A3 Freight Payment Blog

Financial Risks and Freight Payment: EFTs vs. Paper Checks

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 bill audit and payment company that is intent upon serving a client’s needs will employ an aggressive program to pay carriers by means of Electronic Funds Transfers (EFTs). The company will avoid paper checks and encourage carriers to accept EFTs. A large proportion of paper checks could be a warning sign that a freight payment company does not completely embrace its fiduciary role.

Paper checks take time to reach their destination through the mail before they become “good funds” in the account of the payee. During the time, the freight payment company can earn interest from those funds. This time is called mail float. Once the checks are deposited into the bank, they take a day or so to be removed from the account of the freight payment company. This time is called Fed float and is also an opportunity to earn interest.

With interest rates at record lows, the potential earnings from float available to freight payment companies are very limited, at present.

However, the prevalence of check-based payments at a provider could point to a much more sinister situation. In cases of fraud where a freight payment company may be “kiting” checks (using new deposits to cover old checks), the mail float and fed float provide valuable time to keep the shortfall invisible and allow such a scheme to continue. This kiting of payments was a hallmark of all of the major cases of fraud in freight payment during the early 2000s, including both the STI and Computrex cases (Boyce, 2003). These companies used check payments as a way to hide the fact that they had stolen freight funds to cover operating losses of the business and/or its subsidiaries and affiliates.

An aggressive EFT program is the mark of a solid provider willing to embrace its role of providing best-in-class payment features to its customers.


Boyce, C. (2003, March 3). STI Insolvent Since ''93. Retrieved June 1, 2012, from Journal of Commerce: http://www.joc.com/logistics-economy/sti-insolvent-93

Posted by Ross Harris at 1:27 PM
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