Payment Set-up
Getting set-up to get paid is a part of the broker set-up process, though a less challenging hurdle to get through than compliance. The set-up process approval is done primarily by compliance with the goal of ensuring that no liability falls upon the broker in the case that an issue arises.
During our time as a factoring company, what came to us as a surprise was how an incorrect set-up process can delay payment. In particular with large brokers, payment information is often not verified with the same level of diligence as with the compliance requirements during the set-up. The set-up sits with the compliance department while the payments sits with the payment department. The carrier and their money are stuck in a large web of bureaucracy.
Therefore, messing up the payment information during the broker set-up can mean that the carrier’s payment gets delayed. Or worse, is sent to the incorrect party.
Payment Issues Happen Because of…
Missing Notice of Assignment
The Notice of Assignment is a document that a carrier receives when signing up with a factoring company. The Notice of Assignment typically outlines the factoring agreement between the factoring company and the carrier, the effective date, and the factoring company’s payment and contact information.
In cases of missing notice of assignment, the payment can be withheld or can be issued to the wrong entity such as a previous factoring company or directly to the carrier.
Missing Letter of Release
On the other hand, when a carrier leaves a factoring company, the carrier needs to promptly provide brokers they haul with a letter of release from their factoring company. If the Notice of Assignment outlines the agreement between the factoring company and carrier, then the Letter of Release outlines the termination of engagement between the factoring company and the carrier. Without this letter, the broker may hold payment or continue to issue payments to the carrier’s prior factoring company.
Payment Received But Unknown for Which Load
Broker payment process follows very traditional methods: physical checks, ACH, or ePay through a business-to-business payment processor. Of the three methods, both physical checks and ACHs don’t always have sufficient information when issued on what the payment is for, particularly ACH payments.
Usually the broker’s payment team will send “remittance information” to the carrier when issuing a payment. The “remittance information” comes in the form of an email, a PDF, or an attachment to the physical check. In the remittance, the broker outlines the amount of payment and the line items of the payment such as the line haul, accessorials, and deductions as well as pertinent load information like the load number. There is usually an identification number for the payment such as an ACH ID that corresponds to the banking description or a check number.
The remittance information is sent to the email address or physical address that is submitted when the carrier originally set-up with the broker. If the carrier doesn’t provide the correct information or if the information is later incorrect, the remittance will not reach the appropriate contact.
Wrong Carrier Receives Payment
This is easy to get wrong in particular if the set-up is done via PDF or with a software that does not cross-check the data with the FMCSA. In this scenario, brokers may end up pulling a carrier that has a similar name but a completely different MC or DOT #.
This does happen somewhat frequently if enough loads are hauled or if the carrier has a commonly used name amongst carriers. Similarly named carriers in the broker system can cause a lot of confusion. For example, if we were to search for the somewhat generic name “Safeway Logistics” on FMCSA’s SAFER website, we get the following results. There are 7 broker/carrier names that are identical in 7 different states.
Unapproved Carrier Hauling Load
This doesn’t happen often since carriers can not haul until they are approved by the broker’s compliance team. However, like all processes, there’s a chance that a carrier moves a load before an approval. This can happen for a number of reasons, such as:
- Miscommunication between multiple different departments on the broker side,
- Issues with the broker internal software system, or
- A rush on both sides in order to get a load moved on time
When this does happen, the carrier may not be able to receive payment because the carrier has not been set-up correctly in the broker’s system. In this case no payment is issued until the set-up is corrected. One anecdotal example we encountered of this was when a carrier did not meet the age authority requirement to haul a specific load. Despite erroneously being given the greenlight to haul the load, the system could not issue payment when it came due.
Missing Voided Carrier Check
Fraud is common in the transportation industry. Therefore, one of the checks that most of the payment department at brokers do is request a voided check. The voided check should have the carrier’s company name and address that matches what is on file with the broker. Although this is a good check to guard against funds being sent to the wrong carrier, sometimes carriers can miss this step as part of the set-up.
Tips to Getting Properly Set-up
Instead of waiting until an issue arises, when it comes to payment, avoiding the issue in the first place is important. Once funds have been issued by the broker to the incorrect entity, it can be very challenging to recover funds. Withheld funds have a higher chance of being resolved, but can take an extensive amount of time.
Required Documents for Payment
Brokers typically have an add-on document or series of questions with regards to how the carrier would like to get paid. To complete this information, carriers will need to have readily available banking information, mailing address for checks, and preference on how to receive payment.
If a carrier is working with a factoring company, then typically the only required document is the Notice of Assignment. The rest of the process is handled by the factoring company.
If a carrier is doing collections on their own, then a voided check is required that correctly states the carriers’ name and address.
Send Information to the Right Department
The payment information is submitted to the broker at the same time that a set-up is completed. This can sometimes be insufficient, because the information then needs to go from the compliance department to the payment department (or another department). Sometimes the broker will explicitly state where the carrier should follow-up, but this information can be easily missed.
Verify the correct contact information for the payment information. This usually lies at the end of the set-up or as part of a follow-up email from the broker. Additionally, the carrier can check the rate confirmation, which typically has a section on who to contact for invoicing and payment.
Get Confirmation of Accepted Set-up
This follows on to the previous point. At the point of set-up, if possible get an email confirmation that the payment information has been accepted. Most broker departments will do their best to reply and confirm with the carrier if the appropriate department has received the payment information.
Ensure Invoices Have Complete Information
If you work with a factoring company, they will be responsible for ensuring the information on the invoice is complete. However, it’s always good to check. If you’re invoicing on your own, then all the more important to be diligent.
Aside from information on the load and the line haul, complete payment information should be re-submitted at the time of invoicing. For example, this may be a good time to re-submit a voided check or notice of assignment, so the broker’s payment department can re-verify the carrier’s information. Most broker’s payment departments can and do update the carrier information based on any updated information on the invoicing documents.
Get Paid
Carriers go through a lot of work to get hauling. Taking the time to get set-up properly for payment is important to ensure the carrier gets paid for their hard earned work.
Read More From Our “Broker Set-up Series”
We’ve done over a thousand set-ups for both drivers latched onto a carrier and to owner-operators with their own MC. What we’ve found is that most truckers don’t understand the broker set-up process. In our “How to get set-up with brokers” series we’ll break down what a set-up is, how to navigate compliance, and common issues across four blog posts.
- Part 1 - What’s a set-up?
- Part 2 - Compliance Requirements
- Part 3 - Getting Paid
- Part 4 - Troubleshooting Common Issues
Want a more high level overview? Check out our original article: From Carrier Packets to Broker Setups: What to Know
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