Wendy Parker
Factoring in the factoring
Wendy Parker|June 16, 2016
Let’s talk about getting paid.
Dollah dollah bill, y’all!
What happens when you’re done with the job and can’t collect on the pay? It’s something I never really considered, until we jumped into this authority thing and started preparing to be the people in charge. We have always been paid by our employer/lessor and only once has there ever been a discrepancy. We ended up eating a $600 freight charge, and it was like getting kicked in the head by a donkey. I can’t imagine being able to absorb those kind of hits on a regular basis.
So this is where a factoring company is beneficial. I had a long conversation with Rich Templeton of Steelhead Finance the other day, and he really taught me a lot about factoring and what it’s for. The conversation included Drew Krupp, of TurnKey Authority. We’re fortunate enough to have both of these smart guys helping us out with our transition.
The first point I’d like to make, for all the people who just said, “You don’t need help getting your own authority,” is that it’s important to know your strengths and weaknesses when it comes to your business ventures. I’m certain there are many people who really don’t need help, but I do.
This process has been made a thousand times easier for us by having a group of professionals not only handle the paperwork, but advise us on how to set these things up to our greatest benefit. They know things I don’t (and would spend an inordinate amount of time Googling). It’s well worth investing a little money on the front end for us, to have everything in a tidy little package, instead of the carnage I’d likely make of the 7,000 forms and documents.
I’m going to write more on the Authority process, but today I’ll focus on factoring.
Factoring has always been made out to be a dirty word to me. As I mentioned before, we’ve had no direct experience with it, so I kind of listened to the whispers and grunts about how awful it is. The truth is, there are some very shady factoring companies out there, who definitely don’t have growing your business in mind. They have been likened to the loan sharks of trucking, and like payday loan sharks, they suck the life and profit out of you before you have a chance to use it.
According to Rich, a good factoring company, like his own Steelhead Finance, is not in business to hook you into factoring forever. They want to get your money flowing, provide other services that help you grow, and keep the arteries of your business flush to get to the point where you cash flow independently. Setting you up for growth is what they’re in the business of doing.
“As crazy as it sounds, we don’t want businesses to have to factor forever,” he says. “We’re happy to have long-term clients, because that means what we offer is good for their business, but we also love the clients who graduate from factoring after helping them grow to where they want to be.”
Having a factoring company has benefits other than cash flow. Interestingly enough, a slow payer will usually respond quicker to queries from a financial company than they will to an independent request. They’re concerned about dings to their credit scores, and feel a financial institution would be more likely to report, so they generally pay these accounts as soon as they’re billed for them. Long story short, you have “juice” with a factoring company.
Being able to weed out the slow-poke or non-payers makes it easier from the get-go, and for those of us who are just starting to develop relationships with brokers/shippers, Steelhead’s quality resource data base is available to check credit ratings before ever doing business with any of the 40-50 thousand companies they have on record. An ounce of prevention is worth a pound of cure.
We are very happy to have the team we have helping us. Education based services are the backbone of both Steelhead and TurnKey, because they believe it’s important to teach people the “why” and “what” of the processes they help them with.
Factoring may not be for everyone, but it’s not the dirty word I thought it was after all. I learned a lot from Rich and Drew, and I look forward to picking their brains for more important info in the future.