Commentary: Practicing safe freight payments
Thanks for bringing the important topic of the Trendset freight payment matter to the shipper community’s attention.
In my 30-plus years in the business, I have never quite understood why anyone would want to make payment arrangements like these via a third party if it is not a bank. For example, we don’t use a third party to process and pay our credit card bills, utilities or taxes owed to the IRS?
Why is freight different? In reality, it is not. Freight is like any other expense that a business has to pay, and direct payment to the vendor is easy and simple and can be automated like any other payment a company makes. It is a debt owed directly to the vendor, and if the third party fails to pay you’re out of luck. Same as with customs duties owed to U.S. Customs and Border Protection, they should always be settled directly between the importer of record and CBP, never through the customs broker.
Another risk with freight payment companies is that they will most often delay payment to the vendors. They will receive an electronic weekly bank transfer from their customer and often issue checks via “snail mail” to the actual vendors (sometimes days or weeks later).
I do understand the need and value for a good freight audit provider, but that should never be connected to freight payment. Many freight audit companies can provide the approved payment file to the customer who in turn can initiate the direct payment to the actual vendor.
Hopefully, the Trendset disaster will be a lesson and warning to all shippers that this business model needs to change. The risks are simply too high. Same as with shippers that prepay freight to forwarders that then go out of business (like the recent Yacht Path bankruptcy) leaving the customer to pay twice to get their shipment.
The freight payment companies try to entice processing the payment by lowering their audit fees — obviously giving them temporary access to a huge amount of cash. In my book this is not a reasonable and safe method, but shippers need to make that determination.
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