Part 10 of 22 Ways To Reduce LTL Costs That Don’t Involve A Price Reduction – Pay On Time
10. Pay On Time
You don’t expect your favorite fast-food restaurant to provide medical advice. You don’t expect your local dry cleaner to also change the oil in our car. So why do you expect your LTL carrier to be your bank?
LTL carriers are just like any business in that they must make a profit and must manage their cash flow to remain in business. They just want to pick up your freight on time, deliver it on time and in full, and get paid for their services. What they don’t want to do is monitor their cash flow to ensure they can pay their bills while they wait on you to pay them. Who wants to do that?
Customers who pay timely are showing the carriers how much they are valued. Such customers tend to have minimal invoice discrepancies that can lead to full or partial payment delays. Customers who pay timely are going to get more-favorable pricing as they are helping the carrier to reduce their internal costs and are deemed a low credit risk. The carrier is not concerned about being paid on future shipments when a customer pays timely.
Customers who pay slowly are indicating to carriers that they are considered a commodity that is not valued and that can be replaced. Such customers may have inordinate invoice discrepancies which take back-and-forth dialogue to resolve. The longer an invoice takes to get paid, the lesser the odds that the carrier will be paid in full. Carriers will become concerned about getting paid for future shipments. They may become concerned enough that they opt out on future loads.
Simply put, customers who are slow to pay LTL carriers are going to be flagged as a credit risk. They will price that risk into the freight charges. You the shipper will pay more over time. And if you determine a new carrier should be brought on to handle your business for any reason, one of the first things they will look at is your credit risk. In today’s environment, carriers will choose to not even handle your business. Or they may give you only limited credit and a pricing program with the credit risk baked in.
Don’t expect your LTL carrier to be a bank.