Accounting Errors That May Sneak up on Your Bond Cost

Trucking industry may be a multi-billion dollar enterprise that promises opportunities for agents, brokers, and carriers to make a fortune. However, the industry is no exempt for uncertainties that may come out of fluctuating market forces, untoward incidents, and changing transportation policies, among others. That is why it is essential that anyone who engages in the freight enterprise and transportation management must have a broker bond. This bond is one among many other requirements to obtain license to operate.

This enterprise is a complex industry where freight brokers, transportation intermediaries, shippers, vendors, and other key players in the logistics arena often fail to set up sound and effective strategies to avoid hidden cost and glaring wastes.

It doesn’t matter whether you have just discovered the realm of transport enterprise and logistics or have been around to see the industry grow, you need to know that obtaining freight broker bond is a requirement to operate legally. In 2013, the broker bond increased to $75000, a handful sum in exchange to do and continue to do business in the industry.

Understanding the Worth of Broker Bond

It is important to understand that having an optimized freight broker accounting strategy is an asset when applying for a license or continuing it. It goes to show that your business as safe and legal which is required in applying for freight broker license bond. Another advantage of an optimized accounting strategy is the reduction, if not elimination of freight broker bond cost. The reason behind the bond cost premium reduction is based on determining the company’s liquidity and stability.

Upon the review and recommendation of a surety provider, freight companies are approved based of various financial and business factors such as cash on hand, personal credit and financials, and experience in the industry. Applying for a broker bond is important because it serves as a line of credit, meaning being approved for one guarantees the company’s ability to operate legally and follow contractual obligations.

Getting the most out of what you paid for the broker bond should be part of every broker’s accounting consideration. Now that we have established how important for a freight business to have a freight broker bond and how it can be optimized with proper accounting systems, here are accounting errors that may have gone unnoticed, driving up your bond premium. This happens when the freight business appears to be financially unstable, which entails higher premium to compensate for the risk of surety provider to insure the business.

1. Failure to total your assets

Surety providers review your overall financial status and brokerage profitability in a comprehensive manner before determining how much the cost of freight broker bond. That is why applicants must focus on the positive side of their enterprise by showcasing business assets to minimize the risk that can underwrite the premium.

If not trained in finances, it is best to work with a certified public accountant (CPA) to guide you through complex processes such as preparing balance sheets and income statements. The cost of hiring a CPA is worth it because surety companies regard highly the audits done by CPAs compared to review statements or compilations prepared by office staff. This is because CPA audits are viewed as more solid proof and secured that established solidly your assets and overall brokerage status.

2. Applying with too many liabilities

Surety companies pry on applicant’s’ personal credit score as another important basis of bond premium. This is because insuring a business makes the bonding company liable whenever a valid claim is filed against the freight business. It’s no wonder insurers will need to assess the credit status to gauge the capacity of every applicant company to deliver quality freight service.

Hence freight companies applying for broker bond must cover their outstanding liabilities before the bond application. Liabilities should be addressed first to reduce risk and decrease the premium of the broker bond. Credit payments and open liabilities should be finalized, all things considered and tried to increase the status of the credit score. Having a positive credit status is one of the effective ways to present the company as stable and safe.

Repurposed Content

Broker bond is a status symbol of safety and stability. Asani Global, LLC guarantees logistics solution with security and timeliness as a leader in freight enterprise.

Make the most of what you pay for broker bond by avoiding accounting errors to reduce your premium. Asani Global, LLC innovates and delivers for quality and utmost logistics solutions.

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