A trucking company has to perform a customer credit check on every customer. Why? Well, unlike going to the grocery store, convenience store, gas station, fast food, etc these are high volume low cost transactions which pay by cash or credit card. However, the trucking industry is a business to business transaction which involves invoices for $1,000's of dollars. Non-payment of an invoice is a big hit to the bottom line, let alone the non-payment of many invoices which can easily add up to tens or hundreds of thousands of dollars. So, yes, a customer credit check is required.
There are two types of customers and both require a customer credit check.
- Customer Direct - A shipper or consignee that is typically a manufacturer.
- Broker Customer - A transportation broker or logistics company.
Payment Options
A customer credit check is going to establish whether you can reliably invoice the customer and expect payment. If no credit can be established, the trucking company has other methods with which can be offered.
- Invoice - Credit required and generally the payment terms are 30 days.
- COD - Cash on Delivery (COD) still requires a credit approval and a check is provided to the driver upon delivery.
- Credit Card - No credit required, but a credit card form is required and completed by the customer. Typically, a credit card payment must be paid before final delivery and in some cases before loading.
- Wire Transfer - No credit required, a wire transfer is an option for payment, but you have to have the banking information provided to the customer and a wire transfer can take more time to process and verify the funds. This option is generally exercised before loading or just after being loaded.
Credit Reporting Agency
A trucking company has a variety of choices when it comes to having a credit report run on a business. Information provided can vary and so can cost for the information. A user will likely receive a credit score with an average-day-pay number.
Average Day Pay - The average number of days it takes a customer to pay an invoice.
Many trucking companies as do other businesses report their experience of doing business with a customer. This reported information is accumulated and then sold to companies looking for credit information. There is no doubt other methods reporting agencies use to gather data to report on companies, but that's not the purpose of this article.
A list of some credit reporting agenies
Getting Paid
There is too much at stake for a trucking company to not be paid. A driver, equipment, fuel, insurance, etc. are all expensive and are required to haul each and every shipment. Before hauling any load it is necessary to understand the payment terms and credit worthiness of the company providing the shipment. Do your research, communicate and sign what is being agreed to, and you can then focus on providing the best trucking service to your customer without worry of getting paid.
