A3 Freight Payment Blog

Financial Risks and Freight Payment: Audited Financial Statements

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 process.

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. 

Once 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 freight payment 

Posted by Ross Harris at 2:59 PM
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