As a freight carrier, you may wonder whether you should take time to investigate the credit scores of potential business partners—especially as supply lines and capacity shift and loads, in some instances, become harder to find. The short answer is yes, you should check your partners’ credit ratings. The more involved answer is that the long-term health of your business may depend on diligently investigating the credit score of your partners whenever you haul a load. In truth, there are several good reasons to make a habit of this practice, but protecting your revenue is chief among them.
To be as blunt as possible, carriers should be checking the business credit ratings of the brokers and shippers they work with because those scores directly reflect the amount of financial risk associated with moving their loads. Freight brokers and shippers with good ratings are very likely to pay on-time because their history demonstrates it—and they often take a vested interest in protecting their credit because it determines the quantity and quality of carriers that will work with them. Remember, every time you haul a load you’re essentially extending a line of credit. It doesn’t make sense to offer that privilege to a partner who is unlikely to pay you for your services in a timely fashion (or try to skip payment altogether). This is especially true for small companies and independent carriers that depend on consistent cashflow to stay afloat.
It’s also important to note that business credit ratings ashould be checked on an ongoing basis, not just on initial contact with a partner. The people working behind the scenes at a shipper or freight brokerage firm can change—sometimes frequently—and the company’s business practices can change along with them. Savvy carriers will check the credit ratings of their partners, even long-established ones, at some sort of regular interval. It may not be necessary to check the score of a trusted partner before hauling every load, but a quarterly or semi-annual follow up should still be on your radar. It doesn’t mean that you’ve lost faith in or have a specific reason to distrust those long-standing business partners. It just means that you’re being smart about guarding your own financial health.
The evolving landscape of the freight industry mean that carriers need to be especially careful who they trust with their time and livelihoods. Planning for long-term success includes paying attention to credit scores and using that information to make informed, business-first decisions. TransCredit is a reliable, proven partner in business credit rating reporting. Contact us today.