RFX Blog

Solutions for Communication with Factoring Companies

July 30th, 2015

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Factoring companies play an important roll in the administrative side of the transportation industry. Many motor carriers use factoring companies to manage their receivables and collections. In exchange for their services, factoring companies take a fee from the motor carrier. For many small to mid-size motor carriers with limited cash flow, factoring companies provide an answer to cash flow problems. Owner-operators and small trucking companies also have limited resources for billing and collecting money. For this reason, factoring companies act as a clearing house for billing and payments. While it is always best to save money and handle billing & collections in-house, for some motor carriers, this is simply not an option due to limited financial, time and human resources. Perhaps it is this same reason that small to mid-size motor carriers seek loads, especially backhauls, from freight brokers. As a result, freight brokers and factoring companies often find themselves working together on payment issues.

At RFX, we used to receive anywhere from 50 to 100 phone calls each week from factoring companies requesting an updated payment status or to confirm the rate on a load and whether or not the motor carrier took any advances on a particular load. On the one hand, we found that it was important to provide this information to factoring companies in the interest of customer service. On the other hand, we found the process to be inefficient. The constant phone calls from factoring companies were taking away from our core administrative responsibilities of processing freight bills and paying the carriers. After many years of this, we finally put new procedures in place for fielding these calls. We also used technology to automate our factoring company reporting.

1.  Fielding Calls – Simply put, RFX no longer accepts payment status or rate inquiry requests from factoring companies by phone. We understand that we are sacrificing a certain element of customer service by doing this. But we also realize that we are boosting our customer service in other areas by freeing up more time and resources to pay trucks faster. Rather than answering requests over the phone, we encourage factoring companies to email their request. Upon receipt of their email, each email address is entered into an automated system which sends payment status statements via email one or twice per day. We have found that we have dramatically cut down on the number of phone calls for payment status since this system has been implemented. In setting up this solution, we also found that factoring companies don’t want to make so many phone calls. They would rather receive emailed statements. We see this as a win-win situation.

2.  Data Automation – We put a significant amount of research into an automated system that would send emails to each factoring company on a daily basis. Through our investments in technology, we are able to provide information to factoring companies about payment history as well as anticipated payment data for orders that have yet to be paid. We are able to calculate all additional earnings, deductions and fees, such as lumpers, detention, wire deductions and the fees associated with those wires. If a claim is anticipated on a load, we are able to provide this information to the factoring company. We are also able to notify factoring companies if a particular document is missing or illegible, allowing the factoring company and their motor carrier clients to remedy the problem.

3.  Direct Deposit – Another solution we are implementing to make life easier on our staff and the factoring companies we pay is to set each factoring company up for direct deposit. We discovered that over 40% of our paid invoices year-to-date were made to factoring companies and that all of those factoring companies were receiving a paper check. We realized we could increase the speed at which a factoring company gets paid by a few days simply by eliminating paper and postage. At the time of this article, this is a fairly new practice for us, so we have not seen the results of our efforts yet. However, we are optimistic that our payment turnaround time will improve drastically over the second half of 2015 and into the future.

Posted on July 30th, 2015 in business strategy, Technology