Smaller forwarders are suffering from an increase in non-payment by partner companies. According to the Freight Deadbeats website, which lists forwarders who are running up bills beyond payment terms, currently more than $6 million is owed in outstanding payments, by more than 160 companies.
“There has definitely been an increase in the number of forwarders not paying,” said Richard Tracey, customer service. “It is really just a sign of the economic times. Things are bad all over the world economically, and the vicious circle is just that – a circle. A doesn’t pay B for some reason, and then B can’t pay C because of a dent in his cash flow – and so on.”
While some of the sums total just a few hundred dollars, others are fairly significant. According to the website, Alpha Express and Kuriersystem of Germany owes agents more than $224,000, while Taiwan’s Union Best International Logistics has run up bills amounting to some $207,000.
Mr Tracey said it was hard to get to the bottom of why many of the bills were unpaid. “I hear all kinds of excuses, but I cannot say with any certainty that they are truthful. There is an adage in some business circles “bill early, pay late” – and some of these companies take the ‘pay late’ part to the extreme.”
The damage done to the reputations of companies listed by sites such as Freight Deadbeats can be enormous, and Mr Tracey explained that he works hard to ensure all claims are genuine, overdue, and unpaid. “We find that most companies will not immediately report to us…it’s usually only after some long, drawn out back-and-forth that the two have had, and it is patently clear that no money will be forthcoming before it hits our desk. We always follow the same process once we get notice of the debt – we must have proof it exists, we contact the other party to hear anything they want to say about it, and then and only then if verified and it remains unpaid will we post it on the website.”
He added that sometimes it is an individual rather than a company name that forwarders should look out for.
“When we see the responsible parties or individuals leaving companies adrift in a sea of debt and bankrupt, and then starting up new companies, we try to identify those companies. We try to make the simple truthful statement that they are now operating another company. Let’s face it, would you invest in or do business with a company if you knew those who are running it ran the last one they operated into bankruptcy?”
Freight forwarding and logistics seems to be a popular area for unethical businesses to offer services. On the website ‘Rip off Report’, more than 500 instances of complaints come up under the title ‘logistics’, although as a more consumer-based site, many refer to employment problems or lost personal belongings. And it is harder to verify the truth as anyone can enter a complaint.
According to Statistics Netherlands, turnover for forwarders in the country grew 3% in the second quarter of the year, versus 6% a year ago. “Freight volumes are smaller, but turnover is still improving,” it stated. It also pointed to the large number of bankruptcies in the last part of 2011 – a trend that appears to be easing off. “The number of bankruptcies was exceptionally high in the last quarter of 2011, when 52 out of a total of more than 2,600 forwarding agencies went bankrupt. So far this year, 20 agencies filed for bankruptcy.”
Of course, it is smaller businesses that face the biggest challenges, added Mr Tracey.
“Smaller and medium-sized companies seem to be the majority of our “entrants.” The multinationals aren’t going to have these types of problems, forwarder to forwarder, because it’s all in-house to them. It is the small to medium independent that has to rely on a small to medium independent in a foreign country to do the right thing.”
Network protection plans can cause difficulties for the networks themselves during poor economic times. One network confided to The Loadstar that it believed a bankrupt agent was making a fraudulent claim against its own protection plan.
Mr Tracey acknowledged that it can be very difficult for small companies to force partners to pay – especially for smaller amounts.
“There are legal methods that can be employed to collect your amounts; however following those tracks can be more costly than the debt. That is why it is usually fruitless to pursue legal means on small amounts. Additionally, these are generally “international” in nature – A in America owes B in India – if the amount is $500 dollars, it makes no sense to spend $5000 in legal fees trying to collect it.
“Who does pay? The company who understands that his reputation and good name are on the line and the company that has an ethical standard. Those are the men and women who can look in the mirror every morning and know they are doing the right thing, even if it hurts a little – those are the ones that pay. They stepped up and took care of business in an honest, ethical manner.
“What we try to provide is just a form of transparency. We want you (the forwarding community) to make business decisions based on all of the information you can get. If it still goes wrong, we want to help – we do this via my favourite Latin phrase: cum veritas, justitia – With truth, justice.”
