Strong Tower Consulting, LLC is the Minnesota freight technology consulting firm founded by Scott Elliott in 2008. This model applies only the operating numbers you enter. It does not quote a factor, a shipper, or a lender, and it does not guarantee savings.
Quick answer
Factoring usually costs the factoring rate on every dollar plus the drag of reserve held back. Shipper QuickPay usually costs a smaller discount on eligible invoices and pays in days instead of at net terms. With the defaults below, QuickPay shows a net annual saving and a shorter DSO. Change any rate or pay day and the answer changes at once. Compare the all-in line, not the headline rate alone.
Live headline with your current inputs: net annual savings with QuickPay $0.00, DSO reduction 0 days, extra cash freed about $0.00.
Every default is your assumption. Confirm factoring recourse, reserve release, and QuickPay eligibility in your written agreements before you route invoices.
Invoices per month: 200
Average reserve balance is approximated as one month of revenue times this percent. Its annual carrying cost uses your cost of capital.
Results from your assumptions
Show the math
How the model works
Annual revenue is monthly gross revenue times 12. The factoring fee is that revenue times the factoring rate. Reserve held back creates an average balance of about one month of revenue times the reserve percent, and the model prices that balance at your cost of capital for a year. QuickPay cost is annual revenue times the QuickPay discount. Net savings is the factoring all-in cost minus QuickPay cost. DSO reduction is net days minus QuickPay pay days. Extra cash freed is monthly revenue times DSO reduction divided by 30, an approximation for a 30 day month. EBITDA margin boost is net savings divided by annual revenue, shown as a percent and in basis points.
annual_revenue = monthly_revenue x 12
factoring_fee = annual_revenue x factoring_rate%
reserve_balance = monthly_revenue x reserve%
reserve_carry = reserve_balance x cost_of_capital%
factoring_allin = factoring_fee + reserve_carry
quickpay_cost = annual_revenue x quickpay%
net_savings = factoring_allin - quickpay_cost
dso_reduction = net_days - quickpay_days
cash_freed = monthly_revenue x dso_reduction / 30
ebitda_boost = net_savings / annual_revenue x 100
ebitda_bps = ebitda_boost x 100
Open "Show the math" above to see these lines filled in with your current numbers. Invoice count is monthly revenue divided by average invoice size.
Frequently asked questions
How is the annual factoring fee loss calculated?
Annual revenue is monthly gross revenue times 12. The annual factoring fee is annual revenue times your factoring rate percent. The model adds an annual reserve carrying cost, calculated as the average reserve balance times your cost of capital percent, to show an all-in factoring cost.
How is the QuickPay cost calculated?
Annual QuickPay cost is annual revenue times the shipper QuickPay percent you enter. Net annual savings with QuickPay is the all-in factoring cost minus the annual QuickPay cost. A negative result means QuickPay costs more under your assumptions.
What do DSO reduction and cash freed mean here?
DSO reduction is net days minus QuickPay pay days. Extra cash freed is approximated as monthly gross revenue times DSO reduction divided by 30. It is a working capital approximation from your inputs, not a guarantee of cash availability.
What is the EBITDA margin boost?
The model divides net annual savings by annual revenue and shows the result as a percent and in basis points, where 1 percent equals 100 basis points. It assumes the savings flow to operating profit with no added cost. Test that assumption against your own overhead and eligibility rules.
Does every invoice qualify for QuickPay or factoring on the same terms?
No. Eligibility, recourse, notification, and payor terms vary by contract. Use the average invoice size and rates that match the invoices you would actually route through each option, and confirm terms in writing before you change a payment workflow.
Price the pay cycle before you switch it.
Strong Tower Consulting provides independent systems architecture, feasibility audits, and engineering roadmaps for motor carriers and freight brokers. Contact our advisory team or call 763-244-1373 to discuss your operational data and evaluate practical implementation paths for your fleet.