Archives: Marketplace Articles

Tips to Avoid Fraud in the Supply Chain

Freight brokers play a crucial role in the transportation industry. They act as intermediaries between shippers and carriers, helping to match cargo with appropriate carriers, negotiate rates, and ensure timely delivery. However, one of the biggest challenges faced by freight brokers is the risk of double-brokering.

What is Double-Brokering?

Double-brokering is a practice where a carrier accepts a shipment from a broker and then subsequently tenders the same shipment to another carrier for transport. This means that the carrier is essentially acting as a middleman and profiting off the work of another carrier, without doing any of the actual transportation work. This practice is unethical because the carrier is misrepresenting itself as the actual carrier of the goods, when in reality they are acting as a broker.

 

Why is Double-Brokering a Problem?

Double-brokering is a problem for a number of reasons. First and foremost, it is illegal. The Federal Motor Carrier Safety Administration (FMCSA) prohibits carriers from brokering loads without first obtaining a brokerage license. Carriers that engage in double-brokering are essentially acting as unlicensed brokers, which is a violation of federal law and subject to fines.

Secondly, double-brokering can create a number of issues for the parties involved. The carrier that actually transports the goods is most likely not aware that the shipment has been double-brokered and did not agree to the terms and conditions of the initial agreement between the broker and the originally contracted carrier. This can lead to disputes over payment & liability amongst other issues.

Additionally, double-brokering can create a number of logistical challenges. If the carrier that actually transports the goods experiences delays or other issues, it can impact the delivery schedule and create additional costs for the shipper.

 

How Can You Avoid Tendering Loads to Carriers Who May Double-Broker?

While policing double-brokering is a shared responsibility of both freight brokers and carriers, in this article we will discuss the steps brokers can take to avoid tendering loads to carriers who may double-broker their freight. Here are some best practices that brokers can follow:

  1. Conduct thorough carrier screenings

One of the best ways to avoid double-brokering is to conduct through carrier screenings. Brokers should verify that carriers have the necessary licenses and insurance, and should also check their safety ratings, inspection reports, credit ratings and other key metrics. By conducting thorough screenings, brokers can ensure that they are only working with reputable carriers that are qualified to transport their clients’ goods.

  1. Work with carriers who have been in business for more than year

Many carriers and factoring firms will not extend credit to brokers who have been in business for less than a year. They do this to mitigate risk and this is a practice that should also be considered by brokers when deciding which carriers to work with. There is not a large barrier to entry to set up carrier authority so new MC#’s pop up daily. Carriers that are less experienced may not have the necessary infrastructure and resources to transport goods efficiently and effectively which may lead to them double-brokering your freight. By working with carriers that have been in business for longer periods of time brokers can minimize the risk of double-brokering and ensure their clients’ goods are transported safely.

  1. Build relationships with carriers

Building relationships with carriers is another effective way to avoid double-brokering. Brokers can develop a network of reliable carriers they trust and can work with them on an ongoing basis. By establishing a good rapport with carriers, brokers can gain insight into their operations and can develop a better understanding of their capabilities, strengths, and limitations.

  1. Be aware of dispatch service providers

One way that freight brokers can inadvertently double broker shipments is by interacting with dispatch service providers. Dispatch services are third-party companies that essentially find loads for smaller carriers and help with their back-office support. While dispatching services can be useful to smaller owner operators in some cases, they can increase the risk of double brokering. There are many dispatching services that find posted loads from brokers or shippers on load boards and then give them to a carrier under the guise that they are an employ of the trucking company. When you work with a dispatch service you may be opening yourself up to a lack of visibility, a lack of control and a lack of accountability if something should go awry.

  1. Use load tracking technology

Load tracking technology is another valuable tool for brokers to minimize the risk of double-brokering. This technology allows brokers to track the location and status of their clients’ goods in real-time, which can help identify any issues or delays that may arise during transport. Load tracking technology can also provide brokers with valuable data on carrier performance, such as on-time delivery rates, average transit times, and other key metrics. By using GPS and/or electronic logging devices you can ensure that loads are being transported by the assigned carrier and prevent unauthorized assignments.

  1. Include anti-double-brokering clauses in contracts

Broker can also protect themselves from double-brokering by including clauses in their contracts with carriers. These clauses can stipulate that carriers are prohibited from double-brokering shipments and can also outline the consequences for doing so. For example, the contract may stipulate that carriers will be liable for any damages or losses resulting from double-brokering and may also provide for termination of the contract in the event of a violation.

As a freight broker, it is essential to be aware of the risks of double-brokering and take steps to avoid becoming a victim. By following these best practices brokers can ensure that their clients’ goods are transported reliably, legally, and can protect themselves from the risks associated with double-brokering.

Double Brokering Marches On: Strategies and Tactics for Risk Mitigation

Double brokering, a deceptive practice in the freight industry, occurs when a broker who has already been contracted to move a shipment outsources the job to another broker without the shipper’s knowledge or consent. This creates a long chain of intermediaries, which can lead to increased costs, reduced transparency, and lower carrier earnings. As a freight broker, it is crucial to take steps to mitigate the risks associated with double brokering to maintain a reputable business and foster long-term relationships with shippers and carriers. This article discusses strategies for freight brokers to tackle the double brokering issue.

  • Reduced transparency: Shippers lose visibility into the actual carriers handling their shipments, making it difficult to monitor quality and compliance.
  • Increased and unwarranted costs: Each intermediary in the chain takes a cut of the profits, driving up the overall cost of transportation for the shipper.
  • Lower carrier earnings: As multiple brokers take their share of the fees; the end or actual carrier ultimately receives a reduction in pay or no payment for their services at all.
  • Delays and complications: A longer chain of intermediaries increases the likelihood of miscommunication, errors, and delays in the transportation process and also creates complications in the event of a claim.

Strategies for Freight Brokers to Mitigate Double Brokering Risks

  1. Establish a rigorous carrier vetting process: Implement a thorough carrier selection process to ensure that you are only working with reputable and reliable carriers. Verify carrier credentials, including operating authority, insurance coverage, and safety ratings. Regularly update your carrier database to keep track of any changes in their compliance status. Some digital tools can often come with added benefits as well. ComFreight HaulPay, for example, filters carriers coming onto its payment network so that brokers can rest assured they are paying a party that is not fraudulent and is in good standing.
  2. Maintain clear communication with shippers and carriers: Open and transparent communication with shippers and carriers is essential. Keep all parties informed about the progress of the shipment and address any concerns or issues promptly. Providing regular updates and being responsive to inquiries can help establish trust and reduce the likelihood of unauthorized subcontracting.
  3. Implement technology solutions for enhanced visibility: Utilize technology tools, such as transportation management systems (TMS) and carrier onboarding and monitoring systems to improve shipment visibility, track carrier performance, and ensure regulatory compliance. These tools can help you monitor shipments in real time and flag any potential issues, making it more difficult for double brokering to occur. ComFreight HaulPay also can help stop carriers with a double brokering or fraud history before they ever get assigned to a load for final payment with their trusted network process.
  4. Develop long-term relationships with trusted carriers: Building strong relationships with reliable carriers can discourage double brokering practices. A loyal carrier base is more likely to prioritize ethical business practices and communicate any concerns or issues directly with you, reducing the chances of unauthorized subcontracting. Resources that provide a trusted carrier network, like HaulPay, can also offload much of this work.
  5. Educate your staff about double brokering risks: Ensure that your employees understand the negative consequences of double brokering and are trained to identify and address any signs of this practice and are well-versed in utilizing industry tools to cross-check carrier compliance and registered vs purported carrier contact and business information. Encourage open communication within your team and provide ongoing training to keep your staff informed about industry best practices and regulatory updates. The TIA can also help with excellent training for your team to cover these cases.
  6. Set clear expectations and contracts with carriers: Clearly communicate your expectations regarding subcontracting with carriers. Include clauses in contracts that prohibit double brokering or require prior approval before subcontracting to establish clear guidelines and discourage unethical practices. Ensure any Shipper authorizes in writing or signs a formal agreement for any co-brokering arrangements.
  7. Join industry associations and networks: Participate in industry organizations like the TIA, to stay informed about best practices, regulatory updates, and potential fraud risks. Leverage association tools like Watch Dog and continue to learn from other professionals in our industry. TIA Connect, TIA’s member forum also provides an excellent platform to learn more about these challenges and how other members are overcoming them. Networking with other professionals in the industry can provide valuable insights and resources for preventing double brokering.

Factoring Companies and Payment Risk Alignment

The right factoring company will have countermeasures in place to help ensure both carrier and broker clients are not doing double-brokering and are adhering to ethical industry practices. The financial incentives between good factors and ethical brokers are typically aligned because the factor is trying to avoid exposure to bad debt. When double-brokering occurs it is often the case that one of the parties, usually the end carrier is not paid, or the shipper refuses to pay invoices because the party they contracted to did not actually perform the services. This can lead to a high degree of payment risk for both the end carrier, the broker and the factoring company and this risk is only exacerbated by any potential claim that could arise.

As a freight broker, addressing the issue of double brokering is essential for maintaining a reputable business, avoiding potential financial exposure, and fostering long-term relationships with shippers and carriers. By implementing strategies such as rigorous carrier vetting, clear communication, effective training, and the use of technology and payment tools like ComFreight’s HaulPay, you can mitigate the and eliminate many of the risks associated with double brokering and ensure that your brokerage thrives.

By: Steve Kochan, Founder & CEO ComFreight HaulPay

Technology Enabling Instant Insurance at your Fingertips.

By: Andy Bauer, VP Sales & Marketing with Redkik

When you think of technology, most don’t immediately associate it with Insurance. Buying insurance remains grossly the same as it did at inception for shippers and carriers alike, with current processes and solutions that are inefficient and lack very much needed automation. If you have started your technology journey through the use of a platform to help operations, you are already in a unique position to modernize the acquisition of insurance, simplify the process and create value.

Redkik is a global software company with the mission to simplify and improve the insurance industry for all parties within logistics and transportation. By identifying the major issues in acquiring insurance, through personal and learned experiences, Redkik decided to tackle the industry head-on so insurance will no longer be the cause of headache and heartburn.

Redkik decided that the only way to move the insurance world forward is with innovation. Artificial intelligence and machine learning elevate the insurance buying experience with per-shipment instant quotes, backed by leading insurance companies, that are based on actual data sets enabling  lower risk and higher coverage for any type of shipment.

Redkik also cares about its partners, knowing personally the struggle as a start-up fleet owner and comprised of experts in the logistics and insurance sectors. Knowing that change is difficult and sharing in the success of the transition to transactional policies is preferred, we offer a revenue share that adds even more value to your company and signals that we cherish your partnership.

Increase your Business with Embedded Cargo Insurance.

Redkik offers its SaaS solution as an easily adoptable API integrations.  Differentiate yourself from the competition with the world’s first fully embedded cargo insurance solution. Redkik has been integrated on 2 continents so far and is capable of going anywhere in the globe that you are transacting business.

Keep your customer where they belong.

When we integrate into your platform, we want you to keep your customer in your system – without redirecting them to external websites or portals.

Allowing your customers to always stay on your platform streamlines the purchase journey and makes sure you never lose the customer mid-way through the process due to hassle, time, or confusion.

Your Customer, Your Brand.

You have worked hard to build a reputable brand for your company. We believe it’s not our place to hijack your platform to promote our brand.

You will stay in charge of your customers’ experience, while getting access to the vast benefits of Redkik’s unmatched software.

Tailored Coverage

In today’s market the customer should be in the driver’s seat. Traditional off-the-shelf policies do not reflect this as they give you little to no flexibility and they rarely cover 100% of yours or your customer’s needs.

Redkik’ s single trip cargo insurance solution gives your customer maximum flexibility, while our AI and machine learning algorithm makes sure they only pay for what they need so that their needs are prioritized, meeting your customer needs with tailored coverage.

One-click Coverage

Through integrating our API with your current online system, your customers will get access to the market’s most seamless cargo insurance solution with market-leading ease of use.

To solidify our case, Redkik recently collaborated with EKA Solutions Inc. to integrate our transactional InsurTech solution. This particular integration empowers small and medium size broker, carrier, and shipper businesses to operate from quote-to-cash with affordable and best-in-class digital tools, enabling the higher performance demanded in tomorrow’s supply chain.

​​​​​ ​​“There is no greater industry need than reducing risk at every level of the supply chain for customers – so EKA and Redkik are kicking off this new year by taking action,” says JJ Singh, Founder and CEO for EKA Solutions, Inc.

“Together with EKA we are combining our visions for an optimized supply chain to offer solutions for the industry’s actual needs without shortcuts. Through this strategic partnership, we are streamlining the process of purchasing insurance with modern and efficient technology that will undoubtedly transform how the industry views insurance products,” said Chris Kalinski, Founder and CEO of Redkik, Inc.

This collaboration enables Redkik developers to better guide you through the entire API integration process and provide you with all the necessary tools.

To learn more about Redkik and our passion for integrating technology with Insurtech solutions to create a better experience, add value with reduced risk; visit us at  www.redkik.com .

Broker Credit Ratings on Factoring Rates

By: David Yoe, VP of Operations and Business Development, TransCredit

A freight broker is a middleman who helps connect shippers with carriers to transport goods. While a broker’s role is to facilitate the transportation process, their credit score is an important factor that impacts their factoring rates when they use factoring services. Factoring is a financing option that allows freight brokers to get paid faster by selling their accounts receivable to a factoring company. The factoring company will advance the broker a portion of the invoice value, usually around 80%, and then collect payment from the shipper when the invoice is due.

A Freight Broker’s Credit Score

This is an indicator of their financial stability and ability to repay debt. It reflects the broker’s past credit behavior, including payment history, outstanding debt, and the length of their credit history. The higher the credit score, the lower the risk for the factoring company, which means that the broker can expect lower factoring rates. On the other hand, a lower credit score will increase the perceived risk for the factoring company, leading to higher factoring rates for the broker.

In general, factoring companies will consider a broker’s credit score as one of the key factors in determining their factoring rates. It’s important to note that while a good credit score is desirable, it’s not the only factor that influences the factoring rate. Other factors, such as the broker’s business history, the size of their accounts receivable, and the industry they operate in, are also taken into consideration when determining the factoring rate.

Factoring companies also look at the creditworthiness of the shippers that the broker is working with. Shippers that have a strong credit history and are less likely to default on payment will increase the perceived security for the factoring company, which may result in lower factoring rates for the broker. In contrast, if the shippers that the broker works with have a poor credit history or are in a high-risk industry, the factoring rate may be higher to reflect the increased risk.

It’s also important for freight brokers to understand the difference between personal and business credit scores. Personal credit scores reflect an individual’s credit history and behavior, while business credit scores reflect the financial stability and credit history of a company. A broker’s business credit score may be different from their personal credit score, and both may be considered by factoring companies when determining the factoring rate.

Getting the Best Factoring Rates

Freight brokers should take steps to improve their credit score. This may include paying bills on time, reducing outstanding debt, and establishing a strong credit history. By improving their credit score, brokers can demonstrate their financial stability and increase their chances of getting favorable factoring rates.

In conclusion, a freight broker’s credit score is a critical factor that impacts their factoring rates. A good credit score demonstrates financial stability and a low risk of default, which can result in lower factoring rates for the broker. On the other hand, a poor credit score can result in higher factoring rates, making it more expensive for the broker to access funding. Freight brokers should take steps to improve their credit score, including paying bills on time, reducing outstanding debt, and establishing a strong credit history, to increase their chances of getting favorable factoring rates.

TransCredit has been one of the primary credit reporting agencies in the transportation industry for 38 years. If you are a freight broker, we encourage you to contact us to find out what your company’s credit score is and to explore the options we have available to update, manage and monitor your report.

 

Podcast on Innovative Factoring Solutions

Steve Kochan, CEO & Founder of ComFreight, was recently featured on the FreightCaviar podcast to discuss ComFreight’s evolution. From humble load board beginnings to the advanced freight factoring and payment services we offer now, he sheds light on the journey and how ComFreight’s growth has helped carriers and brokers grow as well.

Speaking to carriers specifically, Steve offers advice for how he would build a resilient trucking company in the face of financial uncertainty. He offers suggestions for streamlining back-office operations and ensuring payment comes quickly and in full — including the implementation of our own Load Board and HaulPay products.

Speaking to freight brokers specifically, Steve discusses the earnings potential of brokerages and what it takes to make it in the competitive industry. When you’re competing with so many others in the market, it’s critical to seek and implement innovative solutions (like HaulPay) that can set you apart — and Steve gives some actionable insights into how.

So much knowledge and opportunity packed into this episode! Click one of the links below to listen:

YouTube

Spotify

Protecting Your Most Vulnerable Assets

By: By: Kevin Ricciotti

Vice President, Business Development Western Region, Avalon Risk Management

Accounts receivable make up almost 40 percent of a company’s assets yet are one of its most vulnerable assets. Non-payment of invoices can affect a company’s cash flow and capital to the point of shutting down its operations. Managing this risk should be a priority for companies especially with inflation affecting the cost everything from household essentials to vehicles.

Economists predict that the U.S. is headed for a recession in 2023. Unfortunately, small businesses are usually the hardest hit during a recession. Most small businesses do not have the financial wherewithal to afford a reduced cash flow due to delayed customer payments. According to a survey conducted by JP Morgan Chase, the average small business holds 27 cash buffer days in reserve. Trade credit insurance is one tool that can help 3PLs prepare for recession.
Trade credit insurance’s valuable protection means having a consistent cash flow and peace of mind knowing that your accounts receivable will be paid. The insurer helps you maintain a robust credit risk management process by continuously reviewing your customers throughout the policy period to ensure their continued creditworthiness. If there are signs that a company is experiencing financial difficulty, you will be notified of the increased risk. Trade credit insurance also provides additional benefits such as sales expansion, providing extra credit to current customers, and ability to obtain better financing terms from lenders.

Trade Credit Insurance Benefits
Sales Growth

Trade credit insurance allows you to expand your business while mitigating bad debt risk. New customers pose a challenge because they still need to establish a credit history, and you need to become more familiar with their operations. However, with trade credit insurance, underwriters provide insights to help you decide on whether to approve credit terms or not.
You may have an existing customer who requests a higher credit limit or who applies for less restrictive credit terms than the usual 30, 60, or 90-day terms of sales. If their receivables are insured, you can be confident in approving an increase in credit or longer credit terms. Doing so can not only grow sales but also strengthen your customer relationships.

Access better financing options

Banks often consider accounts receivable a liability, primarily when open invoices are concentrated among a few large customers. The debt is considered riskier because a default from any one of them would significantly impact on your business. However, when accounts receivable is insured, they can be deemed an asset or collateral since it is secured money.

Reduction in bad debt reserves

To avoid having sudden cash flow interruptions, companies set aside a reserved cash amount if a debt becomes uncollectable. The bad debt reserve is essentially an emergency fund for the business and decreases the amount of working capital available. Smaller 3PLs cannot afford to have $40,000 or $50,000 tied up in a bad debt reserve as they need the monies readily accessible. Having trade credit insurance allows companies to reduce or not have a bad debt reserve since their invoices are insured.

Protect from loss due to non-payment

Trade credit insurance provides indemnification from customer non-payment. Your business is insulated from a customer’s financial trouble, and you can continue operating normally.
While trade credit insurance protects you from problems associated with uncollected commercial debt, its goal is to help your company expand. Make sure to talk to your insurance broker about the benefits of trade credit insurance.

The TIA Bond Program and Bond Claims

By: James Francis, Avalon Risk Management

In case you missed our Annual Bond Webinar hosted by TIA in August, the following is a recap of some of the claim topics covered during the webinar. MAP-21 has been in effect since October 2013 and requires property brokers to be licensed with the Federal Motor Carrier Safety Administration (FMCSA) and establish proof of financial responsibility in the form of a bond or trust fund agreement. A property broker can fulfil this requirement by obtaining a BMC-84 bond or BMC-85 trust fund agreement.

The TIA Bond Program

TIA offers the FMCSA mandated $75,000 Bond (BMC-84) to qualifying property brokers and domestic freight forwarders. In addition, TIA members can obtain bonds with higher limits in the amounts of $100,000 or $250,000. Avalon handles all claims that are submitted in accordance with MAP-21 regulations.

The bond is in place to protect carriers against broker insolvency and a broker’s failure to pay freight charges owed to the carrier for services rendered. The bond is in place only to cover unpaid freight charges and is not able to cover lost or damaged goods, or damage to property. Under MAP-21 regulations, the surety must respond to the claim on or before the 30th day on which the notice is received. 

What happens if a claim is filed against your bond?

If a claim is filed, we will notify you of the open claim. You are given the opportunity to pay the claim or provide a written dispute. If payment has been made or is pending, we will request proof of payment. If there is a dispute over the invoice, the dispute should be supported with agreed upon terms of a rate confirmation or a broker-carrier agreement.

Broker Insolvency

If claims are unresolved after 30 days, the surety must investigate the broker for suspected insolvency.
Insolvent brokers are published for 60 days on our website, in accordance with 49 USC 13906, as amended by Map-21, Division C, Subtitle I, Section 32918.

Payment of claims

According to the regulations passed by MAP–21, the surety may only pay a claim if one of three conditions are met:
(i) subject to the review by the surety provider, the broker consents to the payment.
(ii) in any case in which the broker does not respond to adequate notice to address the validity of the claim, the surety provider determines that the claim is valid; or iii) the claim is not resolved within a reasonable period of time following a reasonable attempt by the claimant to resolve the claim under clauses (i) and (ii), and the claim is reduced to a judgment against the broker.

The surety must pay all valid claims received before or during the 60-day advertising period. After the advertising period has concluded, the surety will review all remaining valid claims received. Payment will be made in whole if total claims are under the bond amount. However, if total claims received are over the bond amount, the surety will issue payment on a pro-rata basis. In the event that the surety issues payment from the bond, the broker is responsible for reimbursement to the surety for any claim payments.

Exclusions

There are instances where a claim may not be considered valid. There are three main exemptions found under 49 USC 14705:
• Claims must be submitted to the surety within 18 months of the shipment pickup date. If a claim is submitted to the surety beyond the 18-month statute of limitations, we are unable to accept the claim.
• The bond cannot cover claims containing exempt commodities. If a shipment contains exempt commodities, mostly produce, agricultural commodities, dairy, and poultry, the claim is exempt from coverage.
• If a shipment does not cross a state or federal line at any point during the shipment, it is exempt from coverage

For a comprehensive list of commodities that are considered exempt, please visit

https://www.fmcsa.dot.gov/sites/fmcsa.dot.gov/files/docs/Administrative_Ruling_119.pdf

Additionally, if the claimant does not have active carrier authority at the time of the shipment, the claim is not considered valid. A motor carrier must be licensed with the FMCSA and have active motor carrier authority at the time that the shipment took place.

Lastly, if a claimant is not a motor carrier or shipper operating as a motor carrier, we cannot accept the claim. The bond language states that the bond is for the benefit of motor carriers and shippers by way of motor carrier. If a claimant is not operating in the capacity of a motor carrier, they are not considered a valid party to the bond.

Best Practices

• Have clearly defined terms and conditions in any contract with carriers.
• Acknowledge receipt of clam as soon as possible and forward to the appropriate party for a response.
• The surety only has 30 days to respond. If there is a dispute, provide information on the dispute as soon as possible for the surety to make a decision and resolve the claim.
• To aid a disputed claim, provide the Broker- Carrier Agreement on file with the carrier and reference any terms of the agreement that support your dispute.
• Since the surety only has 30 days to respond, the sooner you can provide information on your dispute, the sooner we can issue a decision and resolve the claim.

Claim Trends

• A deduction was made against the carrier for late delivery or missed appointments.
• The carrier billed unapproved accessorial charges.
• A deduction was made against the carrier for noncompliance with tracking requirements.
• There is an unresolved damage claim against the carrier and an offset has been placed against them.

Having a bond through the TIA Bond Program allows you the peace of mind that claims are not automatically paid and are handled in accordance with MAP-21.
For more information on the application process, please visit www.tianet.org/tiabond.

If you have any questions regarding claims against your bond or MAP-21 regulations, you may contact the TIA claims department at (847) 235-6283 or via email at claims@tiasuretyclaims.com

Brokers: Don’t be Afraid of the F-Word

Freight factoring can be a somewhat nebulous concept for freight brokers. Fear of the unknown can cause some to dismiss the subject altogether. But taking the time to understand factoring and finding a partner that will help make the process easier can combine to make a world of difference on the financial side of things. Simply put, factoring lets brokers receive a much faster payment for their services with the factoring company paying them right away and then handling invoice payment processing and collection. The broker gives up a small percentage of the invoice payment to the factoring company as compensation. Let’s take a look at some misconceptions as well as the many benefits of factoring.

Why Factoring Sometimes Gets a Bad Rap

As mentioned already, freight factoring can be a little complicated and sometimes there are concerns that can impact its image:

  • Chargebacks: If the factoring company cannot collect payment on the invoice from a client in a reasonable amount of time, the factoring company will request the advance back and will hand the invoice back to the freight broker. This is what is known as a chargeback. The broker will then have to contact the client and request payment for the invoice. Chargebacks can happen for a variety of reasons — defective products being delivered, client disputes, and invoices that are just too old. A reliable factoring company will keep the broker updated throughout the process of each invoice. When something seems wrong, they’ll communicate their concerns and will work to avoid chargebacks.
  • Hidden fees: Some factoring companies will add different fees, such as application fees, credit check fees, processing fees for each invoice that is financed, or late fees if a client is past due on a payment. Brokers must stay aware of these types of fees when working out a contract with a factoring company.
  • Poor invoicing etiquette: Handling invoices needs to be a priority, but some companies fall short on everything from leaving out key details on the invoice to simply forgetting to send the invoice to not following up in a timely manner when confirming the invoice has been received. There are plenty of ways the ball can be dropped and the broker can be on the hook for the payment.

How Factoring Can be a Supercharging Benefit to a Broker

The clear reason why freight brokers use factoring companies is that the quick turnover in payment after completing a shipment means immediate cash flow to help cover expenses. But there are more benefits to using a freight factoring company:

  • Factoring services can help brokers monitor the credit risks of a shipper and help them realize when the risk is too great to accept a deal.
  • A lot of the facets of freight payment management can be time-consuming. Having the right factoring company handle concerns like tracking down vendors for payments or waiting months for invoices to clear frees up a significant amount of time for a broker to focus on other tasks.
  • Budgeting and financial planning can be improved with the help of a good factoring company because they offer customized insights and data tracking that can point out issues and concerns within payment models.
  • Factoring service providers can help more effectively track financial health in both the short and long term. They can more easily monitor performance across multiple platforms and more efficiently coordinate loads and drivers, which means increased profits along with reduced fees and expenses.
  • The days of mountains of paperwork involving payment processing, logistics, and tracking documents are a thing of the past. With invoice factoring processes being shifted online, information — bills of lading, PODs, receipts, and actual invoices — can be recorded and shared faster.

Benefits of Getting Carriers Paid Digitally and Faster

The freight market continues to grow significantly. So does the competition for acquiring more clients as shippers or carriers. To stay on top of that aggressive market, it’s more important than ever to provide quality service and to do it as quickly as possible. Here are a couple of ways that can help you stand out from the other freight brokers:

  • With an exemplary reputation for shipping goods and providing the best customer service, you can become a “freight broker of choice.” With expertise in the field, this type of broker is often the first choice of those looking to ship cargo. The benefits of being a preferred broker of choice include being able to charge higher rates because clients know that you can get them the best service, getting more market exposure, increasing credibility that can attract new business more efficiently, having more negotiating power, and faster turnaround times during a time when meeting deadlines becomes even more important. With that new business, you’ll likely have concerns over cash flow while waiting for weeks for payments from your clients, which can disrupt your business operations. Partnering with a freight factoring service can help solve those cash flow problems with payments that are made digitally. With immediate payments from the factoring service, you have money to quickly turn around and put into the next job.
  • Another benefit of switching to a freight factoring service that uses digital payments is the enhanced payment and reconciliation process. Paper-based types of payment are replaced by a much faster digital process. Check codes no longer need to be confirmed, calls in the wee hours are obsolete, and drivers don’t have to wait around to get the payment processed. The process is not only fast, but the transactions all have a digital trail and make the transfer more secure. Lumper receipts are automatically created for the driver, broker, and shipper so that reconciliation is swift.
  • It also lets you take care of the carriers better. By ensuring the rapid turnover of payment, carriers can quickly put that money back into the next job and will realize the new digital service benefits them as well. That in turn raises customer satisfaction, nurtures mutual business loyalty, and can solidify a strong long-term relationship.

The Key Benefits of HaulPay

Using the factoring and payments of ComFreight’s HaulPay, you can leap into the digital age by replacing manual payments and old-school factoring with a better way to pay and get paid. With HaulPay, payments arrive within one day, digital processing comes without hidden fees or extra interest costs, and you can check credit on any customer for free while automating your invoicing with free software or TMS integrations. Here are some key benefits of HaulPay:

  • Non-recourse factoring with no minimums, low or no reserve, and the best flat-rate pricing options. This also means a big reduction in your credit risk.
  • Optional advances of your own broker margin on a load-to-load basis when you want it to accelerate your cash flow on demand.
  • Turn your carrier payables into working capital by having HaulPay pay the carrier at a scheduled time, either with quick pay or on a specific future date the carrier wants.
  • Flexible self-finance so you can use your own funds when you need to.
  • Establish good credit or improve your credit score by always paying fast.
  • The ability to decide how much you want HaulPay involved in your invoicing processes. For instance, you can choose which of your customers and invoices you want to process.
  • Free software to check customer credit approval and add new customers in real-time.
  • Eliminate carrier payment fraud with HaulPay’s carrier setup process and growing network of vetted carriers that you can connect to.
  • Leverage HaulPay’s carrier setup process to automate dealing with your carriers’ factoring companies saving even more time on your payables.
  • Scale faster with more of your back office automated at no additional cost to you.

HaulPay Helps Pave the Way

After taking a deeper look at freight factoring and its many benefits, you can see why the right broker-focused factoring solution can be a part of your future and success. It’s also evident that getting around in this complex world of freight factoring can be much easier with a partner. ComFreight’s HaulPay can help you leave the old-school world of paperwork and manual payments for an automated system that includes flexible low-cost factoring options. Come take a look at the new wave of freight brokering benefits with a demonstration on our website.

 

Provided By: Steve Kochan, Founder & CEO, ComFreight HaulPay

TOOLS YOU NEED, NO MATTER THE STATE OF THE MARKET

Tai TMS HAS EQUIPPED BROKERS WITH THE TOOLS THEY NEED TO MAXIMIZE THEIR REPS’ TIME & EFFICIENCY, NO MATTER THE STATE OF THE MARKET

“Like a fine wine, a TMS matures with age”, says Tai Software CEO, Walter “Mitch” Mitchell. 2022 has been a year full of maturation, evolution, and outlook for the future…not just for Tai Software, but for the entire freight industry as a collective. The resounding heartbeat for the Tai team over the course of this past year has been enhancing their TMS product offerings & integrations to support the growing broker need for efficiency in workflows to maximize their reps time (as hiring has paused for many brokerages) and the need for freeing up reps to focus customer relationships to strengthen those bonds.

As the industry looks onward to 2023, with both optimism and an initial concern of a possible down market, Tai Software has been a leader in actively engaging with brokers all over the country to better understand their new needs in an uncertain market, and how the Tai TMS product has evolved into a must have tool for navigating operations in any market.

When a brokerage is firing on all cylinders; from their workflow, processes, accounting automations, etc.…they are doing all the right things to keep momentum, no matter what the market is doing. Tai empowers brokers to do just that with regular product releases, new features, and new integrations to support your needs with access and benefits such as:

  • New Integrations let Tai TMS users view robust rate intelligence tools and compare directly to their own historical quotes while evaluating and negotiating active carrier quotes.
  • Access to cloud-based billing software designed to facilitate the exchange of bills with carriers, resolve disputes, collect documents, and make carrier payments.
  • Integrated digital factoring and payments that eliminate credit risk,
  • Digital freight matching (DFM) service that identifies available capacity, submits offers to carriers, and provides a Book Now workflow.
  • An efficient solution for streamlining back-office carrier payment operations.

Tai Goes Beyond Providing Basic Tools.

Tai helps to support YOU with a new TMS Chat Support, a TMS Knowledge Center and enhanced time saving features like a Shipment Search Bulk Feature, Shipment Manifest documents, New Customized Alerts, Accounting Enhancements, Insurance Compliance Indicator, and Disabled Carrier Warnings.

Tai Software has coined the phrase, “Your TMS Partner for the Long Haul”. This isn’t just a clever marketing tagline, this is a mantra for how Tai supports their customers’ needs in great times, and in challenging times.

Tai TMS has created an all-in-one domestic freight management system for full truckload and LTL shipments. We provide your team with unmatched speed and scalability with automation implanted into every phase, along with direct integrations to carriers, load boards, and capacity tools.

Tai Software’s core group of developers and freight industry experts has helped freight brokers scale growth for over 20 years. Through constant evolution and new feature rollouts and are on a mission to provide brokers with everything they are going to need as the industry shifts & evolves itself. We are committed to hearing the needs of our customers, not only to gain intel for product developments, but because we want our customers to win, to grow, and to move the needle in any market – and that’s what being a true partner is all about.

Article by: Tai Software

 

The Illegal Practice of Double Brokering

 

Double Brokering occurs when a carrier accepts a load and then rebrokers it to another motor carrier. This is not a legal practice. Likely, the motor carrier that rebrokers the load is not authorized or in compliance with Federal Motor Carrier Safety Administration (FMCSA).

There are many challenges when this practice occurs. For example, it is easy for fraud to be committed. The motor carrier initially hired can keep the payment and leave the second motor carrier on the hook for shipping expenses.

The broker of the load does not know who is hauling the load. The carrier hired to move the load could be vetted to the broker’s standards but then gives the load to his friend, and that motor carrier might not have the proper authority or safety rating to move the load. This puts the broker and the shipper at significant risk of any liability, loss, or claim that could occur through the actions of an unqualified motor carrier.

Double brokering is frowned upon by shippers and brokers due to the hazards of this practice. Transportation agreements often do not allow double brokering or re-brokering. Frequently, the trucker transporting the freight has little or no communication with the original broker, and the trucker must fight to be paid if they are paid.

It is said that double brokering scams are costing our industry over $100M annually.

MAP-21 laws (which were passed in 2012 and implemented in 2016) say that if you broker a load and do not have authority with the FMCSA, you are subject to a fine of $10,000. At this time, the FMCSA has not enforced this section of the regulation.

Insurance Implications

Unfortunately, accidents happen, and when double brokering occurs, insurance matters get complicated. Here is a claim example showing the complexities. A load was initially picked up on May 2, 2022, in Vernon, CA, and intended to be delivered in Lansing, MI, on May 7, 2022. This load was booked with Motor carrier A on May 2, 2022, who then brokered the freight to Motor carrier B. Motor Carrier A does not have brokerage authority. Motor Carrier B then brokered the load out to Motor carrier C. Motor carrier C added an extra pickup and stop to this shipment. The initial load was supposed to only have bedding and comforters. However, Motor Carrier C added pallets of rice cakes to the load. Per the original Broker, the rate confirmations were exclusive use.

While Motor Carrier C was in transit and in possession of the goods, he was rear-ended by another tractor-trailer. The accident resulted in a trailer fire and a fatality. The truck and trailer were towed to a tow yard in Winslow, AZ, where the trailer and product sat for months. Motor carrier C did not have the proceeds to pay for the tow bill and would not help salvage the product. Motor carrier C’s insurance adjuster sent out an inspector who said the product was not damaged. Luckily, the Broker found a secondary market to salvage the comforters for $6,552.00 and was able to offset some of the linehaul amounts. The total amount owed was $11,068.00. Motor Carrier A and Motor Carrier B will not cooperate.

Best Practices

There are things you can do to prevent this from happening:

The claim example mentioned above illustrates the importance of reporting the bad actors and staying diligent in the motor carrier selection and vetting processes. Do not hesitate to contact Jodie Maher, Account Executive with Avalon Risk Management if you have any questions or would like to review your insurance coverages.

TIA is the premier organization for third-party logistics professionals in North America and abroad. Membership at TIA adds value to your business and provides resources for growth.
Learn More

Alliances

partner-image
partner-image
partner-image
partner-image