Finance is more than just number-crunching in the intricate world of brokerage operations. In fact, finance is what makes a freight brokerage tick, serving as the backbone of everything that it does and the foundation for everything that it wants to accomplish.
Ensuring the ability to extend credit and secure unfettered access to carriers in a variety of environments becomes a decisive force, influencing critical aspects like load pricing and carrier negotiations. This extends beyond just maintaining the fiscal health of a company. Financial control is the linchpin of strategic planning and market success.
Whether the business is self-funded, supported by asset-backed funding, or contracted to a factoring service, freight brokers require fast, accurate, and low-cost processing. Accurate, timely invoices are strong evidence of operational discipline and control, and carriers prioritize the critical visibility of their own cash flow. Confident relationships facilitate reliable profit margins and foster revenue growth. Efficient processing optimizes operating profitability while also driving sustained competitiveness in the ever-evolving and challenging landscape of brokerage logistics.
This article explores how Transportation Management Systems (TMS) in logistics are revolutionizing this vital financial aspect, streamlining processes for better efficiency and effectiveness. Continue reading to learn more about streamlining brokerage finance through logistics TMS, and get in touch with the EKA team to discover how our Omni-TMSTM is supporting effective finance operations for freight brokerages.
The freight brokerage landscape is riddled with unprecedented market pressures. Recent significant layoffs and bankruptcies within the industry in 2023 are clear indicators of the volatility and challenges brokers face. As brokers navigate these turbulent waters, and as the 2024 freight forecast looks challenging, the necessity for improved financial strategies becomes paramount. That said, it’s important to understand that traditional financial management in brokerage is fraught with challenges that hinder efficiency and profitability. Those challenges include:
A modern TMS is the clearest way to overcome these legacy challenges in the brokerage finance realm. The ultimate benefit of implementing a modern TMS is greater productivity across your organization, plus enhanced brokerage finance.
The advent of the TMS has changed everything in the brokerage world. These systems are tools for managing transportation, but they also streamline financial workflows and enhance the overall efficacy of financial management in brokerage operations. The following four benefits are among the most prominent reasons why TMSs have transformed brokerage operations:
At its core, a logistics TMS plays a crucial role in streamlining financial workflows, from capturing pricing details to ensuring effective invoice documentation and prompt carrier settlement approval and payment details, including carefully overseeing customer compliance with payment terms. With the proper configurability and workflow management, a TMS reduces the need for manual activities, thereby minimizing errors and increasing efficiency. Artificial intelligence is quickly becoming a driver of more automation of critical financial operations, translating to quicker, more reliable financial processes.
One of the standout features of a logistics TMS is effective exception management. A clear record of accessorial charges and approvals as they occur keeps time-consuming disputes from escalating. The ability to align charges to customer and payment service protocols speeds the approval of additional charges that otherwise can delay the entire invoice, adding stress to cash flow management.
Many inferior TMS systems do not support controls on which users have the authority to validate paperwork, approve invoices and settlements, or release payment. Many more must pass transactions to external systems to release payment by check or ACH or do not have the dynamic application of cash to restore credit so you can properly constrain the credit extended to customers. It is critical that a TMS can enforce the policies and facilitate painless execution of day-to-day processes so accountability is clear, queues are eliminated, and workflow is intuitive.
In the world of integrated processes, good data quality enables options to submit transactions by EDI, API, and secure FTP with minimal exceptions to avoid the annoying and costly effort of duplicating transactions in two or more systems. Increasingly, dynamic two-way API integrations with factoring services and accounting platforms can sync transactions with very little need for manual intervention.
While a modern TMS can help with effective brokerage finance, it’s still important to use proven strategies to get the most out of your investment in technology. Here’s a look at three key strategies brokers should adopt to ensure that a TMS enhances financial management.
The first strategy emphasizes the importance of integrating financial technology into broader operational strategies. A comprehensive TMS offers affordable API, EDI, and AI integration to automate the collection of proper load details. This integration leads to accurate real-time data, streamlined reporting of exceptions, and precise billing information with customers, freight payment services, and factoring companies. Features like third-party services integration and real-time data syncing play a vital role in this strategy, facilitating collaboration with ecosystem services and enhancing the overall efficiency of brokerage operations.
Not every broker has the right scaled relationships to lean heavily into integration, but every freight broker should benefit from configurable billing and payment processes. Improving the collection of load documents, automating billing compliance, and ensuring timely and accurate payments are all critical tasks for a healthy brokerage business. Settings and workflow that define customer requirements and facilitate the prescribed collection of paperwork have an enormous correlation to billing speed and accuracy. A modern TMS properly categorizes transactions into the correct status so billing and settlement work gets prioritized and completed quickly.
Legacy approaches to brokerage financial management that require constant manual intervention and the use of disparate spreadsheets that weren’t always available to all team members who might need access are just not competitive. If your back room is consuming more than a few minutes per load, your administration is an opportunity for improvement.
Lastly, using Business Intelligence (BI) tools in finance is a key strategy in the modern logistics landscape. BI provides deep insights into billing and settlement cycles and the resulting cash flow burden. A crucial management function is the ability to isolate exceptions to take direct action, uncover unhealthy patterns, and formulate actionable strategies. Brokers lose money with bad credit, exposure to load exceptions, and poor administration, resulting in unplanned costs. An inability to plan for access to liquidity can prove to be a terminal event even for brokers with great commercial success. Features like dynamic operational dashboards and AI-driven analytics empower informed decision-making, allowing brokerages to not only keep pace with market changes but also stay ahead of them.
As we peer into the future of brokerage finance, it’s clear that the industry is poised for a transformative shift as machines become more capable of automating a broader range of circumstances in the standard use cases, leaving people more able to invest time solving the exceptions more quickly and personally.
In this evolving landscape, integration is no longer just a buzzword; it’s a strategic imperative. Forward-thinking brokerages are rapidly embracing technology that prioritizes a people-first approach. This approach is essential for fostering efficient workflows that seamlessly blend technology with human expertise. The result is a collaborative environment where all stakeholders, including brokers, carriers, and clients, work in unison. Such an integrated system enhances operational efficiency, leading to optimized financial processes.
This trend improves the bottom line and cash flow, fostering sustainable growth. As the logistics industry becomes increasingly dynamic, the need for agility and adaptability in financial management is more pronounced than ever. A TMS that can adapt to these changing dynamics ensures that brokerages are not just surviving but thriving. The focus shifts from merely managing financial transactions to leveraging financial intelligence for strategic planning and decision-making.
The future of finance in brokerage with a TMS is about enhanced profitability. By streamlining processes and reducing inefficiencies, a TMS enables brokerages to minimize waste and maximize financial potential. This optimization is key to maintaining competitiveness in an industry where margins can be tight and the pace of change is relentless. Even the mightiest companies in any industry can fail without proper investments in technology and innovation.
While a modern TMS holds the power to streamline workflows and automate complex financial processes, there remain organizations that have not yet established modern TMS functionality to benefit their businesses. Without the latest and greatest technology in place, brokerages risk falling behind in a highly competitive environment.
For brokerages looking to stay competitive and adapt to the ever-changing logistics landscape, embracing a comprehensive TMS solution is no longer an option but a necessity, which is why you need a TMS provider that can serve as a true partner to your organization.
At EKA Solutions, we offer a people-first Omni-TMS designed and built to meet the specific needs of the modern brokerage operation. We treat our customers like the true partners that we are, going the extra mile to meet their needs and investing in their ultimate success.
Take the next step in optimizing your brokerage finance by reaching out to us to learn more about what our Omni-TMS can do for your organization.
