Profitable on paper, empty in the bank

A fleet can be profitable on every load it hauls and still not make payroll. This surprises people the first time, because profit and cash feel like the same thing. They are not, and the difference is timing.

You pay for fuel at the pump. You pay drivers weekly. You pay insurance monthly. The invoice for the load that generated all of that gets paid somewhere between thirty and forty-five days after delivery, and only if the paperwork was right.

Work out how long it actually takes you to get paid — from delivery to money in the account, not from invoice date. Most owners assume a number and have never checked it.

Then look at the spread rather than the average. An average of thirty-five days hides a very different business depending on whether every customer pays at thirty-five, or half pay at twenty and the rest at sixty. The slow half is what determines how much cash you need on hand.

A meaningful share of late payments are not disputes. They are invoices that could not be processed — a missing signed delivery receipt, no proof of the accessorial claimed, an invoice that does not reference the load number the customer files by.

The clock does not start when you deliver, it starts when a complete invoice reaches the right place. Every day between those two events is a day of your own money funding someone else's freight.

• Get delivery documents in the same day, not at the end of the week
• Invoice against the reference the customer uses, not the one you use
• Attach the evidence for anything beyond line haul at the moment of invoicing
• Have one place where you can see what is unpaid and how old it is

Factoring sells your invoice for immediate cash at a discount. It is not inherently a bad deal — it converts a timing problem into a known cost, and for a fleet that cannot otherwise fund its own growth that trade can be worth making.

What matters is knowing what you are paying, and the headline percentage is not it. Read for:

• Recourse or non-recourse — who carries the loss if the customer never pays, which is the single largest difference between two otherwise similar offers
• Whether the fee is flat or tiered by how long the invoice ages
• Reserve amounts held back, and when they are released
• Minimum volume commitments and what happens in a slow month
• Termination terms and notice periods

Convert the fee into an annual rate before comparing it to anything else. A small-sounding percentage on a thirty-day invoice is a much larger number expressed the way you would evaluate a loan, and that is the only honest comparison against a credit line.

A broker offering to pay in two days for a percentage off the rate is selling you the same product as a factor, in different packaging.

Work out what that discount costs annualised, given how many days early you are being paid. Sometimes it is cheaper than factoring and worth taking. Sometimes it is dramatically more expensive, and it only looks reasonable because it is quoted as a small percentage of one load rather than as a rate.

1. 1Unpaid invoices, grouped by age. Anything past sixty days needs a name against it and a call.
2. 2Weeks of operating expense you could cover from cash on hand. This is the number that tells you whether a slow month is uncomfortable or fatal.
3. 3Days from delivery to payment, tracked per customer. It will tell you which of your best-paying customers are actually your most expensive.

A customer paying a good rate at seventy days can be worth less than one paying slightly less at twenty. Rate is what you earn. Timing is whether you get to keep operating while you wait for it.