Accounting - Transactional or Static

As a more serious topic, this one goes deep to my heart.

What is Transactional and Static Accounting?

In simple terms, we are discussing the methods of calculating a balance for each order in our system. I will try to explain the science behind why I believe this is the fundamental key to running a financially successful operation.

Transactional Accounting

You are familiar with a transactional system when you look at your bank account. Looking at your account, you can see deposits and withdrawals, purchases and refunds. It's important for you to see the detailed past history of your account balance. When you first create your account, you begin with a balance of $0.00. As you add transactions, your balance becomes a sum of those transactions. In a truly transactional system, your balance is created by summing all the transactions from the account's creation. From a banking perspective, in order for them to correctly calculate your balance, they need to add and subtract all the thousands, if not millions, of purchases you have made over the entire history of your account.

This is what MyCartage is designed to do. Imagine each order is like creating a new bank account. And as that order matures, transactions are recorded. This includes the Rates, Carrier payouts, Fees, Payments, Credits applied, etc... MyCartage will take all these small accounts and add them together to create a balance, giving you the full history of everything.

Static Accounting

Static accounting is a crime. Seriously, you can go to jail for it in some circumstances. Imagine if you had an order in your system and when you wanted to change the carrier payout, you made that edit in your system and there was no history of that edit but all you could see was the current "State" of what you paid that carrier. It's probably not that hard to imagine because this is how the majority of TMS systems are created. Each order will have a column in the database called balance column and when you adjust the bill that column is recalculated and applied.

What's the point?

Managing the invoice balance through state is a terrible practice for many reasons. This topic is basically brushing on the importance of Web 3.0 and blockchain technology, but I'm going to speak now on more practical trucking operation applications.

Correctly Paying Settlements (Preventing Stealing)

Once you have moved to a transactional system, the fear of mispaying your carriers or departments is gone. If you paid a carrier $100 for a load done last month, then three months later the customer says the order never happened, in a transactional system the process of deducting that pay from the department or carrier is automatically taken care of for you.

The reason its taken care of is you are essentially given a statement balance each month just as your bank gives you a statement balance, So the amount of carrier settlement is automatically applied since the negative transaction will show up on the carriers currently settlement transaction statement. This means you are guaranteed to corrections properly. Without this system in place, employees could come up with mischievous ways to literally steal money from you right from underneath your nose.

Keeping Your Accounting Team Honest (Preventing Laziness)

Sometimes a customer might skimp on paying for some odd reason. Often this can become a bureaucratic process when dealing with some of the larger corporate customers. But how do you keep track of this? In a state managed accounting system you can't. As a trucker using the MyCartage TMS, you really can welcome payment disputes. It's data that can be kept and tracked forever, it gives you insight into the forwarders mindset and allows for better planning and action in the future. Using a state accounting system can cause poor planning which can in turn possibly end up losing profits because projected outcomes were not met and you don't understand why.

Also sometimes your own employee may not communicate a pay shortage to you. If a customer doesn't pay they may just erase the charges since it's easier for them to do so than to hunt down the money which can take time. If you don't have a transactional system this could be happening a lot more than you think. You could be losing a ton of deserved revenue and not even know about it. This is why it is important to see these credits on every bill and to also keep a history of all credits made so as a manager you can monitor this process.

Final Thoughts.

I hope this article has sparked something in you that you haven't thought of before. I hope you see that MyCartage is a system that will not just help you manage these typical business issues but completely solve them for you. If you currently don't have these issues automated for you, or if you are currently using a State Managed order billing system then you really have to switch immediately to MyCartage TMS. We look forward to working with you.

Some other benefits include:

1. Integration with other systems: This allows you to push data instead of re-write data, leading to increased accuracy and a universal truth to the data.
2. Better forecasting, budgeting, auditing and decision making: A transparent financial record allows for smarter business strategies.
3. Improved customer relationships: Transparency builds trust with your clients, trust is everything.
4. Better compliance with regulations: Maintain an accurate financial history easily with transactional accounting.