Extending Credit to Shippers. The credibility of information, efficiency of communication and control plays vital role in managing credit in your small business. Before you can even begin to think about granting any kind of credit terms, it is essential that you research and get the correct information you need to obtain reasonable assurance that you will get paid on time and in full. Transparent communications and an excellent flow of information and complete and clear documentation will contribute in building positive business relationships with your customers and clients. Most importantly, having a strong contact relationship with the accounts payable and following-up will be a key aspect in your collections and cash flow. Freight Brokerage and Credit. It is a normal procedure to perform buying and selling operations on credit. Establishing and maintaining a clear credit policy and following the proper credit practices and procedures should be an integral part of your small business operation. Marketing and sales, production and delivery, and customer service are essential aspects of your business, and your credit and collections practices complete the operating cycle. Three key concepts involved in credit are: Communication. Control. Information. To sell on credit is agreeing to deliver the products orders by your customers, or to perform their requested services based on a promise to pay at a determined future date, therefore you will need to make an informed decision about extending credit, before committing your time and resources. Clear communication with the customer will avoid any misunderstandings that may happen later. Once you have decided to extend credit to a customer, the terms should be documented so that they can be clear to both parties. It is also important that all your employees who work in sales and marketing, production and distribution, or accounting, operate from the same base in terms of credit. Your credit policy will only be effective if it is carried out in practice and in order to have a proper control you’ll need to perform constant follow-up. Guidelines should be consistently applied in the sales and billing phase, and enforced through follow-up in the collections stage. Common Credit Practices. You should take into your consideration when establishing a credit policy the factors that will be the standard practices in your line of business. It is mostly common in many business that customers with 30 -day payment terms. In spite of the fact that you are not obligated to accept terms imposed by your customers, but it is extremely important to recognize these standard or common practices. Most businesses operate on a standard pay cycle, issuing payments once a week, for example, based on an accounts payable system that age invoices and calls up for payment those that are due. In many cases, when the invoices are entered into the system, the due date will be assumed to be, or will default to 30 days. The 30-day payment period is an example and it does vary, according to business’s nature, type of industry, general economic industries conditions, and individual companies’ financial policies and practices. You will need to provided your small business cash flow permits, by making it easier for your customers to pay you, it may be acceptable and beneficial, to accept the standard terms of your customers as your company is new established. However, you may be in a business that normally involves payment on cash terms; which means, you receive payment for your sales essentially by cash, check, credit or debit card, or electronic transfers of funds. Your credit policy would involve the exceptions, when you would extend credit to a particular customer based on a certain set of circumstances. Though even in the case of an exception, the same principles would apply in deciding whether to grant credit to that customer. Considerations regarding the potential customer. Some of the questions that may form part of a credit evaluation of a particular company include the following: How long has the company been in operation? Are you familiar with the company? Is the company generally recognized in your market, industry, or community? Does the company have a physical address? Do you know the manager? Has the company undergone a change of management or a restructuring? Who are the owners? Has the company undergone a change of ownership? PAYDEX score. Is the company in bankruptcy or has it declared bankruptcy in the past? Dunn - Bradstreet PAYDEX: The most important things to know as a business is your Paydex score. A company’s Paydex score is the business equivalent to your personal FICO score, or personal credit score. Knowing what this number is and having the secrets to increasing your Paydex score can mean acquiring the financing necessary to start or grow your business and make the difference in achieve your business goals. On the flip side, not managing your Paydex score will cost your business. The exact definition from Dunn and Bradstreet or Dand B is: The Dand B PAYDEX® Score is D and B’s unique dollar-weighted numerical indicator of how a firm paid its bills over the past year, based on trade experiences reported to Dand B by various vendors. The Dand B PAYDEX Score ranges from 1 to 100, with higher scores indicating better payment performance. Understanding Payment Patterns. 100. Anticipate – Payment detail may state: payments are received prior to date of invoice Anticipated. 90. Discount Payment detail may state: payments are received within trade discount period. Discount 80. Prompt Payment detail may state: payments are received within terms granted. Prompt. 70. 15 Days Beyond Terms. 60. 22 Days Beyond Terms. 50. 30 Days Beyond Terms. 40. 60 Days Beyond Terms. 30. 90 Days Beyond Terms. 20. 120 Days Beyond. UN. Unavailable. The payment details section may include the following comments on your payment patterns: Antic. -payments are received prior to date of invoice Anticipated. Disc. -payments are received within trade discount period Discount. Ppt. -payments are received within terms granted Prompt. Slow. -payments are beyond vendor’s terms. For example, Slow 30 means payments are 30 days past due. Ppt-Slow. means that some invoices are paid within terms, others are paid beyond terms. indicates that no manner of payment was provided; the number merely reflects the line where it appears in the listing. For example, 004 means it is the fourth experience listed. Closing Deals. All small business owners either hate or completely ignore the cornerstone of the business; the sales process. The main idea of closing a sale is even less appealing. Sales and marketing are the foundational functions that keep every business alive and growing and that makes every successful business owner make good deals. Selling is much more about educating and informing, then pushing and listening. A truly good salesperson, regardless of what they are selling, is a master at determining their customer’s needs and finding answers for them. The quicker business owner realizes the importance of selling and closing as well as makes a positive business decision to educate himself on techniques and principals associated with selling and closing, so his business will grow. The last and most critical step in the sales process is closing; ask your prospective customer for their business. Closing is a critical step, without thinking many people do not close. They make the age-old mistake of thinking; their prospect will just automatically give them their business. Of course, this does occur occasionally. It’s difficult to pay your bills every month if you rely on what may occur occasionally. Closing the sale is as important as crossing the finish line at the end of a race. All or many business owners do not like going into close mode, as they are fear of rejection. You should not be afraid to close and ask for the business, whenever possible. That is the purpose for having the business in the first place. With practice, you will know when your potential customers interest is high, make sure you take advantage of the timing by asking for their business. Never, ever be afraid to close. Even if your attempt at closing is unsuccessful; you shall tell your potential customer that you are able to offer them your service/product as you will have an instant indicator in order to know where they are in the sales process. Frequently, customers will have the interest for asking about details related to your service. This is a guide an indication that their interest is high this is the time that a nudge puts them over the buying edge. If they committed after your initial close, there is some type of objection standing in your way. You must determine that objection or concern, then address it and go for the close again. Trial Close. In order to close your prospective customer you should define the level of interest, by using a trial close. A trial close is a very simple question that gets the customer to think about the possibility of using your services. Lots of car sales representatives may use a trial close with an interested buyer by for example asking them about the color that they prefer. If the buyer answers with a color, then the sales representative has known that the buyer’s interest is high. Simply because the customer has already imagined owning that car in a particular color. Therefore using trial close technique is very helpful in determining your prospective client’s level of interest. In fact, trial closes builds interest from your customer by getting them to think of you as a service provider who has what they need. Assumptive Close: Assumptive close is considered as one of the most effective closing technique. Simply it is a statement that implies that you will do business with your prospect. Similar to the trial close, the assumptive close have the same aim to gets the prospective customer to consider you as a service provider. It should also be used throughout the sales process to determine and build interest. Nevertheless, unlike the trial close, the assumptive close is normally posed as a statement. The close should be a very conscious part of the sales process and when you enter into a closing opportunity, confirm that you have, Successfully created enough interest in your service. Familiarize yourself with closing options. Have clear pricing objectives. Have mental and emotional clarity about closing. Have prepared a way to accept payment. Have an agreement or contract ready if it is necessary Alternate Choice Close: Alternative choice close is an extremely strong and very powerful closing technique, which gives your prospective client several options on any particular aspect of your service. The alternative choice close is formed as a question that prompts your prospective client to consider how to do business with you or not to do it with you. This is possible to do throughout the sales process. You should limit your choices to two possibilities when using the alternative choice close. After the potential customer answers the question by selecting one of the possibilities, have them commit to specifics immediately after that. A free analysis or a free offer form is highly recommended to be added your website. As it is going to help initiating the sales process by letting you cultivate a contact with the potential client to determine their needs and to educate them on how you can become a solution to their needs. Closing and selling is not a way of manipulating your prospective clients, but as an opportunity for you to show them that your service can serve their needs. It is vital that you are successful at closing and selling and persuading your client that there is a great need for your service. Your job is to be proactive by making others aware that they need your service. As a salesperson, you know that there is always some resistance to change among those considering using your services. Selling and closing are the tools by which you can overcome that resistance. Additional Closing Tips: Ask for the order. Ask for the order again. Ask for commitment using the alternate choice close. Create a sense of urgency with temporary discounts and promotions. Keep your energy and enthusiasm high, don’t lose steam at the end. don’t oversell, ask for the order and quietly wait for a response. Move into closing seamlessly and without hesitation. Visualize yourself successfully getting the business. Ask for the order again. Remember you should not hesitant or fearful in promoting your services proactively. As a business owner we know that most people need our services. Take it as a conscious mission to improve the sales and closing processes and then use as many of the techniques as possible, in order to help more people and essentially grow your business. Additional Closing Techniques: If it’s a low-ticket retail purchase, most people won’t say Okay, I’ll buy it! out of their own initiative, especially if it’s a purchase that will require financial commitment. In order to be successful at closing a sale, you’ll have to convince them by using these ten sales closing techniques. The idea behind closing a sale is learning to make him ask the right questions that will make the buyer want the product. This is not to say that sales closing techniques should be clever, manipulative, or deceptive. Rather, closing a sale should come as a natural conclusion of the selling process. Here is what many consider to some the top ten sales closing techniques that will make the customer say the magic words, I’ll take it! Affordable Close: Price is the key element of any buying operation actually it is the first objection most people have about buying a product, especially a major one like a car or house. But did you know that I can’t afford to buy it is more an excuse than an actual objection? You’ll need to restructure the payment scheme according to your client’s budget in order to change his prospective mind with, this is called the Affordable Close technique. To do that you have to find out their budget and how much they can spare, and present a payment scheme that can fit the buyer’s capacity to pay. Supplement this by showing the price of not buying, e.g. the current car’s cost of continued ownership. You can also make the product more affordable by stripping it down to the bare minimum and selling the other options, accessories, or add-ons as separate products. Alternately, you can present a different product that fits their budget. Your very last option is to bring the price down to something the buyer is prepared to pay. Opportunity Cost Close: The opportunity cost is the cost of not doing something as there is cost for everything in the world of business. We can understand that the cost is not equal for price as the price refers to what the buyers pays, but cost may refer to the problems that may face you such as hassle and dissatisfaction, which are not valued by money. No Hassle Close: The No-hassle close is the way that makes you win the prospective buyer by making the purchase process very simple and avoid him any trouble or hassle matters. For example, you can fill all forms and papers for him. Best Time Close: If your client says that he do not have the time now, then try to persuade him that it is the best time for that, as when the client went away, he will not back again. So you should try to close the deal now. You can do that by showing him the advantages of your product and how it will be suitable in this time. Minor Points Close: You shall persuade the buyer to close the deal by closing the minor points that means that you ask him about small details like the color, delivery time, fitting options, etc. that may make him to decide easier and help you to close the sale as well. In the same time, you should know the factors that may help him to take the decision. 1 2 3 Close: There are three main items in this technique Cost, Quality and time. There are two ways for doing this; they may be together to make a single point or may be separated in order to gain greater coverage. We all know that all customer want free, perfect and delivery on-time products. Adjournment Close: We know that the relationship between the seller and client is very important as it will be a long term relationship. So it will be very bad to push him to take a decision before he is ready. So you can make an Adjournment Close that usually is a great deal for your client to take time before he can decide what he really needs. The Adjournment Close is better and easier to manage when the salesperson in a face-toface meeting than waiting on a call phone. So you will tell him that you will put his deal on the table and give him time to think. Use this when: 1. You are seeking to a long-term relationship and if the client makes the wrong deal that may affect on the relationship. 2. You do not need to make the sale today for perhaps you’ve made your quota and this sale would be just fine for next month. 3. You are confident that the client likes your products and he will come back. 4. You know that they are not going to decide now. 5. Given more time, it is very likely that they will buy more, if they are at the edge of a budgetary period and their current funds are low. Balance-Sheet Close: It works through building Trust by seeming to be taking a balanced and fair approach. It can save customers from wasting their time and it helps them to know their positive and negative sides, so their lists will be different. Squeeze Close: Give the customer three different offers. First offer them something that is well beyond their target budget number, but not quite so far beyond them that they would not consider it. Ideally, it is something they will look at wistfully but just cannot justify the purchase. Then, as another option, offer them a good deal that is within their price bracket. It may not have all the bells and whistles as they wanted, but it is clearly a very good value for the price they want to pay. Lastly, offer a severely stripped-down deal in which very little of what they want is included. More than likely they should, and probably will go for the middle option. Bracket Close: The Bracket Close works through contrasting the preferred option both upwards and downwards. Rejecting a higher option lets the other person feel good about not spending too much. By comparison, the option they choose seems quite obvious in comparison and they may even feel you have saved them some money. Rejecting the lower option tells the customer feel they are not a cheap and can’t afford something of value such as the service you provide. Charmer: Deal with your customers gently and express your admiration for their personality. Boost their selfconfidence and make them feel that they have the necessary expertise to determine what they want to buy. You have to entice the customers and massage their ego to become more concerned about themselves. Link your customers to the product and let them feel that the product meets their personal needs. Praise their earlier decisions and express your confidence that they can take new successful ones. Carrier Set Up Package. When starting a business with new carrier you will need to get them Set Up in your carrier database, you will need to collect the following information from the motor carrier. FMCSA Contract Authority. The Authority or MC number of the motor carrier is required to be placed on file for your protection. You can check the accuracy of information provided by the motor carrier here: http://www.safersys.org/CompanySnapshot.aspx Please read on pages how to check for Valid Authority. Insurance. You will also need a copy of the motor carriers Liability and Cargo insurance. You verify the accuracy and minimum requirements here: http://li-public.fmcsa.dot.gov/LIVIEW/pkg_carrquery.prc_carrlist. IRS W-9 Form. You will also need a copy of the carriers IRS W-9 Form. You can download a blank one here: http://www.irs.gov/pub/irs-pdf/fw9.pdf Broker Carrier Agreement. This agreement will regulate the provided services by the carrier for your freight brokerage. It will also list the exclusionary rules of how the carrier should operate and also help prevent back solicitation of your customers. Company Profile. You’ll need to have a Company Profile to obtain a better idea of the capabilities that the motor carrier possess, the carrier’s company profile should include the following information: Payment Information. Factoring Company. Type of Equipment. Dispatch Contacts. Operating Areas. Emergency Contact Information. Endorsements. Insurance Contacts. Attached are sample Carrier-Broker Packets. Daily Routine. Being a freight broker will involve a huge amount of phone time and being on your computer within your daily routine. You have to communicate with potential shippers efficiently to discover their needs. You will be very busy finding carriers or just providing lane quotes for the shipper to use at a later date. These communications are very important build your database of contacts and getting your name out there to the shippers. The first two to four hours of your day are the most critical. You can maximize your time by receiving calls and booking loads for the shipments you posted the previous day, rather than spending that time performing freight inquiries, there foreit is preferred to implement Inquiries in the afternoon when things begin to slow down. Customer freight inquiries should be looked at as another form of time management that can make you money. The initial load details that will be collected by each broker will generally be: commodity or cargo type, pick up and deliver locations, type of carrier required, anticipated rate for the load, and any special instructions to the carrier regarding the load. As soon as you collect the previous you will begin entering these notes into your contact manager indicating when and where this shipper’s loads move, and also the frequency of shipping. Remember to start as early as possible preferably by 6:00 AM. These offices start work early as the shippers are usually preparing to arrange their freight early in the morning. After establishing your relationship with a shipper, getting loads wouldn’t be a problem. The shipper will tell you on what lanes and carriers are needed. You have to note everything about the load since this information will be relayed in detail to the carriers that are interested in moving the freight. The shipper will give you either a rate that they want to pay for the load or they will ask you to submit a quote for the lane. Once you have the numbers nailed down, you now know what to offer the carrier to haul the freight. On average freight brokers make an about 10% of the load amount. Try to average 15%-20% of the load. It might take a bit longer to find a carrier, but it will work out better at the end of the day. In case you do not have a carrier already in mind for the freight then you should start posting on load boards such as; Internet Truckstop, Get Loaded, or The DAT. However they are not the only load boards on the Internet, but are the load boards that receive the most traffic and most prospective carriers. Once the load has been posted, then you can move on to find more freight or you may start calling your database for interest in the load. While calling the database, you will also start to receive calls from prospective carriers who saw the postings on the load boards. Once you have reached an agreement with a carrier to accept the line haul, immediately call the shipper to inform them that the load is Covered and that you have a truck. If you have reached a deal with the shipper, then you’ll obtain from them the rate confirmation and load sheet for you to sign and return immediately. It might take a while to receive the rate confirmation; this is common as most shippers are extremely busy moving several loads. Now it is the time to clear your carrier through the FMCSA to make sure they have no prior history of accidents and that they have the proper insurance. Once this has been done, you will then fax your Set Up package to the carrier for him to sign and return. Once the carrier has completed your initial Set Up package, you will then prepare the rate confirmation sheet and loading order and fax that to them. They will also sign and fax that back to your office for your records. Now that you have received the signed rate confirmation from the carrier dispatcher, you have to call the truck driver and verify the entire load details and dispatch them to the location to pick up the load. The carrier should contact you daily with a status of the whereabouts of their truck. This is called a Call Check. It is standard operating procedure to impose fines to the carrier for failure to comply with your Call Check policy. This policy should be notated on the rate confirmation sheet. As soon as the load has been delivered, contact the shipper to let them know the status. It is standard operating procedure to require the carrier to fax a copy of the signed bill of lading when the load has been accepted then you are aware of any problems with the load or to verify delivery to the recipient. If there have been any problems with the load, you should contact all parties immediately i.e.; Shipper, Carrier, and Recipient and resolve them amicably. This is your responsibility as a broker. Though this may all seem to be complicated and a very mundane procedure however, but you have to follow those procedures strictly to ensure smooth deliveries and also returning customers. Keep in mind that all situations that may arise concerning any given load can be resolved with the exception of force majeure incidents Acts Of God. Dispatching. Always be calm and speak professionally, never get into a verbal altercation with a driver while he is dispatched on your load as you don’t need to take risk of getting into a situation that could potentially turn bad. Dispatching means the process of assigning motor carriers to your loads. Once you and your client have discussed the line-haul rate, you will have to start searching for a motor carrier willing to haul the load. There are many ways to find motor carriers. You will have to complete some formalities like signing the set-up contract, preparing the rate sheet and scrutinizing the safety ratings of the motor carrier before you can start the dispatch process. It is important to complete all the formalities to prevent any legal or financial issues at a later stage. If you are brokering a load you will be following the roles and responsibilities of a contractor. While availing the services of the motor carrier you need to have an arrangement or ‘set-up’ with the carrier. ‘Set-up’ means the contract agreement which has been chalked out between you and the motor carrier. In case you aren’t aware of the process of creating a contract then you should seek assistance from a lawyer who will draft a proper contract with the help of any sample contract form. There are numerous forms and agreements which have to be filled before you can begin to dispatch. Such forms and agreements are used during various stages of the dispatch process. However, it is important to know the purpose of these forms and agreements. Majority of the companies include a lot of legal terms in their set up contracts to protect their prospecting endeavor. It is also necessary for the brokers to have a ‘back end solution clause’ which is informally called a ‘non complete’ agreement with their set up contract to avoid the possibility of the carrier hauling directly from the clients. Thus as a freight broker, you are sure that the efforts of procuring a client have not gone waste. In case the motor carrier ends up directly dealing with your customer then it will be mandatory for them to share a certain percentage of the revenue they have earned from that customer. Thus, this is the best solution to safeguard your business. Motor Carrier Snapshot/Safety Rating. In case you do not have any setup agreement with a carrier and intend to dispatch for the first time, then it is better to find out more about the Motor Carrier Snapshot or Safety Rating. By doing so, you can find out a lot about the motor carrier. Some vital information you will get is the number of units on file with the FMCSA, the drivers they have employed and their safety snapshot. You will also get to know their ‘Out of Service’ ratio. A motor carrier can be termed ‘Out of Service’ by the USDOT in case it does not adhere to the regulations which have been laid down by the FMCSA. But this is not always accurate. For instance, in case a carrier has just one truck and yet was given a 100% Out of Service rating, it may mean that the truck was being handled by the owner himself and had once been declared ‘Out of Service’ due to a small or major issue. This could have happened unintentionally due to ignorance about the law. Besides, if the carrier has two trucks, out of which one got an ‘Out of Service’ label then it amounts to 50%, which indeed cuts a sorry picture. However, if the same carrier had 100 trucks out of which one was labeled ‘Out of Service’ then the rating would be a mere 1%. Hence, focus on looking for a carrier that has a low Out of Service Percentage. However, this will not make sense unless you find out about the total number of units they possess. After you dispatch the carrier, do not assume that everything is moving smoothly. You should keep in contact with the truck driver directly or the agent and dispatch personnel responsible for that carrier. Typically, you would ask the carrier to contact you: When the truck is loaded . Each morning or once daily while under the load immediately after the load is delivered to the final destination. Have you ever heard the term GAP? It stands for Grab A Pen! Each time the carrier contacts you for a check call, Grab a Pen! Make a note of the following: Who you spoke with. Motor Carrier Snapshot/Safety Rating. Broker Shipper Agreement. The date and time. always use your local time zone. The driver’s location. or nearest town if you’re entering these notes into software. The estimated time of arrival at the final destination. Your customer is depending on you to know where their freight is and whether or not it’s going to be on time for delivery. And if there is a change in plans, such as a mechanical failure or bad weather conditions, your customer may also need to notify their customer. If the motor carrier does not contact you, you should contact them each day while they are dispatched under your load. When contacting customers and carriers, consider the time zone in which they are located. Dispatch Cancellations. Cancellation occurs when the carrier has already signed a rate confirmation agreement and agreed to transport your freight, then for whatever reason, chooses not to haul it. In case the carrier fails to pick-up a load after agreeing to do so, you will have to find an alternative truck to service your customer. Motor carriers use backhaul loads to get back into their home or to an area where they have direct shipper contacts. Obviously, motor carriers can secure better paying freight from their own customers. For this reason, carriers opt to pre-plan their trucks in a direction that will put them closer to their direct customer base. Carrier Fines and Carrier Communication. Brokers will use a system of fines to impose on carriers to ensure the successful transportation of the cargo and communication throughout the load. It is simply not enough to ask the carrier to do his job and move the load with no problems. A freight brokerage is not a daycare center so we may not put the carrier in Time Out if he fails to hold up to his part of the contract moving the load. A freight brokerage will use carrier fines to help avoid a multitude of problems. Below is a list of infractions in which a carrier will be fined. I have also included a suggested amount to charge for each infraction. Daily Call Check. $100.00 Per Instance. It is important to impose fines on carriers who do not maintain communication with your brokerage. These fines are to be clearly listed on your rate confirmation sheet to the carrier. If these are not listed on your rate confirmation sheet, you have no legal recourse to impose the fine toward the carrier. Late Delivery. 25% Of The Load. This is generally only enforced if a shipper has placed time constraints on the arrival of the load. The above amount is on the high end of the spectrum. Fines could range from $100 -$1,500 per load. Failure to Fax BOL’s within specified time. $100.00. A number of shippers want the BOL’s faxed to them within 4 -6 hours of the load being delivered. Dispatching of Drivers. %10 of the load. Fine is enforced if the carrier requires you the broker to dispatch his driver. This is the carrier’s responsibility. Do not create additional work for yourself. Truck No Show Fee. $250.00. I bill the carrier’s company this fine if the truck does not show up to take the load. This is a rarity. Failure To Load Complete Order. Occasionally, trucks will not load a complete order as prescribed by a shipper. It is my recommendation that you place specific quantities needed to be loaded on the rate confirmation sheet. If these are not on the rate confirmation sheet, the truck can literally leave half your order behind. This fine will vary depending on the load. This is on as needed basis.