Become a A/R Ninja
Aside from delivering freight, Accounts Receivable management is one of the most important business activities for any Motor Carrier. As with all businesses, cash flow is always a primary concern. Inefficient receivables management is one of the primary reasons for business failure within the Trucking Industry. If you are not already doing some of these, here are the top nine ways to get your cash flow back on track:
- Establish a Formal Credit Policy – The best place to start is looking at what your competition is doing. Perhaps they are offering incentives for quicker payment. Although margins in trucking may be tight, you may consider providing some sort of incentive for quick payment, even if it is not direct financial compensation. Consider offering some sort of unique incentive (in-kind services for example) for those clients who pay within X number of days. Once you’ve established your policy, make sure every client knows it and understands it. Put it on your invoices, your website and your proposals. Further, make sure every employee in the company knows the policy.
- Know Who You’re Giving Credit to – Research every new account, and if isn’t business prohibitive get references from at least three different vendors. These references should hopefully include one banking reference. Also, don’t fully discount everything you read on the internet. Typically you can uncover past legal proceedings or similar judgements against companies.
- Invoice ASAP – Typically a week lag between deliveries and invoice generation will result in an additional week waiting for your money – get it to them as soon as possible. If your system isn’t generating invoices upon successful delivery – make that a short term goal for your business. Further, if you aren’t already generating and delivering electronic invoices via email, you should consider establishing such a system in the short term.
- Measure – of the Motor Carriers I’ve spoken to over the years, many of the ones who are complaining the most about slow paying customers could not provide a current A/R aging schedule. As the saying goes, you can’t manage what you don’t measure. For a sample one, here’s a link to a simple that may get you on the right track, although most accounting platforms (QuickBooks, Sage, Oracle Financials etc) include various aging templates in their available reports.
- Empower Your Employees – empower your employees to report abnormal payment behaviour (less than full invoice for example). Conversely, empower them to structure instalment plans for those customers temporarily going through a tight phase (give them a decision framework to do so though).
- Make it Easy to Pay You – Allow your customers to pay you electronically. It’s becoming more common for large shippers to prefer EFT or online payment processing. There might be a learning curve on the front end, but it will be a mutually beneficial process over the long run.
- Benchmark Your Results – Don’t just assume that everyone else is suffering from slow payors, find out by benchmarking your A/R performance. Talk to your accountant to see if they are handling the books for other Motor Carriers, or use StakUp to monitor on a monthly basis.
- Negotiate Better Terms – Perhaps your customer will be willing to pay you quicker if you’re willing to accommodate additional delivery requirements (more specific delivery times etc). The more you demonstrate that you’re willing to work with your customers, the stronger the relationship (and more likely to get paid on time).
- Use Accounts Receivable Management Software – Instead of trying to reinvent the wheel, look into ARM platforms (both desktop and cloud based). These tools can be customized to your credit policy(ies) and integrate with your existing accounting/invoice platforms. Checkout some of these popular examples Funding Gates, ZenCash, and AnytimeCollect among many others