Freight Brokerage Business. The Staff of Entrepreneur Media, Inc.

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СКАЧАТЬ that same asset. This prevents someone from stealing and then changing records to cover up what he or she has done.

      Be sure the records you keep are adequate to satisfy financial and tax reporting requirements, as well as the federal regulations governing freight brokers. However, you should limit access to both assets and documents to prevent unauthorized use or theft; keep access on a needs-only basis.

      Finally, set up a system to independently verify individual performance. Someone who was not involved in the work should check it for accuracy. This will help uncover intentional theft and fraud, as well as unintentional errors.

      Beyond techniques to protect your assets, you’ll also need systems to maximize them. Consider these:

       • Set up a sweep account. This is a service banks offer that lets you earn the maximum interest on all the money in your accounts, even if it’s just overnight, without penalties or concerns of bouncing checks. The system is set up so funds are automatically moved—or swept—in and out of the appropriate accounts each day. If your banker is reluctant to set you up with this type of an account, shop around for one who will.

       • Use a lockbox for receivables. Another bank service, a lockbox, works like this: Your customers mail their payments to a post office box that your bank rents in your company’s name. The bank sends a courier several times a day to clear out the box, checks are immediately deposited into your account—literally within hours of their arrival in the mail—and you get a report outlining all the transactions in as much detail as you want, as frequently as you want. Lockboxes mean you no longer have to run to the bank with deposits, or spend your (or one of your staff member’s) valuable time opening envelopes, recording payments, and preparing deposits.

       • Accept electronic payments. Talk to your banker about getting set up so you can accept payments through electronic transfers.

       • Invoice on a timely basis. You can’t expect customers to pay until you’ve issued an invoice, so get your invoices out as soon as you know what all the appropriate charges on a given shipment are. Be sure you include whatever documentation is necessary (copies of bills of lading, delivery receipts, etc.) for your customers to pay promptly.

       • Enforce your payment terms. Be prepared to follow up on late bills as soon as they become past due. Initial reminders don’t have to be ugly or obnoxious, but you want to make it clear that you expect your customers to pay by the terms to which they agreed when they applied for credit.

      warning

      Mail thieves operate even in the nicest of neighborhoods, both residential and commercial. If you do not have a secure, locked mailbox and you receive checks by mail, rent a post office box so you know they’ll be safe.

The Power of Compensating Balances

      One of the ways to measure the value of a company is its profitability. When it comes to the value of a company to a banker, the measure is in compensating balances. Though your ultimate net profit may be pennies on each revenue dollar, you are still funneling large sums of cash through your bank account as you collect from shippers and pay carriers.

      Banks are very interested in companies with large amounts of cash flow. Even though the money doesn’t really belong to you, you have temporary control over it. It will spend a certain amount of time in your account, and that time can be very important to a bank.

      As you build your relationship with your banker, be sure to point out how much cash you expect to move through your accounts—it’s called compensating balances—and ask what types of services and/or concessions the bank can provide you because of it.

      warning

      As a broker, you’ll collect and disperse a tremendous amount of cash. Resist the temptation to spend money that is already obligated to payables. “If they’re not good money managers, that’s where a lot of the startup brokerage operations get into trouble,” says Indianapolis freight broker Chuck Andrews. “They see all this money and start spending it. Then it comes time to pay the bills, and there are no funds.”

Managing Payables

      Due to the nature of the industry, paying carriers on time is critical. In fact, Bill Tucker says you are a financier of sorts for the carriers you use, because you’ll likely be paying them before you get paid by your shippers.

      While carriers make up the major portion of your payables, you have other bills to pay. Certainly on-time payment of all your bills is essential to building a good credit rating and maintaining a good reputation.

      But by the same token, it is not good cash management to pay your bills before they are due. If your suppliers are willing to extend terms of net 30, then it’s okay for you to take 30 days to pay that bill—it’s not necessary to pay it 10 or 15 days early. Keep your money working for you in your accounts for as long as possible.

      warning

      According to freight broker Chuck Andrews, you need to watch your commission levels because if you are in a highly competitive area and working on margins that are less than the industry average, you may end up operating at a loss if you try to factor.

Facts on Factoring

      Factoring is the sale of accounts receivable to a third-party funding source for immediate cash. In a typical factoring arrangement, the client (you) makes a sale, delivers the product or service to the customer, and generates an invoice. The factor (the funding source) purchases the right to collect on that invoice by agreeing to pay the client the face value of the invoice less a discount, typically 2 to 6 percent. The factor pays 75 to 80 percent of the face value immediately and forwards the remainder, less the discount, when the customer pays.

      Because factors are not extending credit to their clients, but instead to their clients’ customers, they are more concerned about the customers’ ability to pay rather than the financial status of their clients. That means a company with creditworthy customers may be able to factor even though it couldn’t qualify for a traditional loan.

      Though the principles are the same, factors vary based on the type of businesses they handle, the amounts of invoices they purchase, and the specific services they provide. Choosing a factor is like choosing a bank—you have to find the right match.

      Though factoring is almost as old as commerce itself, it was used primarily by very large corporations until the mid-1980s. Since then, awareness of factoring has grown, and more companies are incorporating this weapon into their cash management arsenal. Even so, there are still plenty of misconceptions about factoring.

      Though factoring is СКАЧАТЬ