In order to illustrate the benefits that freight bill factoring can have on a small trucking company, we present a case study of how using a factoring service can increase your net income.
ABC Trucking company began as a single owner/operator. With one truck, annual revenues were appropriately $240,000 per year ($20,000 per month) and earned $22,500. Before factoring, ABC was limited to operating one truck due to limited capital. After factoring, operating cash flow was no longer a concern and ABC could operate an additional truck. While ABC Trucking was able to finance another truck, they did not have the working capital necessary to finance the additional accounts receivable that the additional truck generated. Thus, they turned to East Valley Capital to factor the additional invoices from the new truck. Even when you factor in the cost of factoring these additional invoices, ABC Trucking made more net income than the previous year.
| Income Statement: | ||
| Before Factoring | With Factoring | |
| Revenues | 240,000 | 480,000 |
| Expenses: | ||
| Driver Salary | 70,000 | 140,000 |
| Fuel | 100,000 | 200,000 |
| Insurance | 7,500 | 15,000 |
| Maintenance | 6,500 | 13,000 |
| Equipment Payments | 17,500 | 35,000 |
| Other | 6,000 | 12,000 |
| Fixed Overhead | 10,000 | 10,000 |
| Total Overhead | 217,500 | 425,000 |
| Cost of Factoring | — | 8,400 |
| Total Expenses | 217,500 | 413,400 |
| Net Income (before taxes) | 22,500 | 46,600 |
| Balance Sheet: | ||
| Working Capital | 25,000 | 25,000 |
| Equipment | 75,000 | 150,000 |
| Total Capital | 100,000 | 175,000 |
The Cost of Factoring is based on $240,000 worth of invoices. Feel free to give us a call and we can help you to determine if freight bill factoring makes sense for your company.
Other Benefits and Services provided by East Valley Capital that are not reflected in the income statement:
- EVC will quickly run free credit checks on your prospective customers, saving you the potential disaster of unknowingly accepting a customer who might never pay or the expenses of costly credit reports and services.
- EVC takes over your billing responsibilities and management of your accounts receivable and collection processes, enabling you to spend time focusing on your business or saving on accountants salaries or fees.
- With EVC's many years of experience in the trucking industry, EVC factoring clients receive suggestions and observations to enhance the daily operations of their company, trim costs, and increase income.
- Increased cash flow allows a trucking company to take advantage of discounts offered if take pay quickly. Often times, this makes factoring costs about the same or even less, while still receiving the additional benefits listed above.