"Logistics service providers (LSPs) in the air freight sector are often lax in administering the financial risk involved with managing their suppliers at a time when diligence is critical for business success," says Clark. "In business today it is vital to keep a tight reign on all finances, to keep expenditures under control and identify true ROI.'From a credit management point of view it is essential to maintain control over the financial status of debtors to minimize the risk of building bad debt; and from a service cost perspective it is also important that LSPs ensure that their credit lines with vendors are adequate without causing unnecessary financial risk."
Clark points out that a clear and total view of all company finances is needed to ensure the overall well-being of a business. An accurate assessment of its complete monetary risk situation is necessary to ensure that its credit control team is monitoring all activity, chasing the right debt; and that its procurement team can carefully weigh the offers being made by suppliers. Similarly, he says, companies must not forget the significance of assessing revenue stream when reigning in financial risk. From the moment an operator prices a job at entry point, the ideal situation is to have complete visibility of the entire job process through an accrued revenue method, he says. Once the job is correctly entered into the accounting system it is important to manage it closely to ensure it is invoiced to the correct person in the correct company for the correct value with the correct terms.
"The most reliable solution to achieving this kind of comprehensive control over financial risk lies in implementing a totally integrated accounting system that accurately reflects the most current data for all transactions," he continues. "This begins at entry point -- as soon as an accrual is entered onto the job-costing screen of a shipment. These cost accruals can then be electronically monitored, managed, matched and reported from the moment they are entered into the system. Any discrepancies in financial status can be reported with a full audit trail, ensuring that cost control risks are minimized throughout the supply chain process."
With the right security levels applied to sensitive financial information, even the operators on the freight desk should be able to see the impact of their actions to ensure that there are no loss-leading job files, says Clark. This means staff should be able to ascertain if they are maximizing the yield on each consolidation.
"Once this information is automated, and the process to manage it is stable and accurate, the business can rest assured that its operational teams are making the right decisions to minimize financial risk," he says. "Data can be monitored against departmental budgets; and by making this control information available through the CRM process, it enables the sales force and the business management department to focus their administrative efforts on exercising good financial transaction practices, rather than just relying on any accounting process, especially those done manually. In the current global business climate it is essential to focus on executing the right financial system at the right price, not just taking on any business and allowing it to become unsustainable (undeliverable, time consuming, poor payment record, etc.). It's especially important today to more carefully profile the markets served and target clients for risk versus profitable business on the right credit terms. This more aggressive marketing approach helps ensure that
