2018 is hot on the heels of 2017’s rising profitability for trucking companies, and is having an impact on the economy as rising truck transport costs are passed on all along the delivery line. It’s a good time to take advantage of the trends affecting the freight industry to improve profit margins and business strength.
Trucking Company Profitability
2017 was a banner year for private trucking companies with sales increasing almost 15 percent and profit margins expanding to six percent. That is more than triple the two to four percent in recent past years. I looks like 2018 is shaping up to be even better with rate increases and tight capacity thanks to an improving economy with low unemployment.
Even with an aging industry workforce and regulatory challenges such as the federal electronic logging device mandate and minimum age of 21 years for commercial motor vehicle operators, most trucking companies will see sales increases this year. Transportation industry financial advisors like David Roush predict that recruiting issues won’t put a big enough dent in profitability because of spectacular sales increases.
Freight Industry Trends
Freight industry trends hitting in 2018 are starting to have a ripple effect and cause price increases for consumer goods as diverse as cereal, snacks, meat, equipment, and Amazon Prime subscriptions.
Crisis levels of driver shortages are driving up wages and making the work much more attractive according to American Trucking Association’s chief economist Bob Costelo. Companies are paying double-digit raises, offering attractive signing bonuses, and giving out schedules with shorter hours that get drivers home more to keep them happy.
Disruptors in freight include apps like Amazon and Convoy use to match trucking companies with shippers for on-demand freight services, Tesla’s electric semi-trucks, and changing behaviors such as cutting ties with shippers that make drivers wait to push more efficiencies and better service.
How Factoring Factors In
With tight capacity, increasing fuel costs, and a severe driver shortage, cash flow can become a pivotal issue, especially for smaller trucking companies. One way to keep a healthy financial balance is with accounts receivable financing, or freight factoring. Companies like Fleet One Factoring http://www.fleetonefactoring.com/evolution-payment-fleet-factoring/ help trucking companies monetize their receivables and get paid faster for completed work.
Freight factoring enables companies to meet gaps in cash flow or outsource their accounts receivables functions. It’s easier to qualify for freight factoring than for bank loans since they are based more on customer credit than company credit, and typically cost two to five percent per month. There may be some additional fees, and there are varying terms such as advance rate, discount rate, or reserve account.