When you assign your receivables to a factoring company in the trucking industry, you agree that your client payments go directly to the factor. The factor ensures that you are paid for each freight you deliver and on signing, they send your clients a notice of assessment (NOA).
The NOA document is basically the letter a factoring company sends to its customers. It informs them that the accounts receivable are assigned and how they can make future payments by directing them to the factoring company. As receivables are not tangible goods, a notice of assignment is how factoring companies can claim financial rights to the invoices you sell to them.
Exploring the Basics of Notice of Assignment
When you sign up with a factoring company to streamline payment for your freight services, they send out NOAs to protect themselves, ensuring they receive payments from your clients. There is specific information that needs to be included in an NOA to solidify the agreement. According to the Uniform Commercial Code (UCC), the notice must follow these rules:
- It must have the factoring company or client’s signature.
- It must advise the account debtors, the customer, of the outstanding amount now assigned to the factoring company.
- It must confirm that the payment is to be made to the factoring company directly.
- It must include remittance details to inform the debtor how to make payment.
As such, the NOA offers you the following benefits:
- No more waiting for payments — the factoring company will take on remittance.
- The NOA helps to ensure there are no misdirected payments, allowing you to access working capital immediately.
- You can bypass the need for lines of credit when clients fail to pay on time.
- As this letter makes the factoring transaction official, you can focus on your business’s core operations instead of working to collect payment from clients.
- The NOA keeps your customers updated, so you need only focus on general relationship management.
The Significance of NOAs Across Industries
Sending out this legal notification to your client is vital, especially in industries like trucking, where invoice factoring is common practice. It can impact your business and professional relationships in the following ways:
- Avoiding payment disputes: With clear communication through NOAs, your business can prevent payment disputes or misunderstandings.
- Industry-standard compliance: Cash flow management is crucial for operations in industries like trucking. Sending NOAs helps your business align with industry standards and best practices, demonstrating your commitment to responsible business practices and financial transparency.
- Legal and contractual compliance: The NOA formalizes your clients’ notification of invoice factoring, aligning with legal and contractual obligations.
- Maintains trust and relationships: Proactively sending NOAs demonstrates your professionalism and honesty, helping to keep the trust you are building with your clients.
- Smooth cash flow: Sending NOAs helps the factoring process run smoothly which leads to timely funding.
- Transparency and communication: NOAs allow you to be transparent about your financial operations and let clients know how their invoices are managed.
Navigating the Challenges and Opportunities of NOAs
The primary concern about switching to invoice factoring is about what your clients will think. They may be unfamiliar with this practice, making it essential to reassure them that this is common practice for small and midsize organizations through direct communication.
In fact, 37% of small businesses outsource some business processes. Ensure that they understand the benefits of this service, like extended payment terms. Finally, reassure your clients that nothing changes in terms of the service they have come to know and trust from your company.
Answering Common Questions About Factoring and Invoice Factoring
Now that you understand the NOA role, how do you feel about signing up for freight factoring? Here are some frequently asked questions we get about this service and how freight brokers or owner-operators will benefit:
- What is freight factoring? With freight factoring, truckers get their payment for work they have done immediately. The freight billing company purchases the trucking company’s invoices to ensure that these are paid as soon as possible.
- Is invoice factoring a reliable service? Factoring services in the United States will enjoy a compound annual growth rate of 8.1% between 2022 and 2023, showing that these services are common and here to stay.
- What is better, freight factoring or a bank loan? Freight factoring ensures that you get cash without going into debt. Taking on a bank loan may stop you from getting another loan for equipment you need or extra trucks as it can indicate credit troubles in your organization.
- How are my customers paying their invoices? The factoring company pays you for each invoice you issue and they make up their money when your clients pay them directly.
- What if my company received a payment that the factoring company should have gotten? You assign all of your invoices to the factoring company, but if you receive a payment in error, do not deposit the money into your bank account. Notify your factoring company and send it their way immediately. Follow this up with another NOA to ensure the client knows how to proceed moving forward.
Understanding How FactorLoads Can Help
FactorLoads offers freight invoicing to help improve your trucking business cash flow. Aside from sending out these NOAs, our services include:
- Freight factoring: Our services ensure you have accessible cash flow, which you can redirect to other areas of your business. No more waiting for money that is due to you.
- Recourse and non-recourse: We pay upfront when you submit bills, but note that this service comes at a higher cost.
- Spot factoring: With this flexibility, you take control over your finances by choosing when and with which clients you want to implement factoring.
Leveraging NOAs for Business Growth With FactorLoads
The NOA paperwork is vital to your organization’s paperwork as it informs clients of the change in invoice ownership, reflecting the information they need to make payments accordingly.
FactorLoads is a freight factoring company that understands the pressure you are under while waiting for load payments. We have years of experience helping companies like yours get their cash the right way. We don’t require contracts and have no hidden fees. You get 24/7 full factoring services so you can access your money as soon as a client is approved.
Let us take the pressure of invoice remittance off you — contact us today to discuss your business needs and start saving money while you improve your daily operations.
