Managing a freight forwarding business involves numerous complicated accounting issues and operating expenses. From managing shipping and transportation to jugging inventory storage for merchandise, human error is a constant threat. This guide will explore the core elements of freight cost accounting, its inherent challenges, and techniques for overcoming them.
Core Elements In Freight Cost Accounting
Setting up an effective method for managing your freight forwarding accounting needs involves many moving parts. To help you succeed, familiarize yourself with the following core concepts and terms.
● Asset Value: The base value of the goods exchanged and any changes impacting them. Asset impairment, depreciation, and other factors can influence freight operations.
● Freight Expense: Expenses from transporting, shipping, and storing your freight.
● Freight In: Transport costs related to delivery from the sender that the receiver covers.
● Freight Out: Transport costs that are included in the price of the product by the seller.
● Freight On Board (FOB): This defines which party is responsible for the shipping costs following the transfer of ownership.
● Free On Board Shipping Point (FOB Shipping Point): This designation indicates the buyer covers the shipping charge upon arrival at the shipping point.
● Free On-Board Destination (FOB Destination): This indicates that the responsibility for covering inventory damaged during transit falls on the seller. Once they reach the delivery location, the responsibility is transferred to the buyer.
Take some time to familiarize yourself with these terms. Now, it’s time to explore some of the challenges you’ll face in managing your accounting.
Core Challenges In The Freight Accounting Process
The world of freight forwarding is full of countless complications and corner cases. These difficulties multiply when working in an international shipping context. When you’re managing your accounting process, be certain to watch for the following challenges.
● Tracking Carrier Charges: It’s common for shipments to pass through multiple hands between departure and receiving. Overseas shipments may pass through domestic air and land transport before being transferred to a cargo ship. On arrival, the process may be repeated through international agencies. Each transfer represents a point where documentation or invoice errors could affect your accounting records.
● Track Shipment Costs on a Granular Level: Most freight shipments can accrue multiple charges in taxes, transportation costs, and more. These must be meticulously tracked to ensure nothing is left out of your records.
● SKU (Stock Keeping Unit) Proliferation: When merchandise sales increase or inventory is reduced through selloffs, SKU Proliferation can occur. This can lead to complications in paperwork related to individual, collective, and complete orders.
With all the above complications, errors and basic mistakes often occur in freight accounting. These inaccuracies can occur at any stage of the process, putting all information recorded afterward in question. These mistakes, often due to human error, can produce inaccurate shipping charges. In severe enough cases, they can seriously impact business relationships.
Modern freight accounting relies heavily on integrated software that utilizes real-time tracking and machine learning. Some companies have even opted to outsource their accounting to firms that specialize in these processes. For those who prefer to leave their accounting details in-house, software integration is often the best step.
Experience The Benefits of Flawless Freight Forwarding Accounting
Utilizing freight accounting software such as Account-Trak is an important step toward eliminating errors and protecting your business’s bottom line. It’s an incredible tool for eliminating messy hard-copy while effectively reducing opportunities for human error.
If you want to streamline your freight business accounting and have it seamlessly integrated with your transportation management, CSA Software has everything you need. Our full suite of customizable freight forwarding software solutions includes Account-Trak, accounting software built by experts. Reach out to us today and request your Free Demo!
