For freight and transportation companies, steady revenue streams are vital. Particularly for carriers with fleets of equipment and full-time employees, operating expenses are never-ending and can quickly drown organizations without consistent cash flow.
Shrinking margins tend to have a cascading effect in freight, with many brokers and carriers struggling to meet financial goals. Currently, it’s a shipper’s market with freight rates at historic lows. To make matters more difficult, carriers have to keep rates high due to rising fuel and maintenance costs, meaning some brokers are left with unsustainable margins.
According to Bharath Krishnamoorthy, co-founder and CEO at Denim, a freight factoring and payment platform, freight brokers are seeing unprecedented operational strain and cash flow challenges as smaller margins force them to operate more efficiently, increase transaction volumes and manage costs tightly.
“We’ve also seen tight margins leading to bigger issues like expansion and growth being put on hold,” Krishnamoorthy said. “Cash flow issues can jeopardize a brokerage’s ability to make timely payments to carriers, employees and landlords. Even the loss of a single large customer could lead to significant financial instability or bankruptcy.”
Why use freight factoring?
In any kind of market, income is the foundation for growth, but particularly in today’s freight environment. Positive cash flow is crucial for onboarding new business and scaling operations. Conversely, late payments can damage relationships and lead to a devastating loss of business.
That’s why a freight factoring service like Denim can alleviate stress and support brokers.
“Denim offers the most flexible and comprehensive factoring in the industry,” said Krishnamoorthy. “It’s as close as you can get to a line of credit without going to a bank. Customizable carrier payments, invoicing and collections mean that customers only pay for the capital they’re using at any given time.”
Denim alleviates stress for clients in a variety of ways:
- Positive cash flow: Freight brokers receive their advance within 48 hours of funding, freeing up cash that would otherwise be tied up in collections.
- Collections: Denim invoices shippers on behalf of brokers and fleets, notifying clients when an invoice is nearing its deadline and working closely to resolve any issues.
- Carrier Payments & QuickPay: Brokers can schedule carrier payments or QuickPay, helping them stay on the road and cover their truck expenses. Denim collects and stores carrier payment details, eliminating the need to handle sensitive information like banking and routing numbers.
- Audit: Denim’s audit scans invoices, bills of lading and rate confirmations to ensure documentation matches job details.
The pitfalls of using a traditional line of credit
Krishnamoorthy says traditional factoring companies, banks and lines of credit come with inherent efficiency challenges.
With banks and line of credit, freight brokers and fleets are fully responsible for collections and payments. Depending on load volume, this could require several full-time staff members, sometimes as many as one hire per $500,000 in invoice volume.
“We see a lot of transportation companies that take this path fall into a debt spiral by using the credit or loan to finance offices and payroll instead of handling carrier payments,” Krishnamoorthy said.
Banks and traditional factoring companies lack the built-in tools and automation found in Denim’s platform. Many factoring companies rely on email to submit jobs for funding, causing slow payments and long email chains with corrections.
According to Krishnamoorthy, Denim’s self-service portal empowers clients to submit jobs in real time and track progress in one simple portal. “Our platform is integrated with the top transportation management systems, so clients can submit jobs for funding directly from within their preferred system,” he said.
Success stories
Alliance Logistix was searching for an efficient AP/AR solution for their brokerage and faced a constant influx of paperwork from their substantial load volume. With Denim’s straightforward integration, Alliance was able to implement Denim into their EKA TMS and streamline their AR/AP processes.
Alliance Logistix greatly appreciates the intuitive process of integrating Denim and the leverage a healthy cash flow. Now, their workflows are more streamlined and they can maintain strong carrier relationships and referrals thanks to Quickpay.
“We manage everything via the EKA dashboard, using the Denim portal only to monitor finances and payment schedules.,” said Natalie Schick, co-founder and president of Alliance Logistix. “The integration between Denim and EKA has truly simplified our processes.”
Similarly, River City Logistics saved on hiring additional employees while it scaled its brokerage by leveraging Denim’s back-office tools.
According to founder Chris Brewer, River City Logistics’ success is due to the collective effort of everyone involved, including Denim.
“Bringing a business doing over $50 million in annual revenue and asking for credit overnight wasn’t easy. But Denim made it happen, and we’re immensely grateful for their trust and support,” said Brewer.
Denim’s role in the supply chain
“Denim is on a mission to advance the supply chain through the accelerated movement of money and data,” Krishnamoorthy said. “Our platform is a reflection of this mission and our ongoing innovation.”
Faster payments mean quicker growth for carriers and brokers. Denim supports this with reliable payments and advances as fast as 1-2 business days.
By partnering with TMS and carrier vetting providers, Denim integrates load data directly into its platform, eliminating redundant tasks and human error. This data can be seamlessly synced back into the TMS, allowing brokers and fleets to monitor payment status and make swift, informed decisions. Additionally, Denim’s analytics dashboard provides an overview of financial performance, identifies the fastest-paying customers and highlights the most used carriers.
“With these insights at their fingertips, brokers can make faster, more informed decisions, ensuring they never lose a load,” said Krishnamoorthy.
“With Denim, you get a platform designed to streamline operations and drive growth, ensuring you stay ahead in the competitive supply chain landscape,” he said.
Click here to learn more about Denim.