Few trucking companies have the time or resources to collect overdue invoices from customers. It can be particularly difficult tracking down a customer that is intentionally elusive. It is also risky to confront a client that represents a big part of your business.
Fortunately, there are third-party companies that can perform the challenging work of customer collections. This allows you to focus on running and growing your company. If you choose to factor your invoices as a way of generating cash flow, the factoring company you hire assumes responsibility for collecting your customer payments. Some factoring companies have specialists who are solely dedicated to tracking down late payments from the debtors of factoring clients.
Watching For Warning Signs
Collecting on overdue payments requires determination. It also helps to have good data. Having a trusted partner or a resource that tracks payment trends and potential credit risks among your customers is crucial. If a customer that has always paid within 30 days suddenly starts paying in 45 to 60 days, that could indicate a cash flow challenge or worse for that company.
There are many online resources that track credit ratings and days-to-pay histories for shippers and brokers. By closely monitoring a customer’s payments and credit scores, you can anticipate payment problems before they happen.
Asking the Right Questions
Addressing a late payment with one of your customers can be a painful task. This is particularly true if that customer has a long history with your business. A third-party company can be more objective—and aggressive—with the collection process. Collection specialists also know the right questions to ask a debtor: Did you mail us the check? What address did you use? How much did you pay? What was the reason for the delay?
Some debtors can be misleading. “We cut you a check,” they might say. But did they mail it? Cash-strapped companies may sit on a check for weeks before mailing it out. Often, the debtor has a legitimate reason for a late payment that has nothing to do with cash flow problems. You or the company that does your collections should take this into account during the collections process. However, if you are not satisfied with the answers you get from a debtor’s representative, ask to speak with the company’s chief financial officer or another decision-maker.
Having a Partner
As previously stated, it helps to work with a company that specializes in collection work, especially one that is familiar with the trucking industry. These companies have people and resources dedicated to collecting on payments. Having a partner in the collection process is your best bet for avoiding payment default.
Five Tips for Avoiding Payment Problems
- Identify Trends: Be mindful of when your customer takes longer than usual to pay. It may indicate a cash flow problem or worse for that company.
- Stay Informed: Before taking on a new client, check that company’s credit rating and payment history.
- Bill Promptly: Mail out invoices quickly and make sure that the paperwork is accurate. This can help encourage earlier payments.
- Be Assertive: Do not wait 60 to 90 days before contacting a customer about an overdue invoice. If your customers know you are on top of the billing cycle, they will be more likely to pay in a timely manner.
- Know What to Ask: When confronting a customer about a late payment, push for specific information about how much the customer can pay and when. If you are not satisfied with the response, ask to speak with the company’s CFO or another key decision-maker.