Tuesday, January 26, 2021
By Andrew Jackson
The trucking industry saw more than its share of rate volatility last year. After the bottom dropped out during the first and second quarters of 2020, high rates are back. That’s a welcome change for carriers and drivers. But the victory is fleeting when brokers are slow to pay.
In recent months, reports have emerged that brokers of all sizes are paying carriers late. We’re seeing lots of conversations on social media about slow payers, too. What’s the cause? And what can carriers do to avoid slow payers?
Cash-Flow Issues Likely Cause for Slow Payments
With the uptick in freight volumes and the rise in rates, carriers and drivers should expect to be making bank. However, the market conditions set in motion in the spring are contributing to a cash-flow crunch now.
After months of extremely low rates on the spot market
, many small and newer trucking companies closed their doors in the first half of 2020. The Commercial Carrier Journal reports that roughly 95,000 drivers were dropped from the rolls
in April and May alone.
Unsurprisingly, this drove up rates. Retail spot rates in particular have picked up considerably as shippers compete to get their goods to market. Whether this will continue into 2021—and if shipping will pick up in other sectors—remains to be seen. But in the meantime, it has created cash-flow issues further up the supply chain. Shippers are putting the squeeze on brokers, which is putting the freeze on payments to carriers.
For carriers, slow payments aren’t just a bookkeeping irritation. If carriers can’t pay their drivers promptly, they’ll have a tough time recruiting and retaining staff. If they can’t pay their bills, they’ll have an even tougher time staying solvent. And if more carriers go bankrupt, the market will tighten even further. The implications are far-reaching. As carriers exit the market, shippers and brokers will feel it in their bottom lines.
Hedge Your Bets Against Slow Payers
Carriers don’t need to be at the mercy of slow payers. It comes down to building relationships with brokers they can trust. By doing their homework up front, they will be better positioned to get paid when promised.
The first step to any due diligence should include a careful review of pay standards. What is the broker’s days-to-pay standard? Do negative reports indicate the broker has trouble meeting this standard? Does the broker have any nonpayment issues lodged against it? By running only for brokerages that maintain their days-to-pay standard, carriers will be better able to pay their own drivers on time.
Carriers should also ensure brokers pay for detention time or layover. Dwell time increased by 5 percent
overall in 2020. While those rates appear to be on the decline, idle time adds up. Carriers should get compensated appropriately.
Keep in mind that slow payments could be indicative of bigger cash-flow problems, such as a risk of bankruptcy. Doing proper due diligence will help carriers avoid problems that are worse than slow-pay—such as no-pay.
U.S. Logistics is Committed to Fast Carrier Pay
At U.S. Logistics, we treat carriers as if they were our customers. We understand that getting paid on time isn’t a convenience; it’s your lifeline. That’s why we are committed to fast carrier pay.
This gives our agents a competitive advantage. More carriers want to haul our loads, providing more opportunity for agents to grow their business. It also gives our carriers peace of mind that we’ll come through as promised. And it provides all of our stakeholders with trust that despite these turbulent times, we’re always on and ready to meet your needs at your pace.
Learn more about how USL can keep your business moving at uslfreight.com