Independent trucking can be challenging, but if done right can also usher in huge profits. In order to tackle the big sharks of the trucking industry, it is important to know the business in detail rather than just to know how to drive a truck or be familiar with the routes. Here we discuss some aspects of the trucking business that is most often overlooked by the newcomers.
1. Invest in legal, financial help
The key to generating profit and grow a truck factoring company is to invest in legal and financial help. You could hire experienced people but it is a costlier option. Another option is to do it yourself with the help of acclaimed software. Any business, and especially trucking, is a cash-intensive venture. There are fuel costs, taxes, truck lease payments and so on to be made regularly. Furthermore, invoices are cleared generally 15-30 days later. This can very well land you into cash flow problems. The cost-effective way to avoid this is to use freight bill factoring services. One noteworthy mention would be TBS Factoring Service.
2. Decide on the market
Before diving into the business, it is important to identify which is the correct market to tap. This will determine your routes, types of equipment as well as rates that you can charge. If chosen cleverly, you can avoid the markets served by the large carriers which will mean less competition.
3. Know your operational costs
It is very important to know the exact operating costs to determine what will be the profit. A simple trick is to determine the fixed costs beforehand, which will not change depending on the miles driven. The variable cost will mostly include fuel and maintenance.
4. Choose the right rate
After determining the exact costs, you can choose wisely your rates depending on the market price and profit to be made. It is very important to be clear about rates before making a deal. Market study also helps you to stay competitive.
5. Choose a fuel buying strategy
There is a major difference in buying fuel for personal use versus fuel for the trucking business. Truck drivers have to pay taxes depending on the usage of fuel while driving through states, all of which is handled by IFTA. Here, also, the idea of fuel cards which can help you buy fuel cashlessly, and can also help you access electronic fund sources should you need them. It is not only secure by going cashless, but also helps you track your fuel purchases and generate reports for IFTA deductions and more.
In our research, cash flow problems were the determining factor for many new truckers to discontinue their business. It is understandable because the trucking industry is very cost intensive and payments may come later than the bills you need to pay. Factoring services are the only savior here. They help you by crediting a payment within at least four hours from the time you submit your invoice.
A factoring service company not only provides fast funding as soon as you submit the required documents but also funds your fuel expenditures through discounted fuel cards. Freight factoring is the ideal solution when your customers don’t have advance payment policies. This also ensures you have credit protection, in case your customer is unable to pay or goes out of business. But if you are comfortable taking the risk of non-payment, a company can offer you the same services with a lower fee due to the lower risks involved for the factoring company.
Additionally, in case of short pays, that is when a customer pays less than the originally agreed amount due to penalties involved from the trucker’s end, a factoring company will provide you with the documentation that is required to identify that short pay was involved. If the factoring company has already paid you the full invoice money, they will deduct the short pay from your next invoice. However, if some foul play was involved by your customer and the short pay was unjustified, you can dispute it and if the customer decides to pay back, nothing is deducted. Thus with meticulous planning and a reliable freight factoring service, starting and growing a trucking business need not be that daunting.