We've been in business for 14 months now. We have one direct customer and they cut us a check usually within a day or two of delivering their loads (they understand cashflow for a new trucking company). All the rest we carry is off the loadboards. We're hesitant on seeking more direct customers because of the potential of slow payment cycles.
When you guys solicit a direct customer, how do you usually set up payment terms with them?
Payment terms with direct customers
Discussion in 'Freight Broker Forum' started by tomkatrose, Mar 8, 2012.
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The gig you have now seems like a sweet deal. How did you set up payment terms with them?
If you read into MC regulations for shippers, and how a surety bond works, you can understand why many try to keep their payment window as wide open as possible.
Say they have a $10,000 surety bond, and load 10 trucks a day averaging $2.00/mile after FSC and negotiated rates, averaging about 500 miles a trip. If they set up a 7 day payment window, and ask some pizza faced temp out of high school to drop off the mail on the way to lunch, and they toss it in their backseat and forget about it until next week, then BOOM. Surety bond is gone, truckers are pissed off, their credit is trash, and they'll likely have to scrape the bottom of the barrell looking for some new hauling companies.
Keeping a long payment window helps the customer cover their ### in the case of human error, but if you're the one waiting for the check, you'll swear up and down that they're greedy scum that's using your cashflow as debt free financing.
On top of that, I've only ever known one book keeper that was more interested in crunching numbers than gossiping all day and crying about how their home life. If they all worked as hard as he did, book keeping would be an 8hr/week position in most mid sized businesses. These people have some serious issues with job security riding on keeping some daylight between you and your money. -
We just go with the flow. We realize that we're given a good opportunity(assuming they pay well), and then plan everything accordingly. It might seem like a long time to wait 30 days at first, but what you do is take it slowly. One or two loads a week like this, and after a couple of months it becomes normal and cash flow becomes more consistant. Just make sure you do your invoicing for those loads asap, the longer you take, the longer you will wait for checks
Have you done your taxes yet? have you figured out how much you gave back to brokers last year for their "Quickpay"? you might wanna start putting those guys on regular payment terms slowly too
Good luck! -
What you will find is that most of the shippers will already have set payment terms. It is not a big deal to ask what those terms are when providing a bid.
If you get in with a bigger company it is likely a "take it or leave it" in regards to the terms. Smaller companies that have good cash flow themselves can be more flexible.
But understanding when they cut checks is also important. I have a customer that cuts every Friday. Another on 1st and 15th. -
For myself i will not haul for a customer that takes longer than 30 days to pay. I only have a few that take that long and the majority are all 15 days or less and one is even daily. I have found out over the years if your willing to give a little discount say 2% to 3% of the gross the shippers that pay 30 or longer are alot of times willing to pay quicker to get the discount. The smaller the shipper atleast for me the faster they seem to pay.
BigBadBill Thanks this. -
They're all different. It's something you negotiate when setting up the account. Some will be slow pay, some will mail it out on the 30th day, if it's a weekday. Some are just plain flakey.
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one other option is:
Net 15, 2% 7.
You are telling them that it's net after 15 days, and they get a discount of 2% if they pay in under 7. -
Thanks so far. I understand typical payment terms for business. We just have never solicited direct customers yet and I don't know if the average shipper would laugh if we requested anything less than 30 days or not. I guess the clarity to my question is what is typical in the trucking industry?
Sounds like from some of the comments we just need to start working towards a longer cash flow cycle. It's tough when so much of our freight is coming off the loadboards at such cash flow impairing rates. -
Like others have said, most likely the customer already has a payment schedule worked out. The only way some will deviate from that is to offer a discount, as stated above. I've had direct customers that cut checks only on Fridays. I had one watermelon outfit that would cut the check for your previous load while you were waiting for your next load for o/o, but it was 30 days if you sent it in or were a broker. Don't be afraid of soliciting direct customer because of payment terms, as they are far more reliable than brokers. The pay is much better as well. The RIGHT factoring company could help in this situation, but it will take quite a bit of research. If you're established, an SBA loan could also work.
BTW, That 10,000 broker bond is going to cover one days worth of freight, maybe. Definitely not 45-60 days worth which is the case when they go belly up. -
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