New broker-carrier relationships can be delicate as both parties begin working with new people, processes, and technology.
Before entering a new relationship, motor carriers will evaluate a broker or third-party logistics (3PL) provider’s credit history — the average days to pay — and the terms and fees associated with their quick payment options.
In the cash-intensive trucking business, many carriers are used to paying fees between 2 and 5% to get their funds within a few days of completing a load. Getting access to funds may be the only way for small carriers and owner-operators to cover the outlay for fuel, driver wages, and other costs to move their next load.
To process a quick payment, 3PLs deduct the fee directly from the freight bill. For freight brokers, a fee of just 2% is a significant bump in revenue considering that net margins averaged 12% on loads during the past year with freight rates at record levels. https://www.transflo.com/wp-content/uploads/2022/01/TRANSFLO_Infographic_Room_to_Grow.pdf
Getting extra revenue on loads from quick pay can take a toll on new relationships with carriers, however. They will likely start looking for a logistics partner who offers better payment terms.
3PLs that offer carriers a streamlined payment process and better quick pay options can gain an immediate advantage by securing more capacity and moving loads at higher margins.
Don’t Burn Bridges
3PLs with self-funded quick pay programs may be adding a source of friction to the most critical stage of freight transactions. That friction, in the payment process, could be burning the bridge that will keep carriers returning for more business.
In today’s competitive freight market, 3PLs that wait 15 days or more to pay carriers or charge high fees for quick pay are losing ground to those who can offer a more seamless and low-cost payment experience.
Although 3PLs benefit financially from quick pay fees, they could be limiting their access to capacity from loyal, repeat carriers. Also, carriers that use a broker’s quick pay option will try to negotiate higher rates on their next load to cover the fees. As a result, the 3PL gets diminished returns from quick pay fees by having to search for new capacity and increased transaction costs from onboarding and dispatching new carriers.
This helpful illustration, https://www.transflo.com/wp-content/uploads/2022/01/TRANSFLO_Infographic_Cashflow.pdf, shows how 3PLs and carriers can build a better bridge with cash flow solutions that keep capacity returning by using intelligent automation and better payment options.
3PLs that offer carriers a seamless payment experience can use existing technology to:
- Beat the competition with extremely low (or zero) fees
- Pay carriers faster by eliminating delays and mistakes
- Move more loads at higher margins
Better Payments = Better Profits
3PLs that use the Transflo Velocity+ mobile platform can give carriers a fully integrated payment experience. Carriers use the Velocity mobile app to scan their trip documents at the point of delivery. As soon as a 3PL receives the documents it can approve the invoice for payment.
Transflo Velocity can integrate with a broker’s own payment systems or with third party firms that purchase invoices from the broker or carrier to provide instant payment solutions.
3PLs that use Transflo Velocity can keep quality carriers returning to them, as their preferred logistics partners, who provide frictionless payments and convenient access to cash flow solutions.
Now, let’s run your numbers. Use this simple calculator to see how Transflo Velocity+ and its integrated cash flow solutions can deliver immediate ROI by increasing your revenues and profits.