The Owner-Operator's Guide to Getting Paid On Time Every Time

Long hours on the road mean time away from family. No matter how much you love the job, you deserve to be paid a fair rate that covers your expenses, along with the time and care you put into delivering each load.

Though most carriers, brokers, and shippers are honest people, you never know when you might come across a bad apple. Each load carries some risk of non-payment. That person may simply be dishonest, or perhaps they have gotten themselves into a financial bind.

A single missed payment can be disastrous - especially if you're a smaller owner-operator without a cushion of cash to fall back on. Not only are you out the expenses you fronted, including fuel and tolls, but there are also opportunity costs related to the jobs you turned down for this one.

The good news is that you can minimize the risk of not getting paid with a few simple steps. The key is to be proactive - do your due diligence upfront - so that you don't have to chase down outstanding invoices after the fact. This article is divided into two sections. Section 1 will cover how to minimize the risk of not getting paid, and section 2 will cover what to do when you don't get paid. Here's what you need to know.

1. How To Minimize the Risk of Not Getting Paid

Know Your Partners

There are roughly eight million people employed in the trucking industry, and of those, nearly two million drive heavy and tractor-trailer trucks. The number of long-haulers is smaller - between 300,000 and 500,000 - but still, outside the industry, that sounds like a large group. However, in truth, it's a tight-knit community, and lots of deals are closed with a handshake. Trust is part of the culture, but the issue is that not everyone will live up to their end of the bargain. As an Owner-Operator, the rule is trust but verify.

Do your due diligence. Be sure you know exactly who you are dealing with, whether you are working with a carrier, a broker, or directly with a shipper. When doing business, everything should be viewed as a partnership. Conduct the business equivalent of a background check to confirm that your partners have the resources to pay you and a solid reputation for doing the right thing.

Below is the basic guidance on how to maximize your chances of getting paid.

Leasing on with Fleets

Before signing a lease agreement, check carriers out to ensure they have a solid reputation in the industry. Begin by confirming that the carrier's license and insurance are current. You can then look at their CSA score. If you see a lot of maintenance issues or other safety violations, it could be a sign of financial trouble.

Even if the carrier is in good standing, you can inquire to learn about their payment processes so you know what to expect.

It's always a good idea to find out what other leased owner-operators have to say about the trucking company. If you're hearing they haven't been paid promptly, you may wish to pass on entering into a business relationship with that carrier.

Working with Brokers

Reputable brokers comply with all regulations. That means they have a license, insurance, and a bond or assets of $75,000. Check this out with the FMCSA before you make any agreement. Look at standard characteristics like how long the broker has been in business, how long it takes them to pay and their credit score. You can read more about how to identify bad brokers here.

Some Load boards can be helpful in vetting brokers. At TrueNorth, we screen out the brokers who we've identified as high risk and less likely to pay. When using our load board, you'll rarely find loads from brokers who don't pass our screening criteria.

Working with Shippers

It's a little more difficult to do your due diligence when it comes to shippers because they aren't subject to the same sort of regulatory oversight. However, you can still look into their backgrounds, check out their websites, and consider how long they have been in business. You may find helpful information through a Better Business Bureau search, and you can see whether any insights are available through load boards.

Document, Document, Document

Make sure you have all of the details in writing, signed by the responsible parties. If something goes wrong and you don't get paid, your paperwork is the only thing you have to resolve the issue. Without it, you have no recourse at all.

Below is more basic guidance as it relates to documentation:

Fleets

The payment process must be included in your lease agreement. Make sure you have and keep a copy. Specifically, find the language that details when and by how (e.g., check, ACH deposit) you will receive payment once you have submitted the paperwork verifying you turned in the load (e.g., bill and signed delivery receipt).

Brokers

When working with brokers, the most important piece of paper you get for every load that you accept is the rate confirmation sheet. This should note the rate you agreed to, as well as any additional charges to be included, such as tarping, detention time, truck ordered/not used, loading, unloading, and so forth. Remember, if it is not included in the document, the broker is not obligated by law to pay.

Keep in mind that the agreement isn't official unless both parties have acknowledged it, so get a signed copy that includes DOT numbers. This makes your life much easier if you have to take action against the broker for non-payment.

Shippers

If you are working directly with shippers, that ratecon sheet is even more of a must-have. While you won't have the same options that you might with a carrier or broker in the case of non-payment, the ratecon is still a contract that constitutes a binding agreement.

Consider Factoring

Another payment option of taking all the necessary precautions to get paid is freight factoring. This is when the one who is owed money sells the right to collect the money to another party‚ "the factor", at a reduced price in order to receive the money quicker. We won't go too much in depth here because our article What to Know about Freight Factoring has everything you need to know, but know that this is an option that you can take to lower the risk of non-payment by passing some of that risk onto the factoring company.

2. What to do when you don't get paid

As mentioned, if you end up not getting paid after delivering the load, your options to try and recoup your payment are limited and you should be prepared for a tough fight. Further, even if you win the battle, you may receive less than the agreed-upon amount. Fortunately, if you did your due diligence upfront and kept all of the relevant documents, these situations should be few and far between.

Specific remedies depend on your type of business and who you're dealing with:

Leased to a motor carrier (the carrier fails to pay)
Running under your own authority and hauling for a broker (broker fails to pay)
Running under your own authority and hauling directly for a shipper (shipper fails to pay)

In other words, your next steps depend on who is not paying you. Again, below is the basic guidance on what to do for each partner:

Fleets

You might experience disruption to your payment from a carrier for any number of reasons. For example, the trucking company might have general financial problems. However, the most common issue that comes up is the shipper's or broker's failure to pay the carrier, which prompts the carrier to put off paying you.

You should have a Lease Agreement with your carrier per FMCSA regulations, which states that you must be paid within 15 days after submitting your Bill of Lading (BOL) and signed delivery receipt.

It is the carrier's responsibility to know its shipping partners, and carriers are expected to pay you on time regardless of whether the shipper came through.

The trouble comes in when the trucking company doesn't have adequate cash flow to cover the gap between paying you and receiving payment from the shipper. You can begin by speaking with the appropriate account representative or billing agent at your carrier's headquarters to determine whether there is a plan in place to get your payment issued. However, if you have heard "the check is in the mail" too often with no results, the only real recourse for leased owner-operators is small claims court. The fees associated with hiring an attorney to manage the situation usually exceed any amount you are owed, so in most cases, that's not a viable solution.

For the sake of other drivers, you may choose to consider filing a complaint with the FMCSA. The agency can't recover your funds, but it may help to protect other truckers from the same issue. Depending on the specific circumstances, you may also want to file a complaint with the US Department of Transportation's Office of the Inspector General.

Brokers

If you are running under your own authority and the broker is paying less than expected - or not paying at all - get your paperwork together. As mentioned, all legal brokers must post a bond, and you can file on that bond for what you are owed. Keep in mind that while the bond must be $75,000, you are likely not the only one missing pay. If there are hundreds of claims, you may only be able to recover pennies on the dollar.

Don't wait to file against the bond if you aren't paid as agreed. Simply contact the bonding company and follow the instructions to submit your paperwork. The sooner you submit complete documentation, the faster your claim will be processed.

Remember, oral agreements won't stand up if you must file against the bond. Your documentation is everything. The things you are required to submit include:

A clear Broker/Carrier Agreement
Your authority letter
Your certificate of insurance
Your W9/Tax ID number
Signed rate confirmation sheet

Once you submit everything, the bonding company reviews all of the information, contacts the broker for their perspective, and determines whether, in fact, you are owed payment.

If the determination is in your favor, you are added to the list of all approved claimants who have filed against the bond, and the $75,000 is divided up according to the bonding company's standard procedures.

Shippers

When you are running under your own authority and working directly with a shipper, handling issues of non-payment are tricky. There are no federal regulations to protect you, which means the best bet is going through small claims court.

The good news is that unlike a broker, whose bond can run out if there are enough claims, it is far less likely that a shipper will not have the resources necessary to pay your invoice if compelled by the court.

The Truth About Collection Agencies

Even if you have been fortunate enough to avoid your own collections calls, chances are you are familiar with the concept. Essentially, creditors hire these firms to follow up with overdue accounts in an attempt to collect on outstanding debts.

Truckers often consider hiring a collections agency to handle outstanding invoices, but the truth is that this option isn' always practical. Most collections agencies won't handle what they consider small amounts, and they take a large percentage of any cash they recover.

A Note About Exempt Freight

Finally, don't forget that some types of freight are exempt from federal regulations. That means there are no laws or regulations in place to direct the shipment of these commodities, and brokers don't even have to be listed. Examples of exempt freight include certain unprocessed foods, forestry products, and agricultural products.

If you choose to work with brokers or shippers that handle these types of loads, take extra care when doing your preliminary research and consider getting partial payment upfront.

The Bottom Line

Here's what it all comes down to - there aren't any perfect solutions when you don't get paid. You can go through the courts, file on the broker's bond, or attempt to hire a collection agency, but these methods are time-consuming, and they typically don't result in recouping your entire loss.

Far better to avoid these types of issues altogether by doing your due diligence before partnering with any carrier, broker, or shipper. Up-front research dramatically reduces the risk of running into one of the bad apples that we all try to avoid.

Other relevant articles:

What to Know about Freight Factoring

Leasing with a Company vs. Your Own Operating Authority: A Quick Guide for Owner-Ops

The Challenges and Benefits of Working with Brokers