Lets take a few minutes and examine 8 financial myths you might encounter while running your trucking company as an owner-operator or owner of a small fleet.
Myth 1: Your brokers and shippers credit history does not affect your bottom line.
FALSE: Since a businesses’ credit history tells the story of when they pay their bills, how many bills they still have outstanding and how long they have been in business – it can directly impact the financial success of your business. When you haul a load, there are many expenses you pay for up front including pricey fuel and if your broker or shipper does not have a good history of paying their bills on time that will directly impact your cash flow and ability to cover those expenses.
Myth 2: You always have to have the funds for fuel before you haul the load.
FALSE: The good news is with a financial partner who will provide a fuel advance you can get funds to cover your fuel expenses before you haul the load. With a fuel advance you can eliminate the risk that you won’t be able to cover your fuel expenses. Learn more about how Fuel Advances Can Ensure Your Fuel Tank is Always Full.
Myth 3: You can’t control when your freight bills get paid.
TRUE and FALSE: You can include terms on your freight bill that indicate when you would like to be paid but the truth is when the payment arrives to you from your customer is out of your control. That is unless you partner with a freight bill factoring company. When you utilize factoring services, you will get the funds from your freight bill immediately, and the factoring company will wait to be paid by your customer.
Myth 4: To get the cash discount at the pump you have to carry cash.
FALSE: You are in luck, this myth is false! Fortunately, when you utilize a fuel card one of the many benefits is you get to pay the cash price even when using the card. An added bonus is you will also receive an additional discount per gallon when using your fuel card.
Myth 5: You and your business have to have good credit and an established history to get access to much-needed working capital.
FALSE: Even though those are often criteria for a bank line of credit there are other alternatives that can get you access to the working capital you need. One option is freight bill factoring which looks at the creditworthiness of your clients instead of yours and your company’s. Another option is to work with an equipment leasing company that offers programs such as a sale-leaseback that can provide you with immediate working capital.
Myth 6: The highest paying freight is best.
FALSE: Finding freight is easy but not all freight is created equal. Actually finding GOOD high paying freight is hard. Long term relationships and reliable, honest partners are your key to continued success. Also, often the highest paying freight is with new or unreliable shippers/brokers. As a result, they have to pay more for the freight to be moved. The larger more established companies pay less per mile because there is much less risk of them not paying. Large companies usually also understand the shipping dynamics and supply and demand better than small freight brokers making it easier for you.
Myth 7: Being self-employed is easy and what you expect.
FALSE: Many of the people we have talked to started as company drivers and have always wanted to become owner-operators. The perception is that the company is taking all their hard-earned money. However, once self-employed, they realize they have a ton of items to track and take care of in addition to driving. This is where partners such as a factoring company can help. A factoring company, such as Tetra Capital, will handle all your paperwork and billing. We will take care of the back office operational items so you can do what you are great at… Drive the truck.
Myth 8: Small expenses are no big deal.
FALSE: In trucking, everything is soooooo expensive. A new Truck is $150k, an engine rebuild is $20-25K, a new set of tires is $5K, and to fill your truck with fuel is several hundred dollars. Because everything is so expensive, it seems that people in trucking do not sweat the small expenses. $20 here and there seems insignificant. However, added up throughout a years’ time it could be thousands of dollars. For example, all of our clients, at Tetra Capital, have access to a fuel program with fuel discounts. However, many of them do not participate. They think $0.10 per gallon is not worth their time. But if they are running normal miles this means several thousand dollars in discounts each year. All should be participating unless they have a better discount somewhere else. Many of our factoring competitors have hidden fees with charges that are $5, $10 or $20. But throughout the year this is tons of money.
I hope by busting these myths, we have given you useful information to help you run and grow your trucking business.