your behalf or whether you prefer to deal with the process of billing and payments yourself. And these services generally let you decide whether you want to receive payment when the invoice is actually paid or whether you want immediate payment. This can be very useful for small businesses because it can save a lot of time by allowing you to use the Freight Factoring service as a kind of de-facto billing service.
Is There a Price Difference If the Factoring Company Bills a Customer for All Loads Pulled?
Some Freight Factoring companies require that all billings originate through them, while others allow you to decide on an invoice-by-invoice basis whether you want the factoring company to do it, or whether you'd prefer to bill your customer yourself. If you choose to use their services on a spot-usage basis and choose not to have a certain invoice factored, you'll probably still have to pay the $15-$20 billing charge. You'd then receive payment once the customer has settled their account.
Are Extra Fees Payable for Additional Services?
It's not usual for a freight factoring company to automatically pay your customer's invoices: they need assurance that your customer is a reliable, good-paying customer, so they'll typically require a credit check to ensure they'll be paid. Most Freight Factoring companies will arrange for a customer's credit check on your behalf, and this credit check could incur a nominal fee. On the other hand, there are factoring companies out there that are happy to provide you with access to a list of customers that are already pre-approved - these are companies that currently meet the factor's credit requirements. This can be very useful information to a trucking company, particularly if you need to know the credit rating of a prospective customer prior to booking a load.
How Much of the Freight Bill Do You Advance; and Do You Require a Deposit?
It's very rare that a Freight Factoring service will advance 100% of your freight invoice, and that's just one of the reasons why it's imperative that you take the time to do your own research and find out what your chosen factoring company's policy is. You also need to know if this will change from load to load or if the same policy applies to all your customers and all freight bills. p> Regarding deposits, some freight factoring services do require deposits, while others don't. Again, before you finalize any contract with a Trucking Freight Factoring company, be very sure that you know exactly what you're signing up for. p>
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