Freight brokers have a lot of responsibilities, from matching shippers and carriers to making sure each piece of cargo gets to the right place. Another essential task in this busy industry is bookkeeping. Freight brokers who don’t prioritize bookkeeping can end up losing money in the long run. Here are seven common bookkeeping mistakes freight brokers make and how to avoid them.
1. Attempting to DIY
In order to save money, many business owners insist on handling the books themselves or delegating the task to an inexperienced employee or family member. While you may initially save time and money, costly errors can result in higher bond premiums, more expensive financing terms, and other unforeseen expenses in the long-run.
Hiring a competent bookkeeper will save you money, because the job will be done quickly and efficiently, with fewer errors.
2. Postponing important tasks
Running any business is hard work. Many freight brokers find themselves too busy doing the day-to-day work to focus on important bookkeeping tasks such as reconciling bank and credit card accounts each month. Reconciling statements helps you catch errors and know how much cash or credit you actually have.
Although postponing this task may be tempting, you should reconcile your bank and credit card statements every month, preferably as soon as each statement is available. That way, you can identify any missing deposits, lost checks, or fraudulent charges and address these problems in a timely manner.
3. Not tracking invoices and receivables
If you’re not properly accounting for receivables, you can’t get paid. Getting paid equals cash, the lifeblood of every business.
Experienced freight brokers know that the delay between when you must pay your carriers and when you receive payment from your customers can strain your cash flow.
If tracking and collecting invoices takes too much time, consider invoice factoring. For a small fee, an invoice factoring company like Triumph Business Capital will purchase your invoices. You’ll get paid immediately without the time and expense of dealing with collections.
4. Ignoring liabilities
When a surety looks at your business financials to underwrite a bond, one of their major considerations is whether you have enough assets to cover your liabilities. Inexperienced bookkeepers sometimes remember to record a liability, but then forget to reverse the liability when the payment is made. This error results in an overstatement of liabilities and an understatement of net income, making your business look less financially stable than it actually is.
You can avoid this type of error by hiring an experienced bookkeeper. It’s also a good idea to have another set of eyes (either an owner or a CPA) review the balance sheet regularly and look for unusual account balances.
5. Miscategorizing expenses
Another common error made by inexperienced bookkeepers is miscategorizing expenses or creating too many expense categories. Most businesses and industries have a fairly standard set of expense categories. Miscategorizing expenses or creating too many categories can be a big red flag, signaling to a surety or loan underwriter that your books are not well prepared.
Set up your accounting software correctly from the start with the help of an experienced bookkeeper or accountant and don’t add new expense categories without careful consideration. If you’re unsure of how to classify an expense, ask your CPA or accountant for guidance.
6. Missing details on invoices
When invoicing your customers, you need to provide sufficient detail on each line item. For example, is the charge a flat fee, or do you invoice per mile, per piece, or by weight? If you include additional charges, such as reimbursement for fees or fuel, you should list these as separate line items. Make sure the charges are properly detailed so there is no confusion.
Including the necessary details on your invoices will prevent pushback from your customers for charges they don’t recognize. Any missing information can cause delays in payment—a headache no business owner needs.
7. Missing out on accounting software functionality
Often, in an effort to get their business running, freight brokers purchase an accounting software package but never take the time to learn how to use it correctly. If you’re outsourcing all your accounting and bookkeeping tasks, this is probably not an issue. On the other hand, if you’re using the software at all, even just to enter checks and run reports, you should take the time to learn all of the available functions.
The right accounting software, when used correctly, can save you time and give you real-time information on the state of your business—information you can use to make important business decisions.
Get paid instantly
Want to take one task off your endless to-do list? Learn more about how invoice factoring can put cash in your bank account, while Triumph Business Capital handles the time-consuming task of calling shippers to collect on invoices.