An alarming statistic says freight companies can lose up to 10% if they don't entirely track their expenses across functions.
Watching for errors and fraud, precise duty deductions, and correctly filing taxes and financial statements keep the forwarders on their toes. Moreover, the freight business credit period is often long and sometimes needs to incur a few additional expenses on behalf of the customers.
So as a freight forwarder, you should count every cost to keep track of your expenses. Also, late payment receipts or additional expenses should not be your excuse for payment delays. Apart from these external factors, many internal things, like the manual entry of payables and receivables, tracking expenses like customs, charges, and duties, and the use of separate software for finance management, can create gaps in your operations and finance.
Above all, the manual tracking method is not helpful when you plan for any business shifts like business segments addition, expansion to another branch, or scaling up operations.
Let us try to understand why you should track every expense incurred.
When you have a sound financial management plan, it directly impacts your business's financial health. Money earned, spent, and recorded systematically helps your company align with your business goals. Methodically tracking expenses helps your freight business to:
Stick to a budget: Apart from freight expenses, you have fixed costs like payroll, licenses, rent, utilities, and other obligations. Having a budget keeps your spending within bounds for smooth functioning.
Manage and optimize cash flow: Ideally, you want to set aside money for emergencies and to fund new business opportunities. Having a complete view and control of your finances better prepares you for quick decision-making.
Identify cost savings: The freight business has its peaks and can run through some dry seasons too. Knowing which expenses are unnecessary or avoidable helps increase margins in tougher business times.
Ways to know if you're on track or need to take corrective action
As business volume increases and given the current dynamic customer demand, it is no longer advisable to carry your freight business using excel or some software in silos. With the best freight digital ERP like Logi-Sys, you can not only keep your freight expenses in control but also enhance profitability by eliminating unnecessary costs. Here are a few ways of tracking your business expense that we recommend.
1. Easy access to entire company spending
Freight business involves multiple vendors, locations, and various costs. Managing each function with individual software only adds to the complexity. Freight ERP can combine billing, accounts, sales, and operations on a single platform and can run in close coordination with finance. Freight ERP eliminates the communication gap by providing real-time data from all departments and locations on a single database. Thus, it facilitates faster receipt and payment processes.
2. Bank integration
Having an integrated banking solution saves much of your team's time. With the status of transactions updating sooner, you can view payment statuses from one convenient dashboard.
3. Advanced Reporting and Analysis
In the delayed payment cycles, unbilled jobs can create an incorrect picture of your finances. Reports like job profitability, AR, AP, and estimated vs actuals show the accurate financial standing. You can generate reports for jobs invoiced at other branches to avoid missing out on accounting inter-branch or external branch expenses.
With a freight management solution, like Logi-Sys, you can eliminate repeatedly reminding vendors and customers about dues. Generate invoices and send DSRs at a pre-scheduled time to your customers. No more delays due to the non-receipt of invoices.
5. Set customer credit limits
As a business owner, you must safeguard your business's cash flow to avoid risks. Freight ERP allows you to set a credit limit beyond a certain amount. This will help you to maintain the right balance between the company's credit requirement and the ability to absorb bad debts.