Most successful logistics companies are very good at managing and juggling the demands on their cash flow. One one hand you have expenses – there are drivers that need to be paid, fuel that needs to be bough and trucks that need to be maintained. One the other hand you have income, which are usually your invoices. The problem that most transportation companies find is that expenses tend to happen regularly and are immediate while income is always delayed because customers pay in 30 to 60 days. This mismatch in timing between income and expenses is at the heart of most cash flow problems for logistics companies. And this is a problem that can be solved easily – for most.

There are a couple of ways to deal with these cash flow problem. One way is to delay payments until your invoices are paid.  This can work for some, but it can create substantial problems if you face expenses that can’t wait. Another strategy is to ask customers to quick pay their invoices / freight bills. Quick payments can work well, but they still leave you at the mercy of your customer. A third approach is to use business financing to cover expenses while waiting to be paid. Using business financing can create the financial buffer you need to operate and grow your business.

There is one business financing solution that is designed specifically to help with slow paying invoices- it’s called invoice factoring (often referred to as freight bill factoring in the logistics and transportation industry).  It offers a simple solution to the problem – you get a quick payment for your invoice from a financial intermediary called a factoring company. The factoring company holds the actual invoice/freight bill until your customer pays – which settles the transaction.

One of the advantages of factoring freight bills is that is easily accessible to small and mid sized logistics companies. The most important qualification requirement is that you need to work with commercial credit worthy customers who pay their invoices reliably (although slowly). Aside from that, your company must be free of legal and tax problems.

Freight bill factoring is an ideal solution for companies whose biggest problem is that they can’t afford to wait up to 60 days to get paid by their customers.