Regardless of whether you are operating a large or small business, getting paid quickly is crucial to the health of your business. Having consistent and liquid cash flow is essential for keeping your operation running and ready to face challenges day by day. However, some of the top complaints we hear from long-haul carriers and drivers are regarding how long it takes to get paid. Industry research indicates that the typical freight payment process can take anywhere from 30-90 days to complete. Delays in the process can be attributed to the fact that industry is fraught with outdated communication methods. In fact, 67% of shippers still rely on paper records—which means longer wait times, and unnecessary delays.
Average pay cycles
We spoke to various drivers to get their input on the average freight payment cycle. Many said that it takes 30 days upon receipt of an original Proof of Delivery (POD) to get paid. This can be sped up if a broker or shipper accepts POD via fax. One driver told us, “If you take a quick pay you can have your money immediately with a clean POD.” But, this often costs “1.5-5% of the load” which cuts into profits. Another driver told us that if you “send a POD via snail mail and wait for it to be processed and a check to be mailed, it could take up to 45 days to receive payment.” And, another driver said he only dealt accounts receivable with one broker and that for him, it typically took 21 days from receipt of all paperwork.
Without automation, the freight payment cycle drags on and looks something like this:
- Loads are matched and a route is set
- Contracts are signed
- Driver picks up load
- Driver completes delivery
- Driver submits POD. Here’s where things get tricky and time consuming…
- A driver working directly for a carrier must submit a POD to the carrier. Most likely they will call dispatch and inform them that they have a POD which they will fax in or scan/email over when they have time. Once dispatch receives the POD, they will send it to the broker or shipper.
- An owner/operator (OO) must submit a POD to the broker or shipper. Most likely they will call dispatch and inform them that they have a POD which they will fax in or scan/email over when they have time.
- In both cases the process of delivering the POD to the broker or shipper can take +/- 10 days. Drivers working for larger organizations with digital solutions may be able to submit a POD via a mobile app, however adoption rates remain low and access is often just for direct employees.
- Drivers wait for payment. This is where things really slow down…
- In most cases, including when a carrier or broker invoices a shipper, payment terms are 30-45 days net. Small carriers and OOs working for a broker generally get paid after the broker gets paid, which means 30-45 days later (brokers rarely pay early). Small carriers and OOs working as independent contractors for large carriers may have separate payment terms (especially if they have a long-term independent contractor contract in place), but the payment terms are usually around 30 days.
- In general, very little happens during these 30-45 days. It’s simply a way for those making payments to better manage their cash flow and avoid paying interest. However, in some cases, the time spent can be attributed to a process called: audit, approvals and payment. During this process, the vendor will:
- Verify the load is real and verify details such as: origin, destination, equipment type, miles charged, fuel and other surcharges, contract rate for the lane, contract terms for surcharges, etc.
- Verify that service levels are compliant, meaning the carrier picked up and dropped the load within the prescribed time window listed in the contract
- Complete manual checks after system checks to be sure “projected cost of freight” and “actual charges by the carrier” are within range
- Since some of the above tasks are manual, these activities take time.
- There’s also additional time involved to disburse funds or mail checks.
Better cash flow and less stress
Fact is, it often takes way too long for long-haul carriers and drivers to get paid, and in this day and age, this shouldn’t be the case. Automating transactions via a digital freight platform like SemiCab, reduces the number of days it takes carriers and drivers to get paid. Here’s how:
A digital freight platform:
- Removes unnecessary steps and tedious paperwork from the billing process.
- Eliminates the need for the audit. Yes, there may be some exceptions, like in cases where there is a detention fee, but these fees are fixed at a certain amount per hour and ELD-based GPS data can be used to support/calculate detention claims.
- Means small carriers and OOs only have to deal with one (hopefully large and fair) company rather managing multiple entities with different payment processes.
- Encourages larger companies to take the risk of paying drivers within a few days (~3-7 days) while they wait to collect money from shippers and brokers, as technology (ELD, GPS pings, POD, etc.) increases their confidence that they will be paid.
I’m ready to get paid faster, what’s next?
The good news is that the freight industry is pioneering the adoption of countless technological advancements aimed at improving efficiencies, utilization, and transparency across the network—and that includes freight payment. There are lots of digital freight solutions out there right now that will help you get paid faster, but we suggest you investigate solutions that offer that as part of an overall strategy to grow your business. A digital freight ecosystem like SemiCab offers a holistic approach to building fully loaded round trips with guaranteed minimums and schedules built around driver preferences. But we go way beyond that to help grow your business, by enabling you to deliver a load and receive payment quickly. Best of all, there’s no cost to use our platform.