Build an Effective Collection Strategy

Build an Effective Collection Strategy

Whether your small trucking business is sailing smoothly, treading water or moving against a strong tide during these tough economic times, having a reliable collection strategy is key to maintaining enough cash flow to remain solvent.

By taking a few measured steps, you can create a streamlined collection process to help boost your business' cash flow and alleviate concerns about how to handle late payments.

Consider these tips when developing your collection strategy:

  1. Create a tracking system. Develop a payment-tracking system that alerts you of overdue payments. The sooner you're aware of late payments, the sooner you can take action. Consider utilizing software specifically designed to track payments or consult your banker or financial advisor for suggestions about how to get started.
  2. Follow strict protocol for missed payments. With your tracking system in place, create a contract delineating clear payment guidelines so there is no room for client misinterpretations. Ask your clients to sign the agreement before providing your products or services. Have a letter outlining the consequences of a missed payment ready to mail, and follow up with a phone call to the client in case a payment becomes late. A phone call reinforces the importance of prompt payment and may provide additional insight about why the payment is late.
  3. Conduct credit checks. When working with a new client, it may be wise to conduct a thorough credit and background check. Consider enlisting the service of a professional credit check company or accessing credible, inexpensive online resources.
  4. Avoid extended payment terms. Try not to extend payment terms beyond 30 days when the economy is tight. If you have an existing contract that extends beyond 30 days, consider offering a discount for faster payment. Don't extend credit or terms unless you've verified that a customer is in a position to repay.
  5. Avoid spinning your wheels. If you are not having success with your collection efforts, consider enlisting the help of a collection agency or legal expert.

Consider incorporating the following tools into your collection strategy to facilitate increased cash flow:

Invoice your clients as soon as possible. The faster you can invoice your client, the quicker you can get paid. This is especially true if your client has time-based terms of payment, such as net 14 or net 7, etc. The clock usually starts when the client receives all completed paperwork and invoice. Trip Sheet Central creates an invoice as soon as all load details have been entered into the system thereby giving you the opportunity to submit the invoice as soon as your truck is unloaded.

Direct deposit. To facilitate faster access to funds, consider signing up for direct deposit, ACH transfers or Remote Deposit --a service that enables small businesses to scan deposit checks at their office and electronically transmit them to the bank. Most banks offer this service, and some financial institutions offer software that enhances clients' operating efficiency by integrating directly with their accounting software and enabling them to update their account receivables in one process.

With a reliable and efficient collection strategy in place, you can devote your valuable time to other key elements important to the ongoing success of your business.

Hours-of-Service Regulations

The Hours-of-Service regulations (49 CFR Part 395) put limits in place for when and how long commercial motor vehicle (CMV) drivers may drive. These regulations are based on an exhaustive scientific review and are designed to ensure truck drivers get the necessary rest to perform safe operations. FMCSA also reviewed existing fatigue research and worked with organizations like the Transportation Research Board of the National Academies and the National Institute for Occupational Safety in setting these HOS rules.

The regulations are designed to continue the downward trend in truck fatalities and maintain motor carrier operational efficiencies. Although the HOS regulations are found in Part 395 of the Federal Motor Carrier Safety Regulations, many States have identical or similar regulations for intrastate traffic.

Read the most current HOS rules and regulations at the FMCSA website

Frequently Asked Questions about IFTA

What is IFTA?

IFTA is the International Fuel Tax Agreement. Through the IFTA, member jurisdictions act cooperatively to administer and collect motor fuel use taxes.

Which jurisdictions are members of IFTA?

The 48 contiguous States of the United States and the 10 Canadian Provinces are members of IFTA.

Should I apply for an IFTA license?

If you are based in a member jurisdiction and operate a qualified motor vehicle in 2 or more member jurisdictions, yes. If you usually operate your vehicles only in one jurisdiction, but make occasional trips outside the base jurisdiction, you may elect to purchase trip permits for that occasional travel. Permitting services can usually be contacted from any major truckstop. Contact a permitting service for rates.

What is a qualified motor vehicle?

A Qualified Motor Vehicle is a motor vehicle used, designed, or maintained for transportation of persons or property and:

  • has two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds or 11,797 kilograms; or
  • has three or more axles regardless of weight; or
  • is used in combination, when the weight of such combination exceeds 26,000 pounds or 11,797 kilograms gross vehicle or registered gross vehicle weight.

Where should I go to apply for an IFTA license?

You should contact the jurisdiction where you are based. Your base jurisdiction is the jurisdiction where you have your qualified motor vehicles registered, where you have some travel, and where the operational control and operational records are maintained or can be made available.

What if I have qualified motor vehicles registered in more than one jurisdiction?

It is important that you contact one of those jurisdictions. You may be able to consolidate your operations under one license. The jurisdiction you contact will assist you and give you information on how that can be accomplished.

Taking care of family -last?

That's an odd headline, but I figure it oughta catch anyone's attention fairly quickly.

As an owner operator, or independent truck business owner, you may fall into the category of small business owners that do not have big company benefits like health insurance or life insurance. Insurance of any kind these days is outrageously expensive, and even with the folks in congress talking about it all the time it is still a few years away from being useful to us right now when we need it.

I want to focus for now on life insurance. Driving a truck is much safer these days but there is still the odd chance that as a truck driver you could be involved in a fatal crash. Back when I was driving a truck, there are times I would be just so tired and yet I could not stop because I needed to cover more miles to make an on-time delivery. In many of those instances I dreaded falling asleep at the wheel and the thought of being in a crash often kept me awake. I thought of my wife and kids back home who depended entirely on me for the bread on the table, clothing, shelter, -you name it. I thought about buying life insurance and the one quote I got was so high I immediately shelved the idea.

Well, I'm now more informed about life insurance and the kind to buy. I'm not an expert on this, but I do know that Guaranteed Level Term Life Insurance can be purchased for less than a couple lunches a month. For instance, you can buy a $400,000 15-20yr guaranteed level term life insurance policy for about $30/month or a couple hundred/year depending on your age and health. This is a good buy, and peace of mind knowing that you're taking care of your family the last time you do. To get a free quote and see just how affordable it is go to Zander Insurance' website www.zanderins.com

How do you ask a Shipper to start paying a Fuel Surcharge?

This is a difficult subject to discuss with the shipper because it means raising rates -you could lose the business you've been getting from that shipper. So how do you go about get the fuel surcharge to cushion the high cost of fuel hitting your business?

If you have had this shipper/customer for a while, the task is somewhat easier and could be discussed over the telephone and followed up with a letter spelling out the details. Of-course any time you are about to raise, check to see what the market is doing and then tread carefully. Here is a sample letter that you can use when notifying your shipper about the pending increase:

Your Company
Address Here
City, State Zip


Date

Mr. Shipper
123 Main Street
Your Town, USA 12345

Dear Sirs:

I am sure that you are aware that fuel prices have spiraled upward over the past several months, and presently are higher than they have ever been in our history. We have acted in good faith in our attempt to resist seeking relief, but this has placed an undue burden on us. We had hoped that this would be a short term inconvenience, but now it looks as if it will last longer than expected. Due to the critical nature of the current situation, we can no longer continue to absorb these increased costs.

Therefore, we must implement a temporary fuel surcharge on all shipments. This fuel surcharge will remain independent from our base rates and will be shown as a separate entry on our freight bills. We will compute the fuel surcharge on a mileage basis, and it will reflect the extra cost of the fuel used in the specific trip.

Our computations will be based on the U.S. National Average Diesel Fuel Index. (You may view the charts provided by the Department of Energy by visiting their website at http://tonto.eia.doe.gov/oog/info/wohdp/diesel_detail_report.asp . We will review this data and calculate our actual costs on a weekly basis. The figure used for cost per gallon is also region specific, established by the average cost of fuel per gallon, on the date and in the load's origination point.

We regret that this action is necessary and deeply appreciate your understanding and partnership with us in helping to share the burden of these fuel cost increases. Together, we will keep our nation strong during this time of crisis. We hope that this solution will keep the goods and services that power our great nation’s economy moving.

Respectfully,

Name

Company

I am sure there are other ways that this subject can be approached. Any thoughts out there?

Manage TIME instead of rate/mile

To maximize profit, manage TIME instead of rate/mile.

Choose the load with the best average revenue/day

Why?

In the trucking business, fixed costs usually run about $80 - $100 per day. As an independent owner-operator you still need about $100 a day for personal, family and home expenses that you must meet whether you're loaded or not -even on weekends!

How do I start a trucking business?

TSC Makes Trucking Business Success A Reality

Starting a trucking company will require coordinating a number of processes. Federal and state registrations and permitting are required, as well as securing insurance.

The trucking business requires a special kind of person to succeed. Special in the sense that even though the basic characteristics of smart, persistent, articulate and well organized, one also requires patience, dedication and a reliable support system.

OK! Let's get started...

Business Plan

You need a plan. The same way you wouldn't begin to build a $100,000 home without a blue-print is the same approach you should take when starting your trucking business. Yes that's right - Trucking Business!

Lay out on paper everything you can think of that you'll need to do. Your plan should be guided by facts, research and professional advice from experienced people in the trucking industry.

At a minimum, your business plan should include:

  • Organizational setup (company name, location, management, etc)
  • Financial plan (cash flow, balance sheet, projections, etc.)
  • Operating plan
  • Marketing plan
  • Growth plan
  • Research and development
  • Exit plan

Choosing a Company Name

It is very important to decide on what to call your company from the start. This name will be your company's identity and should be unique, easy to spell and pronounce, and most desirably -should be available as a web site domain name. So for instance, if you choose to call your company Quick Transport, Inc., then you should check to see whether the domain name www.quicktransport.com is available and reserve it by registering with a reputable service like PairNIC (www.pairnic.com).

Resources

Here are some government/state websites where you can obtain more information and specifics on creating a company in your state.

I will be adding more links to this post for all states

Tax ID / Federal Employer Identification Number (FEIN)

This is an important step in setting up your business. Get this setup as soon as possible.

An Employer Identification Number (EIN) is also known as a federal tax identification number, and is used to identify a business entity.

This EIN is your permanent number and can be used immediately for most of your business needs, including:

  • opening a bank account;
  • applying for business licenses;
  • filing a tax return by mail

However, no matter how you apply (phone, fax, mail, or online), it takes up to two weeks before your EIN becomes part of the IRS' permanent records.

You must wait until this occurs before you can:

  • file an electronic return
  • make an electronic payment
  • or pass an IRS Taxpayer Identification Number matching program.

Do not pay anyone to get this for you! It is free.

Go to http://www.irs.gov/businesses/small/article/0,,id=98350,00.html and do it yourself.

Bank Account

Take the time to open a small business banking account to simplify your record keeping and life. Shop around for the best deal. Small business banking varies in fees and features.

The costs of a business account are far less than the benefits to your business. Fees are partly tax deductible as an expense.

Keep in mind that your business may grow. Opening a business account with a bank earlier can help with required financing in the future.

Remember run your business as a business and do not mix personal funds with business funds.

Apply for an USDOT number and MC number

Register your business with the U.S. Department of Transportation (USDOT). Trucking companies, commonly referred to as carriers, are regulated by the Federal Motor Carrier Safety Administration, a part of the U.S. Department of Transportation. All trucking companies are required to have a USDOT number, obtained by registering with the U.S. Department of Transportation. When you begin the registration process there are some things that you need to know about your trucking company.

Setting up Insurance

Contact an insurance company or broker that specializes in trucking companies and request a quote for insurance. They will generally require information on your vehicles, drivers, type of cargo and distance traveled (interstate, intrastate, international, for example). Proof of insurance is required for a number of permits and filings that are required to start a trucking company. However, don't secure your insurance too soon, because you will be paying for insurance that you can't use until everything else is in place! Ask your insurance agent if it is possible to have your insurance effective date about 2 weeks after you secure insurance - that will allow you some time to get all of the other paperwork done.

Apply for an IRP/License Plates

Develop your International Registration Plan, or IRP. When you license your commercial vehicle in your home based state, you have to fill out an IRP form. This form requires you to identify the U.S. states, Canadian provinces and Mexican states that you will be traveling in. This form also requires you to estimate the number of miles that will be traveled in each state. Your fee is based on the number of states and the number of miles traveled in each state.

Apply for an IFTA License

The International Fuel Tax Agreement (IFTA) form is completed with basic truck and company information and submitted to the IFTA office to receive an IFTA sticker. This IFTA sticker must be placed on the vehicle. IFTA filings are required on a quarterly basis. The IFTA filing consists of documenting the number of miles driven in each state and the number of gallons purchased in each state for the quarter. You will, generally, send in a fee when you send in your quarterly IFTA filing-unless you get really bad fuel mileage! Trip Sheet Central offers IFTA fuel tax reporting at affordable rates.

Learn more about IFTA

Apply for your Unified Carrier Registration (UCR)

UCR is a relatively new registration. This registration allows you to carry cargo across state lines. There is a simple online process available from most state Department of Transportation websites. You may also contact your state public utilities commission office (PUCO) for the form. This form requires basic company and vehicle information.

Apply for State Specific Permit Requirements

Many states require registration or permits for carriers that will be hauling intrastate cargo or even for carriers that will cross the state line en route to another location. These states include Oregon, Texas, Kentucky, New Mexico and New York. For example, a KYU number is required for all carriers that travel in or through the state of Kentucky. This number is obtained by filling out a form and sending it into the state. They get their money when you file a quarterly report that indicates how many miles you drove in the state of Kentucky for that quarter.

Once you determine the states that you will be traveling in or through, contact the Motor Carrier office in that state. This office may operate under a different name but will generally be a part of the state department of taxation or motor vehicles.

Signage Required on Vehicle

Post the following signage on your vehicle:

  • Company Name
  • Home Terminal Location
  • USDOT
  • MC Number
  • Last 8 digits of the vehicle VIN
  • Truck Number

Additional information may need to be on the signage, such as your KYU number, if required. Tip: You can have vinyl signs printed for a low price at most print shops like FedEx Kinkos. Truck-stop printers are generally more expensive.

Driver Qualification Files and Other Records

This step must be complete before you can begin trucking operations of any kind. All drivers must undergo and pass a drug screen test and physical/medical exam before starting work. A medical certificate is issued after these tests, which must be carried by the driver at all times he/she is on duty. A copy of the medical certificate (card) will need to be on file at the home terminal.

  • Perform a department/bureau of motor vehicles search on your driver, for all states that he/she has held a license in for the past ten (10) years. Perform this search annually.
  • Perform a pre-employment check on your driver and obtain employment history for the last ten (10) years.
  • Sign up for participation in a Drug/Alcohol program which will provide random and post accident drug tests.
  • Create or sign up for participation in a safety program.
  • Create or sign up for participation in a maintenance program (includes preventative maintenance, annual inspection and repairs).
  • Create or sign up for participation in a Log auditing program.
  • Create an accident register-documentation of any accidents that vehicle is involved in-regardless of who is at fault.
  • Document vehicle information-VIN and gross vehicle weight.
  • Document all dispatch data-listing when, for whom, where and what were shipped to whom and where.
  • Document fuel purchased; listing quantity and location

Keep all the driver information above in the Driver Qualification file at the home terminal. It must be available when your trucking company is audited. All trucking companies must undergo an audit within the first eighteen months of operation.

Truck Permit Book/Dossier

The transportation industry is a heavily regulated industry. Documentation that confirms that your trucking company is properly licensed and has all the necessary permits must be available for inspection in the truck.

It is a good idea to have duplicate copies of all licenses and permits at the home terminal.

Documentation required in the truck at all times includes:

  • CAB card - This record shows your current USDOT number, MC number, IRP, UCR and IFTA jurisdiction information. It is normally valid for one year and must be renewed annually. Tip: Always renew early to avoid steep fines, penalties and down-times resulting from a failed road-side or weigh-station inspection.
  • Any required permits or filings for individual states will need to be carried in the vehicle as well.
  • Proof of Insurance. Truck Insurance companies will normally send you a cab card insurance certificate. The actual policy will normally be mailed to the home terminal where it should be kept.
  • Driver's Daily Log Books. Your driver will need to complete, on a daily basis, a driver's daily log.
  • Daily Vehicle Inspection. Your driver will need to complete, on a daily basis, a vehicle inspection report. Standard driver's daily logs incorporate the vehicle inspection on the form.
  • Bills of Lading. For every load picked up by the driver, the shipper will issue a bill of lading (BOL) to be delivered with the shipping. The BOL is a manifest describing the cargo being hauled, and information about the origin and destination. A copy of the BOL should be sent to the home terminal for billing and record maintenance when the truck is unloaded.