Accessible Capital, Trustworthy Partners Key to Managing Freight Costs
Q: What is the key to managing freight spend in today's environment?
A: In addition to the slow growth economy, the transportation industry has been hit with significant economic and industry challenges, including increasing regulations, driver shortages, fluctuating fuel costs, and a tight credit environment. Carrier costs are going up—costs that will likely get passed to the shipper. To keep their business moving forward, shippers and carriers need visibility, improved working capital, and partners they can trust.
For shippers, the goal is getting one system to process and pay all their freight transactions, and provide full visibility at all points. That journey starts with the basics: 100-percent auditing of transactions, ensuring 100-percent accuracy. If shippers are processing paper transactions manually, they're not checking each invoice, so they're leaving money on the table.
Visibility means that both shippers and carriers know the status of a payment anywhere along the process, so they don't need to pick up the phone and track down information. When shippers and carriers have data they need, and the business intelligence tools to analyze it, they can make smarter decisions.
Q: How do both shippers and carriers improve working capital? Doesn't the nature of their relationship put them at odds?
A: It doesn't have to. It is true that shippers want to extend their days payable outstanding, while carriers want to get paid as quickly as possible. But that potential friction point—longer payment cycles—can be removed from the working relationship by using an automated freight payment solution with trade finance capabilities.
This allows shippers to extend their payment terms while accelerating payment to the carrier. For example, a shipper can take 30, 60, or even 90 days to pay, but the carrier can get paid as soon as the shipper approves the invoice. As a result, both parties have improved working capital.
Q: Turning over payment responsibilities to a third party requires trust. How can shippers ensure they're working with a fiscally responsible partner?
A: Shippers should apply the same care to their financial supply chain as they do to their physical supply chain. Most shippers closely monitor the safety of their physical supply chain, ensuring that their carriers are safe and financially stable.
Shippers need to pay that level of attention to their financial supply chain—especially third parties they trust to manage freight transactions. An effective financial supply chain ensures timely payments to carriers.
Ultimately, the only institution that can guarantee funds will be delivered exactly when promised, to whom promised, is a bank. Banks go beyond the basic Sarbanes-Oxley Act, and Statement on Standards for Attestation Engagements 16 Type 2 certification to meet the financial industry's rigorous regulation, audit, and compliance requirements.