Vitamins for your vocabulary

Accounts Payable (A/P): the money the trucker or small motor carrier owes to someone else; for fuel, licenses or permits; even toll charges could be filed under Accounts Payable.

Accounts Receivable (A/R): this is the money owed to the trucker or small motor carrier. Since many truckers don’t get paid before 30, 60 or sometimes even 90 days after they’ve hauled a load for a shipper. This is where a factor can step in and pay the trucker earlier than the shipper will pay, by asking the shipper for payment, taking a fee for processing the paperwork and then turning the rest of the money over to the trucker or motor carrier.

Account volume per month: how much in Accounts Receivable your motor carrier generally bills per month.

Collateral: Something of value which is considered to be held in reserve and could be sold if the loan, usually of money, isn’t paid in full within an agreed-upon time limit.

Fraud: Just like any other business, presenting an invoice to a factor for goods that weren’t ever shipped is an example of fraud. The trucker or motor carrier has obviously broken the contract between them and the factor, and the factor is legally able to sue.

Misrepresentations: These can be anything from lying about the actual number of invoices your trucking company deals with on a monthly basis to claiming the shipper can’t be found (and he’s your brother-in-law) or not mentioning the load has been double-brokered.

Non-Recourse: The factor takes the risk of non-payment of the invoice, and if the shipper or broker refuses to pay, the factor can’t ask the trucker or motor carrier to pay the invoice. A non-recourse factor often has higher fees for their factoring services because they have to cover all the invoices.

Recourse: The trucker or small motor carrier is responsible for the invoice if the shipper or broker doesn’t pay the factor. Recourse factors may have lower fees than non-recourse factors. If the trucker or motor carrier has long-term, reliable shippers, then the trucking company would probably be safe taking the lower factoring fees and trusting the shippers to continue paying the invoices as usual.

Un-noted advances: If a shipper offers to pay the trucker or motor carrier an advance on a receivable, even for fuel or tires, and it doesn’t go through the factor as a contracted receivable, the trucker or motor carrier is in serious trouble, because accepting that advance is also fraud.