Insider Secrets to Successful Freight Brokering

Freight Brokers Using Factors

Some freight brokers use factors to get money quicker than waiting for their shipper/customer to pay. Of course, the factor buys the invoice at a discount and invoices the shipper for the full amount.

To be honest, using factors is not the least expensive way to get started. Sometimes the fee can take 30% or more of a freight broker's profit. That's a chunk.

Here is something else to consider: some factors require a year's contract. You will be stuck with them for that duration. This is not good. You want more flexibility.

So, in addition to just looking at the fee you will be paying, check and make sure that you can bail out with a 30-day notice; or at least with a 90-day notice.

There are many factors and it is hard to do a apples-to-apples comparison. But make the attempt anyway.

Freight Brokers and Cash Management

A big part of brokering is to determine what payment terms you want to offer your truckers. For example, will you be making cash advances or not, will you have 21 day or 14 day quick pays, etc.? If you will be offering advance pays, how quickly will you pay the balance due?

As far as the shipper is concerned, what terms are you asking for? Due upon receipt? Due in 10 days? A discount if paid by a certain day? Or will you be satisfied with the normal 30 days for collection?

How are you going to check new customers? Will you send credit questionnaires or run credit checks?

In our training, we cover these topics in detail and help you come to a good understanding. All our input is based upon actual experience.

To learn more about cash management and other required skills, go here:

http://www.atexfreightbrokertraining.com/7Skills.pdf

 

The Freight Broker Squeeze

When you buy something at the store, you give your money and you get your item(s). It is a fast transaction that needs no explanation.

When you broker freight, however, here is what you run in to. The truck will take some time to make their delivery but many of them want a partial payment upfront. This is a common way of transacting business in this industry.

Here is the squeez - the broker may wait 30 days or longer to get paid from the shipper. So, if the broker is making a partial payout upfront, his or her cash flow is reduced. Multiply that times ten or so when business gets rolling.

But if the broker does NOT make an advance payment, he or she may lose the trucker to another broker who is able to advance some money.

In our training, we focus a lot on making YOUR strategy work based upon your resources. Everyone is different but many fall into several classes: those brokers with sufficient cash flow, those brokers with adequate cash flow, and those brokers who are struggling.

As a freight broker, you need to have a workable plan of action and create your payment terms before you open your door for business. Here in our training, we help you do just that.

By the way, if you are waiting longer than 30 days to get paid from your customer, you may always be struggling with cash flow.

Go to www.atexfreightbrokertraining.com for more information and learn how to get your cash coming in faster.

Freight Brokers: What About Advance Payments?

New freight brokers, or established freight brokers with a small cash flow, need to establish a policy for making advance payments. Should advances be made? If so, how much and to whom?

Managing cash is a required skill that freight brokers need to master. If advance payments are made without the broker knowing when to expect payment from the shipper, a "perfect storm" is in the making.

The most important part of this is knowing when you can expect payment and any broker who starts business with a shipper without know this will go down in this perfect storm.

We cover these issues IN DETAIL in our training: cash receipts and payment alternatives.

If you need to boost your cushion of cash, we have a new financing source for our clients.

Lastly, you might want to check out some 2-3 minute audio comments that I've prepared. Go here: http://www.atexfreightbrokertraining.com/podcastsrecordings.shtml

Freight Broker's Cash Management Needs

I see ads all the time from third party companies called "factors" that will advance money to the broker based upon the broker's invoice to the shipper.

The factor asks "Why wait 60-90 days for payment when you can get your money in one day". In one of my factoring examples in my freight broker training, I illustrate how a 3 1/2% fee can amount to taking a bite of nearly 2/3's of the broker's profit on a particular load.

Ouch! That's a big bite.

Here is the thing - there are procedures and techniques that need to be in place in order to be a good stewart of your money. You do NOT have to wait several months for your money and you do NOT have to use a factor.

All you need is to put in place certain policies and pocket even more money.

Be sure to check out my website in detail. On my homepage, down about half way, there is a link that will reveal many of the topics covered in our comprehensive freight broker training.

Freight Broker Cash Management

Every business needs to have top-notch cash management skills or they lose. The loss could be loss of potential income or the loss could mean going under.

Freight brokering is a little different than other service businesses. Normally, you will pay your carriers before you get paid from your customer. At least, this is the routine for beginners.

Here is what you want to do to control your cash:

1. As you are speaking with potential customers, ask them how quickly they normally pay freight brokers; then, make a note of this,

2. If and when you do get loads from them, run a credit check first so you know what to expect before you go any further,

3. Record the actual number of days that it takes to receive money from the customer; then compare this to what they told you and with what you find out on the credit check;

4. On your invoice terms, enter "Due upon receipt", or "Net 10 days"

5. Refuse to take loads from a customer if they are paying you later than 40 days,

6. If the customer is behind on some payments, make them pay up 100% before you take another load,

7. Require advance payments for those customers who are slow payers.                                                                                                                                    
Is all of this easy to do? Not always, but you are better off losing some bad paying customers rather having them mess with your cash flow.

As anxious as you are to find and work with customers, you have got to be a pit bull at times to manage your cash.

How Quickly Will You Get Paid?

Cash management skills are extremely important for freight brokers maybe moreso than for most other businesses. This is because you normally pay the truck before you collect from your customer. Thus, a gap exists between the time you make pay outs and the time you receive cash.

If this gap widens and snow balls out of control, good luck to you.

Here are the some steps to take that will help you get off on the right foot. One, as you are calling on prospective customers, ask the shipping manager how quickly does his or her company normally pay freight brokers. Two, write it down.

Then three, If you do work with that shipper, compare what they told you with what actually takes place. If there is any big discrepancy, get back with the shipping manager.

No matter how badly you want to start working or continue working with a customer, if they are sitting on your money, you might have to fire them.

There are other precautions and techniques for managing your cash. I'll bring these up in other blog posts.

 

How to Get Cash Fast

Cash management is extremely important in any business but especially so for freight brokers. In this business, you want to pay the truck quicker rather than later. You will build a more loyal and reliable base of carriers if you do this.

You normally will wait 1-4 weeks to get your money from the shipper after you pay the truck. So, you have a gap to fill until you get paid. What are your options?

The ideal thing is to have a cushion of money to pay your trucks on time. And, you do NOT need buku thousands of dollars for this especially if you are starting from scratch. For those without a cushion, there are "factors". They will buy your invoice at a discount and advance the money to you quickly.

Factors are all different in the way they operate. It is hard to do an "apples to apples" comparison (I tried it). Nevertheless, you will want to talk to a number of them. The first four questions you would ask are:

1. Do you work with freight brokers? (Some don't)
2. Do you have a monthly minimum?
3. Do you have non-recourse advances?
4. Do you require every invoice from a particular company to be run through your system or can I pick and choose which invoice I want to factor?

So, if you are strapped for cash, consider factoring your invoices to get you started. Believe me, the time is ripe for some of you to get going here, one way or the other. Don't be left with the crumbs after the economic turnaround takes on more strength.

Personal Financial Planning

With the economy the way it is, many people are looking for ways to stay afloat, to survive or just to make sure they are on track. I have developed a 22 minute video and some spreadsheets to help you do some projections on your cash flow.

You can save these spreadsheets with a new file name and then enter your own financial data. It will be data like your monthly take home pay from whatever sources you have. It will be data for your household expenses and my listing is comprehensive. 

You can learn how the numerous household expenses are summarized, giving you a benchmark to compare to what other experts are saying you should be spending relative to you income.

There is one tool that is included in these spreadsheets that is very powerful and it is most likely you have not encountered it anywhere else. It is a tool that business owners use but it can be applied to your personal situation.

Go here now to order this video and the spreadsheets: http://atexfrei.ipower.com/purchaseFBTrngCashFlowProj.html

It's a tiny sum of $10 and you will find this information very helpful.

How Do You Collect Your Money? - Part II

In Part I, I mentioned the importance of knowing beforehand what you can expect as far as receiving money from your customers. How quickly are you going to get paid?

People and clients ask me if they are going to get paid or will they run across shippers who won't pay them. I tell them that, yes, most likely you will get paid. That's not the problem. The problem is not knowing how quickly the shipper is going to make payment and just hoping you will get paid.

It is my opinion that more freight brokers go out of business because they let their accounts receivable get out of hand as compared to those who don't get paid at all.

As a business owner, YOU are in control and if you are not, you need to rethink your policy and revamp your habits. It is hard to turn down business especially in this economy. However, if your customer is sitting on YOUR money for 60 or 90 days or longer. It is almost as bad as not getting paid.

Having said this, be sure to use a credit service to run a credit check. There are several that focus on the freight and transportation industries.

Don't waste your time sending credit applications. You will most likely be tied up making a lot of phone calls to people who really don't want to give you any information.

If you can't find a particular customer in a database, call the accounting department. Explain that you are just a small business person and you need to get paid within a certain amount of time (you set your terms - whatever they might be). Be friendly but be firm and know what you want.

Don't let your accounts receivable be the most neglected item in your freight broker operations. You won't survive until you stay on top of it and take control.

It all starts with creating a credit policy, putting it in writing and then following it with very strict adherence.