Do you know how long your brokers and shippers take to pay other carriers and even if they pay them?
Working with qualified, stable, and established brokers and shippers is critical in trucking. Doing your due diligence before you haul the first load is essential to learn about those you are hauling for. It can save potential headaches from wondering if you will be paid for the loads you haul. You can do several things to help ensure you work with established brokers and shippers. In fact, simple Internet searches and credit checks can provide invaluable information.
What does a small trucking business do when they have delivered the freight and paid all their expenses (fuel, equipment, payroll, maintenance, etc.) only to find they are the ones on the short end and not being paid? Working with qualified clients is imperative to your success, and performing credit checks can help. A credit check can be completed on a person or a business. It will provide invaluable information for you to evaluate a potential or existing client.
Know how long your brokers and shippers have been in business.
A credit check tells how long the broker or shipper has been in business and how much business they conduct. These reports are essential because it is not hard to start a freight brokerage, and many have tried and failed for various reasons. This reason alone makes it critical you performed a credit check on shippers and brokers from the beginning. Without a credit check first, you risk not getting paid for the load you have already hauled.
Know their risk score, average days it takes them to pay, and their debt summary.
In addition to the amount of time a business has been around, the credit report will give you their risk score, average days it takes them to pay, and their debt summary. These three things will provide you with a good picture of how they will handle paying you. With all this information, you will be able to make an informed decision regarding the loads you haul and reduce your risk of not being paid.
How can you get a credit check done?
There are many different services that allow you to pull credit reports, and they all charge various fees. The largest most well-known companies include Dun & Bradstreet, Equifax, Experian, and TransUnion. In addition to subscribing to these services, trucking companies could consider working with financial partners that offer the checks for no additional charge. For example, some trucking factoring companies will check the credit of your brokers and shippers because they use this to analyze your financing options.
History is a pretty good indication of future performance.
Obviously, there are still risks in hauling freight for someone you don’t know; however, history is a good indication of future performance in this business. Very rarely does a company with a high credit rating all of a sudden go out of business. What generally happens is their days to pay will continue to move upward as they struggle to pay their bills. Then finally, one day, they can’t drag it out any longer, and they go out of business. During this process, the credit rating will typically decline.
Leverage trucking factoring company’s internal database of brokers and shippers payment histories.
Credible and established finance companies specializing in the trucking industry will also have access to several other options to check credit before their client hauls the load. Additionally, they will have a huge internal database filled with payment history for thousands of brokers and shippers. All of this can help protect you and your trucking company and assist in getting you paid for the loads you haul.
I have learned from my many years in transportation that I would never run freight without knowing how likely they are to pay. Unfortunately, many smaller trucking companies do not have the means to access the numerous databases we do. There is good news, though. By partnering with the right finance company, they will have access to this critical data and quickly and inexpensively perform the much-needed credit checks. Click here for more information on how you can get free credit checks when you partner with Tetra Capital.
-This post from June 2016 has been updated-