The logistics industry is the backbone of nearly every business in the USA. The challenges trucking companies face have grown significantly in the last decade. Trucking companies have been experiencing severe distress due to competition, regulations, limited workforce, and overdue accounts receivable.
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Common issues faced by Logistics/Trucking companies include
- Unpredictable fuel costs and competition
- Driver shortage, employee retention and truck parking issues
- Customers expect greater tracking of their goods, resulting in increased expectations and unwillingness to pay for any additional expenses.
- Ups and Downs in the economic cycle cause significant demand variation.
- Adherence to government laws.
- Compliance with environmental laws like anti-idling and other emission reduction regulations.
- Difficult to implement newer technology and business process improvements.
- ELD Mandate and Hours-of-Service rules.
- Controlling operating costs
- Dispsute over services
- Client bankruptcies
But far the biggest challenge faced by trucking companies is accounts receivable. Other business challenges are still controllable, but a client’s non-payment ( or delayed payment) after the service has been provided can exert tremendous pressure on trucking companies.
They have to pay for insurance, driver salaries and recurring expenses, regardless of whether the owner gets paid on time by its client. If your trucking business and facing cash flow challenges, invoice factoring may be worth it despite its expense.
Trucking companies have a small back office clerical staff and are certainly not trained to handle tough debt collections. Debt collection is further divided into Commercial and Consumer collections.
After 60-90 days have passed due to non-payment, transferring the account to a debt collection agency is highly recommended.
A debt collection agency will attempt to understand the root cause of debt and try to find solutions that may include getting paid in installments. They will always adopt a diplomatic approach to preserve your client’s relationship. They have various tools and tricks to settle the account, after all that is what collectors do all day long.
For Commercial Collections, the contingency fee is usually between 25% to 40% depending on the outstanding debt. For Consumer collections, a collection agency will typically send low-cost collection letters before switching to contingency collection that costs 40% of the amount recovered.
The biggest mistake trucking companies make is waiting longer for the payment, hoping they will magically get paid. If a client has not paid for 90 days, the likelihood of them paying goes down substantially.
The involvement of a collection agency puts tremendous pressure on your debtor, due to the very fact that they know that Collection Agencies are skilled debt collectors. If required, the matter can be forwarded to an attorney who will work on getting a court ruling that allows garnishments, liquidations and other tactics that force a recovery. Debt collectors with experience dealing with logistics companies’ delinquent customers can easily handle debtor excuses very well.
Collection agencies consider logistics debt a good paper since the average recovery rate is higher than in other industries.
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