Freight brokers have an essential part to play in today’s American transportation industry. They have the task of skillfully bringing the shipper and carrier together while also optimizing and streamlining the process. There’s a lot of effort that goes into being a successful freight broker. And while the demand for freight brokerage services remains steady, those operating in the trucking industry will still need to know how to effectively run all aspects of their business. While it’s relatively difficult to pinpoint a recipe for success, mainly because there is no such thing as a one-size-fits-all approach, successful brokers tend to follow certain patterns that help them boost their business.
As mentioned, an experienced freight broker will have numerous responsibilities, aside from matching any freight carrier and shipper and ensuring that every piece of cargo reaches the right place in time. Another essential task that should not be neglected is in terms of how they manage their accounting tasks. Below are several critical accounting mistakes that many freight brokers make, ways to avoid them, and several best practices to improve the overall process.
Key Accounting Mistakes For Freight Brokers
Whether they’ve just set up their business or have been operating for years, freight brokers will need to deal with numerous priorities daily. With so much on their plate, it’s common for mistakes to be made that cause things to slip through the cracks. Unfortunately, however, the accounting aspect will tend to be one of the business’s parts that will be neglected by freight brokers. And in doing so, they risk missing out on numerous opportunities, let alone result in loss of revenue and other mishaps. These are some of the most common accounting mistakes that any freight broker can make.
Improper Expense Categories
Many freight brokers have problems when it comes to maintaining proper expense categories. Even if this is an incredibly important part of their business, many freight brokers will either not categorize their expenses or create too many of them. In doing so, brokers can end up not being able to maintain proper records. To ensure that they can achieve proper expense categorizing, freight brokers may want to use accounting software such as QuickBooks and should only add new expense categories after thorough consideration.
Postponing Their Credit Card Payments
Credit cards can be a great tool for every freight business, as you do need to make sure your carriers are paid even when cash flow is slow. However, many freight brokers and other businesses postpone or even forget to pay off their credit card balance at the end of every billing cycle, which can result in huge interest being charged on their credit card balance every year. While interest-free credit cards will help improve the company’s cash flow and delay repayments, without proper and consistent accounting, as well as quick balance interest and fee repayments, can result in huge dents in your overall profits. The best way to keep track of your credit card debt is to set reminders, or better yet, automate this process to avoid any of these issues.
Incompatibility In Invoice Details
Skilled brokers will also need to make sure that their invoices are complete and include as many details as possible regarding every fee. This will help customers better understand and identify the charges and better categorize their expenses. As a result, this high level of invoice details can result in a faster payment speed, which will increase the cash flow.
For instance, brokers will need to clearly state if the items will be charged by weight, dimensions, miles, etc. If any extra charges apply, you will also need to make sure that it’s explained, such as express delivery or a fuel surcharge, for example. These additional charges will need to be included in a separate section for the rest of the invoice to make it easier for your customers to understand. By providing the correct details on your invoice, you will also increase the speed at which clients will make their invoice payments.
Not Enough Tracking of Invoices and Receivables
Insufficient tracking or receivables indicates that freight brokers either don’t get paid on time or, in some cases, at all. Many will admit that the time difference between when they make their payments to carriers and when they receive payment from their customers can often significantly negatively affect their cash flow. Using the right truck broker accounting software can help improve their cash flow, particularly in situations where tracking and collecting invoices is too difficult.
Handling Accounting Processes for LTL Exceptions and Variances
Aside from the above-mentioned common accounting mistakes, freight brokers need to pay close attention when they are dealing with LTL variances and exceptions. Be it in the form of a reclass, reweigh, liftage change, residential fees, etc., these common occurrences and freight carrier bills need to be properly managed in the TMS. That said, it can also be a challenge just communicating them to QuickBooks (QB) at times. There are several ways to manage these incoming carrier bills without changing the existing carrier bills or invoices.
- Create Supplemental Customer Invoices – After a customer invoice has been created and sent, it’s common best practice to create supplemental invoices for the additional charge instead of changing the existing customer invoice. This will leave the original invoice intact while also allowing for separate tracking and processing for the second invoice.
- Creating Supplement Carrier Bills – When receiving a supplemental carrier bill after the initial one was approved and paid, it will be preferable to create a supplemental bill for the shipment instead of changing the existing carrier payable.
There are several benefits in creating supplemental bills and invoices instead of modifying existing ones. For starters, this will increase the visibility on the TMS, as it will show the user that two separate invoices/bills were created, approved, and processed. Also, freight brokers will be better positioned to keep track of their invoices, statements, and payment dates. Since the original invoice or bill is separate from their supplement counterpart on the TMS and QuickBooks, they will also have separate dates. This will make it easier to track any changes associated with every shipment. This will also make it much easier to reconcile the data between the TMS and QB.
It’s also important to keep in mind that accountants don’t like it whenever existing bills or invoices from a period they just closed are modified. Supplemental invoices, however, will allow for any shipments to be changed whenever needed without also having to interrupt the accounting process associated with taxes or bank audits.
The Tai Accounting Module
Freight brokers will often purchase accounting software to avoid as much hassle as possible. Using such software, a freight brokerage business will be able to generate real-time information regarding the progress of their business. That said, it’s important for any transportation broker to find the right accounting software that will fit their needs and a TMS solution that will perfectly integrate with that accounting program.
This TMS solution should allow you to manage your entire accounting process by separating your Customer and Accounts Receivable (AR) and Carriers and Accounts Payable (AP). The system should also allow you to automate any motor carrier bill audits and manage any disputes easily. The system should also allow all of your accounting documents to be automatically generated and stored to make it easy for your CPA and Tax consultant.
As it so happens, Tai Software’s Accounting Module allows for the entire accounting process of your freight logistics operation to be easily handled from a single, centralized location. Its accounting dashboard will provide you with a high-level view of all Accounts Receivable and Accounts Payable activities. This way, managers will always be informed about the financial situation.
Its Accounts Receivable Module makes it an easy process to compile customer invoices and keep track of all payments received. You will also be able to modify payments at any time, thanks to its easy-to-use interface. The Accounts Payable Module, on the other hand, will organize all motor carrier bills and enable the user to approve and pay the carriers from the system.
Invoices will be automatically generated, along with all the necessary documentation. They can be stored directly in the TMS and emailed straight from the system. Put simply, Tai TMS can combine automation with the entire shipment lifecycle throughout the supply chain, and a state-of-the-art accounting module, which will allow you to easily download data and integrate it into your accounting software like QuickBooks or Microsoft Dynamics GP.
The Tai TMS Accounting Module is the perfect tool to simplify the accounting processes for freight brokers and other freight logistics professionals operating in the transportation industry. Request your free demo today and put your freight company in the best possible position!