If you can’t seem to find out why your company’s bottom line isn’t improving despite making profits, your accounting solution and practices should give you some hints. As per statistics, you can lose between 1 to 5 percent from revenue leakage, and you may not even realize it till a thorough analysis is performed.
Since logistics and freight involve several sources of payments on different schedules, it gets difficult to have visibility of every transaction.
To date, many Logistics Service Providers (LSP) do not use an integrated accounting solution that can consolidate all payments made, received, and pending. The effects of such disorganized accounting result in unstable cash flow and loss in revenue.
A few companies have achieved financial control by adopting sound practices in accounting and implementing industry-specific tools and software rather than general ones. Below we explore some of the benefits of implementing an accounting system in your logistics business.
Turning Fragmented Views into a Consolidated one
The benefit of having an accounting software or module for LSPs is the ability to collate financial activities. Any payment made or received during any phase of the operation or shipment is accounted for in the system. This means every dollar that is received and paid has a digital record. All cash transactions and even multiple banking transactions are included in reports and dashboards for a consolidated view.
Automating Processes and Posting to Accounts
Manual errors like misplaced decimals, an extra zero, or an incorrect currency can impact revenue significantly. The use of an industry-acclaimed accounting system allows you to save time by reducing manual entries. Rich integration of accounting module helps to make all postings like Account receivables, Account Payables, and bank/cash transactions to accounts directly. Consider a scenario when a customer defaults on payments. In an integrated accounting module, all other functions and operations can be auto-alerted to take needed action till the dues get cleared.
Integrated with Business Functions
Traditionally, logistics businesses are known to work with a separate accounting software like Tally. Working with pure accounting software has some challenges in an industry like logistics. Consolidating payment modes like cheque, cash, credit and debit notes, letter of credit with multiple currencies can pose difficulties. Moreover, if this financial information cannot be easily shared with other business functions, payment settlement can take longer. When you use an integrated accounting solution, your billing, operations and even managers can be updated with real-time information. This is possible because of a single database for all business functions. In this way, all functions have clarity if any payments and invoices are settled or are due.
Effective Digital Trail
Integrated systems adequately track down the leakages so you can take measures to prevent them in the future. Some traditional entities in the logistics industry continue to work with cash transactions. Missing to reconcile the cash transactions may lead to delays and inefficiencies in settling payments. With all records and transactions digitally available, your organization’s financial transparency is enhanced, giving your partners and customers more reasons to trust.
Summary
For protection against revenue leakages and to reduce business risks, coordination between finance and operation managers is required. An integrated accounting system helps bring all functions onto a connected platform with up-to-date financial information. LSPs with access to real-time accurate financial data can make better decisions to improve the top line.