Fleet accounts on net-30: factoring or an advance?

A fleet invoice is a receivable, not a deposit: money you are owed on somebody else's schedule, not money in the account. The shape built for a receivable is factoring, and it is on the shelf here. An advance is built for deposits that arrive most days, which a fleet account does not produce. Here is one fleet invoice followed from the repair order to the bank, four ways to carry the wait priced in dollars side by side, and the honest line at which the fleet half is the business.

How long a fleet invoice really takes to pay

Take a shop with a fleet account, as an illustration. Over a month it closes $25,000 of repair orders for the fleet, bills them as one invoice on the 30th, on net-30 terms. The parts went on the distributor account or the card before the work; the techs were paid every Friday during it. The terms say 30 days; the ledger, if you look at last year, says the fleet pays on about day 45. So the shop carried the parts and six Fridays of wages before the first dollar of that work landed.

On the bank statement, that month shows nothing from the fleet and then, six weeks later, one lump under the fleet's name. That lump is real revenue and it reads badly in two ways. It is not a rhythm, so a partner reading the statement sees a quiet month and then a spike it cannot tie to anything unless you say what it is. And if an advance is sized while the lump is in the file, the debit is set off a month that was fat for one day and thin for the other twenty-nine. The auto repair page makes that point in short; the warranty guide follows a warranty ticket the same way. The fleet invoice is the same problem, six weeks longer.

Four ways to cover the wait, compared

The same $25,000 invoice, the same 45-day wait, four ways to have the money before the fleet pays. Every figure is an illustration on the site's usual numbers, not a quote from anyone.

Illustrations, not quotes. The line-of-credit figure is $21,250 at 24% for 45 days; the factoring and advance figures are the factoring calculator's and the advance guide's starting positions; the discount is a made-up offer. Annualised on a simple basis, the line is about 24%, the factoring about 29%, the discount about 21% measured against the 45-day wait if the fleet pays on day 10, and the advance many times any of them; none of those is an APR, and the dollars are the column to read.

Three things the table says. The cheapest money for a 45-day wait is the discount, then the line, then factoring, and then, a long way behind, the advance. The two cheapest are the two that may not be available: the discount needs the fleet to want it, and the line needs a file a partner will lend against. Factoring is the one that is built for exactly this and is usually open to a business whose customer pays, because the factor is reading the customer. And the advance is the one an owner is most likely to be offered for this gap, which is the reason this page exists.

Why a cash advance is a poor fit for fleet work

A fixed daily or weekly debit is sized, in my read, off the average of the deposits a partner saw, and it comes out every banking day whether or not anything came in. A fleet-heavy business deposits in lumps: one on day 45, another six weeks later. Between them, the debit is coming out of whatever the retail counter brought in that day, and if the counter is small, out of the balance. By construction the debit over-bites every day that is not the day the fleet paid, which is nearly all of them.

The card split does not fit either. It flexes with card takings, and a fleet check arrives by transfer, so the split never sees it: the advance would be sized off and remitted from the retail card volume alone, which makes the fleet revenue invisible to the very product taken to bridge it. The shapes guide puts it in one line: paid by invoice at net 30, neither shape fits, because that is a receivable and the product built for it is invoice finance. It is on the shelf; ask for it on the form.

What a factoring company looks at

A factor underwrites the customer more than the shop, which is why factoring is open to businesses that a line is not. In my read of what a factor asks: whether the fleet pays and how long it takes, whether the work is complete and undisputed, how much of your book is one customer, and whether the invoices are already pledged to a lender or a line. The shop's own history matters less. The fleet's habits matter most, which is why the invoice to factor is the one from the customer that pays on time.

Two words decide the rest, and they are the factoring page's two questions. Recourse: if the fleet never pays, you buy the invoice back. Notification: the fleet manager is told to pay the factor instead of you. The second is the one to think about before it happens to your customer. A fleet manager who learns from a factor's letter that the shop has sold their invoice has learned something about the shop; one who heard it from you first, as a normal way of running a service business, has not. Have that conversation before the first invoice goes.

When fleet work is most of your business

Here is the honest line. If the fleet accounts are most of the month, the shop is a receivables business with a repair counter attached, and the product built for it is factoring. That is not a lesser answer; it is the right tool, and it is on the shelf. What a partner can read for a line or an advance in that shop is the retail half, the card-paid tickets, and the answer to "how much" is sized off those weeks, with the fleet lumps named and set aside.

If the fleet is a slice of the month rather than all of it, the gap between paying a tech on Friday and the fleet clearing on day 45 is the shape a line of credit is built for, if one is open to you, and factoring the fleet invoices alone is the alternative that does not depend on your file. An advance fits only the retail half, sized off the retail weeks, and only for the narrow case the auto page describes: the bay opens now, the work is booked, and the debit clears in your thinnest retail week. Tell me the split and I will be straight about which half is readable. Partners underwrite and decide.

Two ways to shorten the wait instead of financing it

Before any product, two changes to how you bill, neither of which costs anything.

1. Bill the fleet weekly, not monthly. The same $25,000 becomes four invoices of about $6,250, each on its own 30-day clock, so the first one is paid before the last is issued and the lump becomes a rhythm. A rhythm is what a partner reads, and it is what the shop can plan payroll around.
2. Put parts on a card on file, or a deposit. Many fleets will pay for parts at authorisation if asked, because parts are not the part of the invoice they argue about. That turns the biggest cash outlay from a receivable into a deposit on the day, and leaves only the labour on terms.

If those two are done and the counter is the business, the form takes about two minutes, asks for bands rather than figures, and I do not run credit on it. If the fleet is the business, ask for factoring on it. Either way, the fleet invoice goes on the half page with your statements (the bank-statements guide says what else does), with the customer's name, the terms, and the day they actually pay.