The payment term is a pain that freight forwarders cannot escape from. It is usually not the lack of business that crushes a freight forwarder, but the breakage of the capital chain and the payment term that crushes people. Let's talk about this topic today.

First of all, the global COVID-19 will begin in 2020. Fuel costs will rise, aircraft capacity will decrease, but freight will rise. Many freight forwarders no longer advance shipping costs, especially for large quantities of epidemic prevention materials with high customs declaration risks, and begin to deduct orders and settle them on the spot. The CASS air freight settlement system did not increase the deposit ratio due to the epidemic, but in 2022, with the epidemic basically under control, CASS assessed the deposit ratio based on last year's freight rates. This year, many freight forwarders have been required to increase the deposit ratio. This year, there is a shortage of epidemic prevention supplies, and competition will become more intense. Many freight forwarders have also relaxed their credit terms, and increased the deposit ratio, which undoubtedly increases the financial pressure.

Secondly, sea freight is even more difficult. A single container can cost tens of thousands of dollars, and small customers can pay 100% upon receipt of the bill of lading. The financial pressure on large customers can be imagined.

The same goes for air freight, as fuel costs rise and air freight rates increase, with single shipment costs often exceeding tens of thousands. If settled monthly, a single customer will generate millions of accounts receivable, bringing great financial risks.

Thirdly, it is often not until the accounts are settled that one realizes the danger. Previously, the payment terms between peers were 30-45 days, but currently most companies can only accept 30 days. For example, in air freight, if peers follow the rules of a profit margin of 5 gross per kilogram, the shipping cost is so high that the average market shipping cost is 50+, and some places may have shipping costs of 70-80. Sending just one ton, it costs 50000 yuan for shipping, which accounts for 2 months of capital and earns 500 yuan. Based on the current market loan interest rate of 6%, there is no need to deduct the cost of people, food, and transportation, office expenses, taxes and fees. In case the customer's ink shipping fee cannot be flown well, do you think it will make money? Is it necessary to accept this shipment? CASS settles accounts twice a month. The more goods there are, the greater the financial pressure. If you accept such goods, it may really not make any money.

Finally, giving credit is like lending money to someone else. There is a popular saying nowadays that 'Grandpa owes money'. Currently, many unregulated companies delay payment and repeatedly deduct it when making the final payment, causing a lot of losses to the company. It is difficult to get money, and there are many reasons for not paying. Every day, many different excuses can be given. Every employee in the freight forwarding industry is very busy and does not have time for a dedicated person to collect payments. There are many international logistics links that can easily cause varying degrees of damage, delay, or loss, so it is best to collect payment as soon as possible and ensure that the package is not properly secured.

Every year, some logistics companies encounter various cash flow problems.

The occurrence of a bad debt often means that at least a month has been wasted. In order to reduce the company's financial risk, the collection of accounts receivable is relatively tight to accelerate *.

The cost of advance payment is high, and the risk of new cooperative customers is not very controllable. Even old customers may default, resulting in a serious shortage of cash flow. Therefore, freight forwarders are so concerned about payment terms and always urge payment.

So, different payment strategies should be adopted for different customers, and small companies are not recommended to give payment terms, otherwise there will be endless troubles in the future.