How to Avoid Freight Debts

Making sure that invoices and bills are paid is one of the most important tasks for any business, but it’s especially important for freight forwarding businesses. Without a workable collection pipeline with actionable management tasks, it can be very difficult to keep cash coming in. 

It doesn’t matter how great your service is; any freight forwarding business must have cash to keep the business going. And that will only happen if you can avoid freight debts. Some of the things that you should be doing to avoid freight debts and keep your business growing are:

Create A Credit Application Process That Mitigates Risk

Improving your payment process starts with having a credit application process designed to minimize the risk of getting stuck with clients who don’t pay or don’t pay on time. Any credit application process that you create should include the following information:

  • Verify the freight forwarder
  • Collection of the Company Registration Documents 
  • Try to sign a simple agency agreement 
  • Collect the ownership details 
  • Clarify the terms, credit limit, and credit period  

Conduct A Credit Check 

The next step is to conduct a complete and accurate company credit check. Check to see if it’s listed on FDRS or the IFD Delinquent List. If the company applying for credit is on either of those lists, you should not extend credit to them. Do some online research as well to protect yourself before approving any company for credit. 

Set Up Clear Payment Terms

In this industry, most businesses use 30-day terms or net-30 terms. Make sure that the credit contract has very clear payment terms that spell out the length of the payment term, the methods of payment allowed, and elements like a credit limit, the interest rate for late payments, and any late charges. It is worth it to take the time to make the contract as specific as possible. 

Invoice On Time And Collect On Time

Your clients can’t pay you on time if you don’t invoice them on time. You have a responsibility to provide clear itemized invoices on the date specified in the contract. Make sure that your staff is getting invoices out on time to clients so that you can collect payment on time. You should also make sure that your staff understand the late payment policy. Create a system of reminders that can be sent to clients to remind them to pay before a late charge applies to increase your chances of getting paid promptly. 

Get Expert Advice

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