The below is an excerpt from the publication A Guide to the Financial Risks of Freight Payment Providers which
was produced by A3 Freight Payment for the benefit of customers and prospects.
For the complete publication, CLICK HERE .
A freight payment company that
will not produce audited financial statements for its customers’ review should
be automatically eliminated from consideration during a freight payment bid
Audited financial statements
are the lynchpin of any financial due diligence over a potential freight
payment provider. The audited financial statements provide several key insights
into the potential provider, which cannot be garnered from any other source.
First, audited financial
statements show the general financial health of a freight payment company. This
is important to a customer even if the customer is not utilizing the processor
for payment of invoices. A financially unstable freight payment company poses
an operational risk to all customers. What if the freight payment company just
goes out of business with minimal warning? A financially unstable freight
payment company could also be tempted to use freight funds or refunds (see
discussion below) to cover its operating losses instead of paying freight
bills. A consolidated set of financial statements brings clarity to a user as
to whether the freight payment company is engaged in other businesses, which
could be draining cash (see the Computrex case).
Second, a set of audited
financial statements provides a customer with assurance that the freight
payment company has an internal control structure that can be relied upon. As
part of a standard audit of financial statements, the independent auditor will
test the basic control structure of the provider. The results of those tests
will tell the auditor if the control structure can be relied upon in the
preparation of the financial statements. If the control structure cannot be
relied upon and additional testing does not give the auditor comfort, the
financial statements will not have an auditor’s opinion. Rather, they will have
something called a “disclaimed” opinion.
The vast majority of public
accounting firms can perform a high quality financial statement audit. A little
due diligence by a customer regarding the accounting firm might be important
for a customer if he wishes to ensure that the auditor is strong enough to
conduct a thorough examination. However, the rules around audit engagements are
extremely strict. A public accounting firm rendering an audit opinion has to
comply with the same set of standards regardless if they are a “Big Four” or a
regional firm. Further, all firms engaged in such attestation work are subject
to strict “peer reviews” to ensure continuing quality of work.
again, the absence of a freight payment company’s commitment to provide audited
financial statements should be a disqualifying factor in your selection of a