With economic hardship showing no bias, businesses across sectors are still reeling from the ongoing market volatility of the pandemic. The trucking industry is no exception, even amid a continued surge in digital commerce activity and, as a result, shipping and transport needs.
Freight rate fluctuations, delayed payments and high costs can burden trucking companies, particularly smaller enterprises and independent drivers. With many corporates and retailers struggling themselves to manage cash flow, delaying payment to their trucking service providers has created a capital backlog, adding strain to supply chains.
The impending congressional stimulus package could help alleviate some of those cash flow pressures. According to CCJ reports, the first round of Paycheck Protection Program (PPP) loans shifted $12 billion into the pockets of trucking companies, and it’s likely that truckers will once again move to secure their share of the next round of funding.
But it may not be enough — and according to Andy Lupo, vice president of strategic partnerships at Pilot Company, truckers should embrace a variety of strategies to alleviate their financial stressors. Speaking with PYMNTS, Lupo discussed how a mix of cost-saving measures tied to external financing tools can support the trucking sector during a hectic and uncertain time.
Between driver salaries, high fuel costs and the unexpected expenditure on things like trucking maintenance and repairs, keeping a trucking business profitable is no easy feat, even as freight costs rise.
At the same time, organizations often withhold payments to their trucking providers as a way to strengthen their own financial positions, putting fleets in a bind. In Australia, research from CreditorWatch revealed just how hard the trucking sector has been hit amid the pandemic, finding a 500 percent increase in payment delays as the average invoice payment of 15 days past-due in 2019 jumped to 90 days past-due in 2020.
Not only does this place a strain on financials, but it creates an even deeper lack of transparency and predictability of when truckers will see money flowing into the enterprise. As such, truckers and fleet managers must be flexible and dynamic in how they cut costs and expand margins.
“Trucking fleets operate on tight margins, and any areas where they can save on expenses or streamline their business helps significantly,” said Lupo.
There are opportunities in fleet card and other credit products that can connect truckers with rewards programs or fuel discounts, as well as in external financing products, which are important tools for the sector today. Factoring can be particularly beneficial, considering the late payment habits plaguing the industry.
“Given these slow payment trends, which have impacted fleets of all sizes [as well as] new carriers entering the market, factoring has become critical to keep businesses on the road,” Lupo added.
There is no silver bullet to cash flow woes, so trucking firms should embrace a multifaceted approach to strengthening financial positions. In an effort to help the industry do so, Pilot Company recently announced a partnership with RTS Financial to combine Pilot’s fueling services with RTS’ factoring product. This bundling approach can offer a more streamlined approach to cash flow management, said Lupo, while also accelerating the pace at which end users can access financing.
It is important, however, for trucking companies to be educated about the financial service providers with which they work. Earlier this month, reports revealed that one trucking company in Georgia has filed a legal complaint against a merchant cash advance firm, 800Fund.com, on allegations of excessive fees and costs. That case was reportedly settled.
There are a range of financing options available to truckers today, ranging from merchant cash advances to factoring solutions to PPP loans. Understanding the right mix of products can ensure that trucking companies, particularly smaller operations, can keep business moving in support of the broader economy.