No one goes into trucking because they have a passion for working for free or for chasing payments. But as another month begins and you realize a broker you hauled a load for and invoiced over 30 days ago still has not paid you, and the invoice is now past due, so what should trucking companies do when they have past due invoices?
We thought long and hard about this and came up with six options trucking companies have when they have past due invoices. You may be lucky enough to get paid after doing only one of these, but it might take a combination of these suggestions for some past due invoices.
What you can do once invoices from your brokers and shippers are past due:
1. Follow up – We recommend starting with a polite reminder that the invoice is past due. It could be beneficial to include payment options and remind them of late fees – if you have them. Some invoicing programs such as Wave will let you automatically set up the reminders and include an option to pay by credit card.
2. Stop delivering loads for them – If they are not responding to your requests for payment, stop working for free.
3. File on the broker bond – To be a “freight broker,” according to FMCSA, you must have a $75,000 bond or trust fund (this must be in place before broker authority is active with the FMCSA). If the broker does not pay accordingly for services rendered, you can file against the freight broker’s bond. If the bonding agency deems the request for payment within their guidelines and legitimate, it can use the bond to pay the carrier directly. This is not as simple as it sounds, and most bonding companies are not quick to pay out proceeds. We have filed against many bonds and very rarely have success. In general, the bonding companies are not quick to pay out claims for non-payment. However, it is an option that most should try to exhaust when needed.
4. Reach out to the shipper and consignee directly for payment – If your polite and aggressive reminders have gone unanswered by the broker, this could be a helpful next step. You may want to consider including some of the same information as you did in the follow-up regarding payment options and late fees.
5. Use a debt collector – For some trucking companies with past due invoices, this is one of the last steps they want to take because of the often-high percentage rate the debt collector will charge. Still, in some cases, it is better than nothing and can save you the time and energy needed to chase the unpaid invoices.
6. Take legal action – This will generally take place as a last resort. Especially if the amount owed by your debtor is not significant. However, there are legal processes put in place to protect the carrier of record. Building a relationship with a legal expert could greatly benefit you even if they are only sending out a demand letter and not actually filing with a court.
While you can’t go back in time, you can take steps to help enable you to make decisions about the brokers or shippers you work with.
When it comes to safeguarding that your brokers and shippers will pay you, your best line of defense can be what you do before you haul the load.
1. Conduct credit checks – Before you haul the load, run a credit check on all new brokers and shippers, you may want to regularly check credit while you build valuable relationships, and any time anything seems to change with the payment terms. The credit check will tell you how long they have been in business, their risk score, and how they have paid other carriers.
2. Work with a factoring company – A trucking factoring company will take away the headache of worrying about when and if your brokers and shippers will pay. The factoring company will pay you within hours of delivering the load. Additionally, they will run credit checks on your brokers and shippers, handle your invoicing and manage the collections process for you. Depending on the factoring company you choose to work with, fees for these services will vary unless you choose Tetra Capital which provides all of these services at no additional cost.
3. Optimize your invoice – By having clear payment terms and accepting multiple forms of payment such as credit cards, you can help ensure a timelier payment. Check out our post on solutions to eliminate late payments for more helpful tips.
Our team at Tetra Capital would be happy to discuss with you ways we can help your trucking company when it has past due invoices and ways to avoid that from happening again. Give us a call today at (801) 676-0182.