Thursday, October 23, 2014

FREIGHT PAYMENT & THE ICC

The issue of freight payments is not new.  It goes back to the days of the ICC.  Why don't companies learn?  Why do they repeat such obvious mistakes?

COMMENTARY: Payment a two-way street....American Shipper

Shippers and carriers would do well to better understand the payment concerns of the other.

It’s amazing what a new crowd can do for perspective.
Earlier this week, I got a chance to attend a gathering of transportation finance professionals to discuss American Shipper’s research on the freight payment landscape. Our research is purposely focused on the trends, strategies, and technology usage of freight payers.
The crowd, from the National Association of Credit Management, was composed largely of people at carriers and logistics services providers. Their jobs are to ensure their companies get paid for the services rendered to shippers of freight.
So a couple people came up after my presentation to note that it was good to get the broad perspective of shippers when it comes to freight payment. They also noted shippers sometimes fail to understand the perspective of the carrier, particularly those far removed in finance.
One specific point was related to the failure of some freight payment vendors in recent years. A finance professional from a trucking company said it amazed her that:
  1. Shippers think of these vendors as banks. (I clarified that she meant non-bank backed vendors, and also made the case that many non-bank vendors do have extensive internal controls.)
  2. When a freight payment vendor goes belly up, or even has trouble paying some of its customers’ bills, the shipper often thinks it is absolved of the duty to pay those bills.
Indeed, this is a frequent misconception. Shippers need to remember that a freight pay service or tool is a vendor of their choosing, not that of the carriers they use. If there’s a problem with that vendor, it really isn’t the carrier’s fault, and it shouldn’t be their problem. Shippers might not like the idea of resolving a debt they already essentially paid. But it certainly isn’t the carriers’ fault, and they have provided a service and deserve to be paid.
Another notable discussion at the forum: the extent to which carriers often need to go to get paid is astounding. One session focused on collection tips that revolved around collection regulatory compliance, psychological tricks in conversation, the use of Google Earth, and even calling neighboring businesses of the delinquent payer.
It really drove home the point the relationship between transportation user and provider is not complete until the provider is paid. If you’re a trustworthy enough customer, that may mean you can wait as many as 60 days to pay, but that payment must come, no excuses.