Commercial truckers know that getting paid on freight invoices for the truckloads they hauled is critical to the success of their business. Unfortunately, freight transporters can rarely count on receiving guaranteed payments. However, you can set yourself up for success through best practices to make sure you are working with reliable companies with a strong history of good business.
You should do credit checks before you haul loads to see a client’s payment history and if they were reported for questionable business practices. Some companies offer credit check services for free to help you reduce risk and have better chances of getting paid without the headache.
What Is a Guaranteed Payment?
The term guaranteed payment can be deceiving as it hints that without a doubt you will get your money. While you always want that to be the case, payments are not guaranteed unless you negotiate prepayment, which is far from a common practice in load procurement. You might be able to negotiate a prepaid load if you have a long-standing contract or potentially on some less-than-truckload (LTL) loads in rare cases, but pre-payment should not be expected.
How Does Freight Payment Work?
Freight payment is the process of reimbursing a transportation company for services rendered. In most cases, freight bills are completed by the shipper, who contracts with a carrier to move goods from one location to another. The carrier provides the shipper with a freight invoice, which is a detailed document billed for transportation services that covers all associated shipment costs. Several considerations affect payment.
Invoice Receipt
Invoicing and payments are essential components of trucking freight. The invoice is the legal document that binds the shipper and carrier. This document outlines the terms of the agreement between the two parties, and it is important to have a clear understanding of its contents before signing. Freight contracts and receipts are important documents that should be kept on file for legal and financial purposes.
Invoice Validation
Freight invoices can be a huge headache. Not only are they often inaccurate, but they can also be time-consuming to validate. However, invoice validation is an essential part of the freight payment process. To ensure that you are being paid correctly, it is important to take the time to validate each invoice to make sure they are correct and complete. Catching this through a validation process can save you trouble down the road.
Database and Accounting
Trucking freight payment and accounting can be a complicated process, but it is vital to keep a proper accounting of your bottom line. The best thing you can do here is to make sure that you have and keep excellent paperwork in your database and keep track of the aging on your invoices. If you are using a factoring company, you’ll want to make sure to monitor those invoices and make sure your factoring company gets paid. If they do not, the invoice amounts will be charged back. To help avoid this situation, if you notice the invoices have still not been paid and are approaching your chargeback date, you should reach out on the status to help push that along.
Payment
A variety of methods can be used in the trucking industry such as pay upfront, cash on delivery (COD), pay by factor, pay by supplier third party and payment by a collection agency. By seeking a guaranteed payment you would be looking for a load offering pay upfront. Upfront payment is a situation that should not be expected. You can take measures on your end to take on minimal risk with the loads that you haul, giving you a higher likelihood of getting payment within the agreed-upon payment terms for the load.
Four Steps for Guaranteed Payments on Freight Invoices
Although no payment is truly guaranteed, you can and should take steps to reduce the risk of not being paid. Let’s take a deeper look at four steps for lowering risk on your freight invoices.
Step 1: Choose Reputable Factoring Companies
Any trucking company owner will tell you that one of the hardest things to manage is cash flow. However, special service companies can help. With fuel costs and maintenance costs, not to mention the actual cost of hiring drivers, it can be difficult to keep enough money on hand to keep the business running smoothly. One way to free up some cash flow is to factor freight invoices. This process means selling your outstanding invoices to a factoring company at a discount in exchange for immediate payment. While this can be a great way to get some quick cash, it’s important to choose an experienced factoring company to ensure that you actually receive the payments you’re owed.
Using a factoring company for your freight invoice processing can help reduce the risk of nonpayment or delayed payment as they will typically handle your accounts payable and billing for you. Using one can help stay current and keep debtors knowing that payment is due and expected.
It is important that you work with an experienced company here as well to know that they handle this side appropriately. Some factoring companies will offer business credit check systems worked into your factoring pricing. This service is to help you know who will likely not pay you or give you trouble before you haul a load for them in the first place.
Step 2: Carefully Choose a Customer
Any business that provides services on credit is at risk of not getting paid. This is especially true for businesses that provide services to other businesses, as corporate bankruptcies have been on the rise in recent years. As a result, it is essential to carefully choose customers who are likely to pay their invoices on time. Business credit checks are a great tool to have on your side to evaluate a potential customer and the level of risk you are taking by working with them.
Step 3: Maintain Accurate Freight Bill Documentation
In the trucking and logistics industry, it’s not uncommon for shippers to pay freight invoices late. In fact, according to a recent study, the average payment cycle for freight invoices is 46 days. This convention can cause serious cash flow problems for trucking companies, which is why it’s important to keep the necessary documentation such as bills of lading and accessorial charge statements. Optimization in this area can make a large difference for your company. When shippers provide a guarantee of payment, it means that they have agreed to pay the invoice within a certain time frame — usually within 30 days.
To get a guarantee of payment, make sure the shipper has all documentation as laid out in the freight contract, verifies the receipt and accuracy of the necessary paperwork and provides a pay date. Once the documentation is in place, trucking companies can feel more confident that they will receive payment for their services on time. It is smart to keep all of this anyway for your freight audit process.
Step 4: Communicate
Excellent communication skills are key to making sure you get paid in full and on time. When you send out an invoice, you can put a notation in the memo field that says something like “Please pay within 30 days.” This sets the expectation for when you need to be paid and gives the freight company a heads-up that prompt payment is important to you. By setting this expectation upfront, you’re more likely to get paid on time and avoid any miscommunication about when payment is due.
You Can Mitigate the Risk of Nonpayment on Freight Invoices
Although pre-payment contracts are rare, it is possible to get guaranteed payments on freight if you get pre-paid for the loads. The most-used option for the average trucking company, however, is to take measures to reduce the risk of not getting paid.
FAQ
A freight invoice is a document issued by a carrier or freight forwarder to bill for transportation services provided to ship goods from one location to another. It typically includes shipment details, itemized charges, payment terms, and serves as a record of the transaction for both the shipper and the carrier.
To create a freight invoice, start by gathering all relevant shipment details including origin, destination, cargo description, weight, and dimensions. Then, calculate the total charges including base rate, fuel surcharges, and any additional fees, and compile this information into a standardized invoice format.
A cost and freight (C&F) invoice is a type of commercial document used in international trade that includes the cost of goods and the freight charges to transport them to a specified destination port. It differs from a standard freight invoice by combining the cost of the goods themselves with the shipping costs, but unlike CIF (Cost, Insurance, and Freight), it does not include insurance for the cargo during transit.
