MID-KY Trucking LLC and Clear Spring Inc. were used to doing things on their own. The small, but successful trucking firms are part of the 97% of US transportation companies operating 20 or fewer trucks. A shift in cash flow can be tectonic for small companies, and the organizations only have a staff of three to handle administrative tasks for both companies combined. Randy Curry, along with his brother, Keith Curry, are co-owners of MID-KY Trucking LLC and Clear Spring Inc. Randy spoke about some of the difficulties trucking companies face with invoicing and cash flow.
“You have to get paid on time to ensure the drivers get their money,” stated Randy. “We realized that things could get past us in a heartbeat. With a significant number of loads in a week, administrative overload can cause us to miss something that has not been paid. If something doesn’t look right on a reimbursement we need to send it back. The next thing you know, an invoice is 75 days out and we don’t have the cash flow to move forward.”
Collecting on late or partial payments was a tough prospect to begin with but it’s one made even tougher when business is doing well. Back office demands outside of invoicing and collections take up significant amounts of time. As a business grows, a small company can become too overloaded to deal with clients who refuse to pay or underpay an invoice. A RILA Transportation Benchmark Study says up to 28% of shippers pay at 45+ days after the original invoice date. Even when paid in full, managing cash flow can be difficult when faced with an uncertain payment schedule.
Keeping drivers paid and happy is always a unique challenge. MID-KY and Clear Spring pay drivers a percentage of the invoice. When the company gets paid, the drivers get paid, which means the drivers have to wait as long as the company does. Partial or unpaid invoices hurt both the drivers and the trucking company.
It was one of their own drivers that suggested that the organizations turn to Bibby Financial Services’ Transportation Finance team to streamline and stabilize their cash flow through the billing process known as invoice factoring. Invoice factoring releases working capital from outstanding invoices, with BTF assuming collections responsibilities for the trucking companies’ clients. Factoring enables the companies and the drivers to be paid weekly, protecting precious operating capital.
“After meeting with a BTF representative it was easy to switch over to invoice factoring. There are other trucking companies that don’t want to pay a small percentage of each invoice for this service but it makes such a difference to our cash flow that I don’t pay attention to the percentage at all,” explained Randy. “Before, an invoice might slip through the cracks and thousands of dollars that we thought had been paid, hadn’t. When we did get paid on time, it could be that we were paid short. Now, I don’t have to go back in and figure out what went wrong, BTF just takes care of it. We’re collecting money we would have previously lost. I think many trucking companies don’t realize how many invoices they have on the books more than 120 days overdue!”
To put the impact of BTF into perspective, MID-KY and Clear Spring have purchased four new trucks in the last three years partnering with the company, expanding their fleet to 19 trucks. The trucking companies and their drivers get paid cash every week instead of whenever the invoice is paid.
“Since we don’t have to wait to get paid our drivers don’t have to wait - and that’s a huge benefit for them,” described Randy. “I can honestly say that after 15 years in operation, with the last three using invoice factoring, BTF has had a tremendous impact on what we do.”
Bibby Transportation Finance services support invoicing and collections while saving administrative time. Previously, there was little recourse when a client underpaid an invoice. For MID-KY and Clear Spring, partnering with BTF has meant significantly more revenue collected, allowing them to receive and keep more of what was owed than ever before while freeing up administrative time to focus on growing the core of the business and finding new customers.
“Your money is already there, locked in invoices,” Randy said. “It’s a big difference from when we used to have to wait a month at minimum to get paid on anything. Now we’re making ends meet and have extra cash in reserve because we’re getting paid every week. For transportation businesses that have to deal with brokers I don’t know how you manage cash flow without a factoring company. We do a lot of brokered loads, so we don’t know what we’re shipping from one day to the next. Now that we use BTF, it’s tough to see how we could protect our cash flow any other way. With BTF, you're going to get paid for every load and if you don't, you will know exactly why. It’s as simple as that.”