Last Updated on December 14, 2021
If you own or manage a trucking business, you must have an idea of how much slow-paying customers can affect day-to-day operations. There are many expenses to take care of, such as fuel, fleet maintenance, salaries, etc. If you have a negative cash flow, crucial parts of the business can grind to a halt.
But did you know there are ways you can improve your invoicing to encourage quick payments? With a few tweaks here and there, you can get paid shortly after delivering freight. Here are some invoicing improvements you can make to maintain positive cash flow.
Keep Your Invoice Template Simple and Professional
When creating an invoice, lack of clarity and professionalism can cause back and forth engagements between you and clients, which causes delays in payments. Put yourself in their shoes. Can you pay an invoice that is not clear or does not make sense?
In the worst-case scenario, your business might get into uncomfortable arguments with clients because some invoice entries might seem inaccurate. Not only will this delay payments, but it can also cost you customers and referrals in the future.
For this reason, you should keep your invoice template neat and simple, which also communicates that your business is professional. The easiest solution is to use a TMS (trucking or transportation management system) with a professionally designed invoicing module, or accounting software.
However, this option is expensive and might not be the best option, especially for a startup. You can create a simple template to reuse when billing all of your clients, and it should include the following:
- Your business name, contacts, and address in the header, plus the logo, if available
- Invoice number
- The date of sending the invoice
- Details of the job that you are billing (shipper & consignee details, truck number, driver name, rate, and subtotal)
- The name and address of sending checks
- The total amount for the job and the due date of payment
- Notes relevant to the task and a thank you message
As a standard business practice, the due date should not exceed 30 days of receiving the invoice so that you get your money in good time.
Invoice Immediately and Accurately
As soon as you deliver the cargo, send the invoice to the client immediately. Procrastination will only hurt your trucking business because it might lead you into debt or having many unpaid bills.
What’s worse is that it might make your clients think they can delay your payments and get away with it. If they are regular customers, they might prioritize other expenses when settling their bills, then pay for your service as the last one on the list.
To avoid this, make sure you send all your invoices promptly and accurately to all clients. Additionally, confirm if the client received the invoice and has queued it for payment as soon as possible.
If the client does not pay within the due date, send another invoice with the due date labeled “immediately” and a note indicating “late payment”. You can insist on cash on delivery for clients who delay consistently until their payment history improves.
Schedule Automated Follow Up Reminders for Unpaid Invoices
As stated above, whenever a payment is late, you must deal with the customer immediately. Even if it is your friend owing you, always keep emotions out of business. You can opt to go the manual way and call or email the clients, but this might be expensive and time-consuming.
The best way to do this is by setting up an automated system that sends emails or engages the clients using phone scripts to notify them of the urgency to pay.
The automated system will make it easier to track late invoices when you are dealing with many clients. It might be difficult to trace the overdue ones from hundreds or even thousands of sent invoices if you do it manually.
Every client would want to save as much money as possible. If you have a system that applies incentives or discounts for payments made early or on time, you might not have to follow up on any overdue invoices.
Even though this might imply slightly lower revenues from each transaction, it is better because it will keep the cash flowing in and on time.
Similarly, you can impose penalties on late payments by charging a flat rate on the total invoice value. For instance, you can implement a penalty of 3% of the total bill amount per month.
Of course, the goal is to push clients to pay on time, but this can earn you extra cash if a few of them delay the payments. At least you will get a small reward after waiting that long.
Make Payments Easy
Some clients can take advantage of unclear payment methods as listed on the invoice. Instead of only listing one avenue of payment, such as a check, indicate all the methods they can use to transfer the funds so that they pick the one that works for them.
In addition to this, clearly state the terms & conditions of the payment and applicable taxes. Do not give the client any excuse to keep your money on hold.
Use Freight Factoring if You Still Need To Get Paid Faster
In the ideal trucking business environment, invoices would be paid immediately after freight delivery. However, the client might be expecting payments from his/her customers to get money to pay you. If the chain is long enough, you can imagine the time it can take for you to get your dues.
Instead of enduring all this wait, you can use freight factoring, also referred to as invoice factoring (make sure to read our full guide on how does invoice factoring work). Companies involved in this business buy outstanding invoices, and this takes care of your accounts receivable.
There is a catch, though. Part of the transaction involves paying them a fee (a rate charged on the invoice total). It usually ranges between 1% and 5%.
However, you won’t have to wait several days for the client to settle the bill or follow up on late payments. Instead, the freight factoring company will pay you in a matter of hours, then follow up with the client(s) later.
Using this method ensures you have a positive cash flow, and it is better than getting a bank loan due to these three reasons:
- There is no interest because the payment is not debt. Even though factoring attracts a fee, it is not as much as what you would otherwise pay as interest.
- It does not affect your business equity. You can still secure loans to expand your business.
- Approval is quick and easy. Freight factoring companies base your qualification on the creditworthiness of your clients, not your business assets or credit rating.
That said, you need to read through the terms and conditions of the invoice factoring company to make sure you get the best deal. In addition to the primary fee, most charge other rates for the period the invoice remains unpaid after the due date.
There you have it. The trucking industry has a big challenge of late client payments, which negatively affects most businesses. However, if you implement the steps above, you will have a better shot at having your invoices settled on time.