How do you get paid in hotshot trucking?
Trucking is no different than any other business. You provide a service and then you invoice the customer based on the services you just provided.
How long do you want to wait before you get paid from that customer? Your agreement with that customer will determine how long you have to wait for your money.
4 Ways to Get Paid in Hotshot Trucking
- Prepayment — they pay in advance.
- COD (Cash on Delivery) — some customers will reach out to you. This is usually the quickest way of getting paid.
- Delayed Pay — net 7, net 30, etc. That number represents how many days it will take before that customer has to pay you — before you can start imposing late charges or put the bill into collections. Net 7 is rare. Net 30 is a more common option in the trucking business. There are companies that do net 60 and net 90. Yes, there are companies that take 90 days to pay. Those are the ones you don’t want to work with. Any company that takes that long may not be in such a good financial position.
- Factoring — It gets a little more complex when there’s a broker involved — the broker is the middleman to the customer. And you don’t know what the terms are between the broker and the customer. You only know the terms between you and the broker. In this case, there’s usually going to be another person — or another company — serving as a middleman. This is a factoring company. They pay you the next day or within two days or whatever the terms are. They take a small percentage.
For example, you just delivered a load for a broker and the broker is net 30. That means you have to wait 30 days. But instead of invoicing the broker, you send your invoice to the factoring company. And they pay you the next day. And then the factoring company waits 30 days to collect that money from the broker. And so the factoring company basically is like a bank. They have a lot of cash. And so for that service what they charge depends on how much revenue you’re doing per month — anywhere between like a percentage and four percent of the invoiced amount.
When you don’t use factoring, and you have to chase down your money yourself, it can be a real pain. You would much rather have that money on your account, working for you, so you can reinvest it in your business, pay your employees, or set it aside as a reserve fund.
How to Choose a Good Factoring Company
Read their contract or agreement.
Compare what’s important to you. Some factoring companies have higher fees. Some charge three percent, some charge two. Some don’t have an app, some do. Anticipate any possible issues. Will you have problems with their fuel card? Do they have an early termination fee?
Try to go with one of the big players, like RTS. They have enough money coming in that they can then reinvest into websites. The last thing you want to do is sign up with a company that has a bad website, where you can’t get factored, you can’t submit invoices, or they’re too picky, saying the pictures are incorrect. That just holds up your money even more.
So choose wisely.