FreightRover’s PayEngine provides a mutually beneficial supply chain finance program for companies and their vendors. Companies benefit from extended pay terms to improve working capital while providing their suppliers with tailored options for accelerated receivables.

Despite the wins supply chain finance provides both parties, many companies hesitate to implement a structured payable program due to balance sheet concerns. Poorly managed programs can result in trade payables reclassifications to debt, which negatively impact leverage ratios and debt covenants.

PayEngine’s program meets all trade payables accounting standards to protect a company’s balance sheet and bottom line. Following is our guide to understand the difference between a trade payable and debt in a supply chain finance program.

The First Question:
Has the economic substance of the trade payable changed?

When accountants review payables classifications on the balance sheet, they look at each of the following categories to assess if the trade payable has been modified in such a way that it is creating a financing cash inflow that benefits the company. Accountants will look at the categories collectively to assess the entire supply chain finance program as well.

Terms:

  • Settlement of trade payables cannot take place at a date later than or for an amount other than what is stated on the original invoice upon submission to a third-party payor. Doing so would be considered borrowing, which is debt.
  • A new trade payables arrangement cannot change the terms between a supplier and a third-party payor that’s inconsistent with normal trade payables terms.
  • The company cannot participate in or influence term negotiations between the supplier and third-party payor. The vendor and third-party must negotiate directly.

Population Impacts:

  • A trade payables arrangement must apply to a broad range of suppliers. However, the program does not need to include all suppliers. Companies can extend days to pay without all vendors accepting the new terms if most suppliers do comply.
  • Supplier participation in a supply chain finance program must be voluntary. If enrolling is required to maintain a relationship with the company, a debt reclassification may be required.
  • Should a large majority of suppliers impacted by extended pay terms select an accelerated pay option, which marks a significant change from the previous arrangement, this could trigger a debt reclassification. For example, if a company extends terms from 30 days to 120 days and now most of their supplier base elects to monetize receivables and did not prior to the change, this would require review as potential debt.

Benchmarks:

  • Companies can extend pay terms to align days payable outstanding or other working capital ratios with peers without changing the structure of their payables to debt financing. As a reference point, the US average across the largest 1000 companies currently is 57 days.
  • Trade payables should not include the accrual of interest prior to when the trade payables become due. Late payments can incur interest without reclassification impact.

Credits:

  • A company must retain its negotiation rights with the vendor directly and have the ability to withhold payment. Application of credits must be consistent with past practices. For example, if a company places a freight claim against a carrier, they should have the ability to withhold payment to the carrier until the issue is resolved. If a third-party payor compensates the carrier prior to the completion of the claim negotiation, and the company must arrange for a credit that’s inconsistent with how they’ve traditionally done business with the carrier, there could be a debt implication.
  • Whether or not a vendor decides to monetize their receivable cannot impact the company’s cost of goods sold or services received from a vendor. The third-party’s arrangement with the vendor and company must be independent of the other party’s interests. Therefore, a company cannot pay a vendor more to offset the cost of accelerated receivables.

Legal Characteristics:

  • Companies cannot change the legal characteristic of trade payables. Events that indicate characteristic changes include: immediate draw-down of credit lines, altering trade payable seniorities, securing trade payables through collateral, or incorporating default provisions.
  • In general, trade payables cannot have guarantees. However, in the case of a parent company being “jointly and severally liable for a subsidiary’s obligation,” a reclassification may not be required if it is the sole indication of a debt trait.

Impact of Third-Party Payor:

  • Implementing a structured payables program may be part of a larger accounting outsourcing strategy. This could include using a third-party platform like FreightRover’s PayEngine, which includes posting invoices and assigning accounts for fund withdrawals as payables reach their maturity date.
  • Rates paid to the third-party payor by the company cannot vary based on things like the number of vendors selecting a quick pay option or number of invoices sold to the third-party.
  • Red flags for debt reclassifications include: the third-party receiving new rights, if the third-party has influence on which invoices get paid, or if the third-party can withdraw funds from the company’s other accounts without consent if sufficient funds become unavailable.

If you are interested in learning more on trade payables or modifying your vendor payments using PayEngine’s technology and supply chain finance program, visit www.freightrover.com/pay, email info@freightrover.com, or call 866-621-4145.

To end FreightRover’s week focusing on women in logistics, we talked with all-star Misty Darnell of Paschall Truck Lines about her thoughts on trucking and the unique female perspective.

Misty Darnell Image

How did you get into logistics?

I received an offer to work fulltime while I was getting my master’s degree in finance. I got my first taste of logistics and instantly loved it. I love that there’s a new challenge every day. Nothing’s ever perfect within logistics – there’s always something that can be better, that can be improved upon. I did that and then got offered a job to come back 5 years after I graduated and to work at Paschall Truck Lines. I knew I loved trucking and it was a good opportunity to get back into it and do something I knew I liked. From there I’ve progressed into the roll I’m in now, which is Vice President of Corporate Development.

What are the biggest problems in the industry?

I think for any carrier the driver market and driver turnover are big issues within our industry. We must make trucking more attractive to more people and get them involved because we have a driver shortage. I think our biggest challenge currently is deciding what we need to do as an industry to get more people involved and wanting to become truck drivers.

Do you think being a woman in the logistics industry gives you a different perspective? Do you think you’ve brought anything new to the table being a woman in a traditionally male-dominated field?

My mind races at 100 miles an hour and is constantly thinking about a bunch of things at once. When you think about logistics and trucking, that’s exactly how trucking is. There are so many things going on at once. It’s not just one process, you’re working through the whole system. You’ve got your trucks to worry about, you have your equipment, your customers, and your drivers.

I’m not sure why there hasn’t been as many women in trucking – I guess because from a driving perspective everyone just thought it was more of a male job. But from the carrier and driver side of things, it’s a huge opportunity for women to come into this industry to give a completely different perspective and thought patterns. Women tend to look at things very openly and question things at times. I know for myself, I always question why I’m doing something and what potential opportunities might be there. I think logistics for women can be a huge opportunity for them to be successful if they can come in and handle the driver aspect of it as well as the back office.

What can other women learn from your success?

Within my organization, I’m the only woman vice president and I’m also the youngest. I sit on two vendor customer advisory boards where I’m often the only woman in the room. It’s easy to worry about stereotypes like, “Oh you’re a woman. Do you know as much as everyone else?” However, when you’re able to open your mouth and speak very intelligently, you instantly gain respect. As a woman, you must prove yourself. Be confident in what you’re speaking about and be knowledgeable. That comes with any industry and any job, but especially here where there traditionally haven’t been very many women at higher levels.

How is technology helping to bring more people into the industry?

The technology advances help enables automation and back-end procedures, which free up time to work more hands-on with the drivers. Technology allows us to reallocate resources. There’s a driver shortage and there’s also a shortage on the experience side. We’re a training fleet, so we hire drivers from CDL school and put them through our training program. We’re able to expedite processes and reallocate those resources to training novice drivers to become better long-term drivers.

What is Paschall Truck Lines doing to get people into the transportation and logistics industries?

On the driver side of things, we have taken a hard focus at hiring additional women drivers. Our percentage right now is about 8% of our total driver pool. I know that doesn’t sound like a lot, but within the industry it’s actually really good. We see hiring more female drivers as a big opportunity and we are trying to increase that percentage monthly.

More Women Truck Drivers: A Solution to Many Industry and Gender Challenges
I recently attended a national transportation conference, where a featured panel included a high-level discussion with leaders from three prominent trucking fleets. As they candidly discussed the challenges present in the industry, the driver shortage took center stage. I noticed as they discussed ideas around recruiting and retaining drivers, they didn’t refer to any drivers as women. “He,” “him,” “men,” “guys,” “the boys” – not a single reference to females. While I’m certain the phrasing wasn’t intentional, it does speak volumes about what’s missing in our industry – more women.

Addressing the Driver Shortage
According to the American Trucking Associations, trucking currently is about 50,000 drivers short, a number expected to more than triple by 2026. Despite comprising 50% of the US population, women only hold about 6% of truck driving jobs. This leaves a massive pool of untapped human capital to address the driver shortage.

It’s hard to be what you can’t see, especially when most recruiting advertisements feature men. I asked an agency specializing in driver recruitment advertising why that is. They stated that many fleets don’t request advertising geared toward females because the cost per hire increases for women. However, it’s important to assess the total value of a hire over an extended time.

According to Ellen Voie, President and CEO of Women in Trucking, women tend to stay with fleets longer, engage in less risky behavior, and value team collaboration and goals. Considering the whole picture, the return on investment of hiring a safe, goal-oriented, team player that prefers to stay with the same carrier for as long as possible should be very high.

Closing the Pay Gap
On average, women earned 28% less than men in the United States in 2017 according to the Pew Research Center. While the gap is closing overall, trucking represents a great avenue for closing the disparity even quicker. With most trucking compensation plans using per mile rates, productivity rules. Additionally, transportation wages are increasing, with driver pay up about 12% year over year. Trucking provides a fantastic avenue for women to earn equal wages in an industry with increasing compensation trends.

Women as Entrepreneurs
The US is home to 11.6 million women-owned businesses worth $1.7 trillion in revenue and employment for 9 million people. Women-owned businesses are growing at five times the national average. However, more than 50% of female business starts are in the health and human services sector. Logistics has been identified as a high-growth, high-wage industry where women aren’t aggressively starting businesses. In a market desperate for additional trucks, independent contractors and owner-operators hold the flex capacity shippers need. Many of today’s largest US fleets started with a single truck. Women as independent contractors provides a new avenue for entrepreneurs with high market demand already established.

Changing Lifestyles
Women historically haven’t entered the industry in large volumes because trucking hasn’t always supported raising a family or being a care provider. Equipment also hasn’t been designed with women in mind. Those things are changing. Shippers are redistributing networks to create more daily runs. Carriers are working to provide nightly or weekly home time to their drivers. Equipment manufacturers also are modifying truck designs to be more inclusive for all driver types and builds. Automatic trucks also have become prevalent in the industry.

More women also are looking for second careers. As Boomers continue to enter retirement, they average just $15,000 in savings. They also are living longer on retirement benefits as costs continue to rise. Retirement benefits are typically lower for women as they often earn less during their careers. According to an article published in The Atlantic, Social Security replaces only 40% of an earner’s income when they retire, when 70% is required to live comfortably. With more fleets offering no-cost or low-cost CDL training programs, trucking provides an easy-access alternative career for women. Hitting the open road and seeing every part of the United States while being paid seems like a retirement plan worth some consideration.

Breaking Down Barriers
Technology providers like FreightRover also help lessen the barriers preventing more women from joining the industry. FreightRover’s CarrierHQ pay-as-you-go insurance program offers upfront capital cost savings of more than 80%. Paired with per gallon fuel savings, low factoring rates, and business formation in under 48 hours, launching a fleet has become much quicker and more efficient. FreightRover’s partnership with Urgent Care Travel also offers reduced-cost medical access for drivers and their families at multiple locations throughout the US. Women can better care for themselves and their families while still being on the road.

Trucking needs more women. They represent one of the most viable solutions to truly address the capacity crunch. And, women need trucking. Equal pay, entrepreneurial opportunities, and a different career for evolving lives – trucking supports efforts to create better equality for women. When I attend the next transportation conference, I hope to hear a lot more mentions of “she,” “her,” and “women” when it comes to drivers and other careers in transportation.

Transportation and logistics have historically been male-dominated industries. However, to capitalize on rapid technology advancements and tackle a historically high driver shortage, companies are looking to attract more women into supply chain management. As we spotlight women in logistics this week, we sat down with Jenyce Houg of Houg Logistics and Transportation to learn about her story, how the industry is changing, and why women are so important to the future of transportation.

Jenyce Houg

What got you into logistics?

I think most people don’t just choose a career in logistics and supply chain. I was a high school junior. My father owned an air freight company in Colorado and would fly freight out to the Western Slope. He said, “Why don’t you come work for me and my partner doing billing, filing railroad paperwork, and learn the ropes.” We did a lot of intermodal rail business back then. My friends jetted off to universities and I had already worked two years making pretty good money, so I decided to stay in Colorado and get my degree locally.

What is the most interesting aspect of your job?

I’ve been in it for 29 years. There are so many facets to logistics and supply chain. There are so many opportunities and different arenas you can go into. Whether it’s operations, human resources, driving a truck, or being an analyst, there’s an array of different types of job opportunities. My dad and I started a local transportation company which evolved into over-the-road trucking and warehousing. I was able to touch every sector over my career inside the industry and I think that’s what I ended up loving about it. Not only did I love the drivers and what they do, but we’re seeing that today it’s really tough to be a driver. I have such respect for what they do. Everything about the industry is fascinating, it’s like putting a puzzle together all the time because it moves so fast.

The logistics industry is traditionally male-dominated. How has being a woman in logistics given you a different perspective into the industry?

It was probably really good that my father brought me up in the industry. I learned how to not take things personally, and you had to be that way. I had a lot of respect and would listen, especially at a roundtable. I made sure when I spoke that I was very firm about what I was speaking about and I knew the subject, because as a woman you’re always tested. I would really make sure I had the facts and I knew what I was talking about. When I did, they took me seriously.

What I tell young women coming up in this industry is that you can’t be afraid to get dirty. One of the things I always did is take road trips with my female drivers. I’d go down and work in the warehouse. To be in this industry and to really understand it, you have to get in on the ground floor. Walk the rail, walk the warehouse, go with the driver, understand what the issues are because that knowledge is just incredible to have. I don’t care if you go into the technology side, analytical side, operations side – when you know the ground floor and what the people do on a day-to-day basis in the trenches, that’s the key to success.

How do you think women drivers/workers are impacting the industry?

I think the statistics now say it’s about 7% women truck drivers, which is rising. With technology rapidly advancing and the equipment becoming more user-friendly, it benefits all drivers, especially women. Down the road I don’t think it’s going to be driver-less, I think it’s going to be driver-assist with the autonomous trucks coming into the market. I think you’ll see more women enter the industry, whether it be on the ground or managing the truck, because of equipment changes.

What’s your advice for someone interested in a career in logistics?

With the rapid development in advanced technologies in the industry, I think that it’s going to reduce the barrier to get in, especially for women, because there’s such opportunities in the market for key roles in technology. I’m really encouraging people when we present at events to consider a career in transportation. There’s a big event called Operation Stimulus that includes about 20 schools and universities that compete in logistics for scholarships. We promote that here in Colorado to really try to encourage college students to get into logistics. There are so many key roles and opportunities right now. Hiring more women also is critical to solving the truck driver shortage. I’m reading about how companies are making concerted efforts to increase female staff to provide the needed perspective to better recruit women into truck driving jobs, which is really important.

How do you think FreightRover’s technology helps with this?

I can’t say that anyone is ahead of their time anymore, because now we all see technology as sort of a horse race. It’s very difficult for people out in the huge ocean of supply chain to really pick good technology. What I love about FreightRover is that it applies to all, big and small. I love that FreightRover’s CarrierHQ offers my independent drivers quick, easy, friendly tools like Occ/Acc insurance. Drivers want to be on the road and having this tool on their mobile device that’s easy to update is ideal. The quick pay through PayEngine also is great for drivers. That’s what I love about FreightRover – the engines, the tools make it seamless and user-friendly. That’s why Houg Transportation and Resources joined up with FreightRover. The CarrierHQ tools and PayEngine quick pay is perfect for our independent contractors. They love it. They absolutely love it.

How are women in logistics changing the industry?

What I love about women working in a male-dominated industry is that we all know we’re different. Men and women are completely different. When you embrace differences and diversity it makes companies successful because we challenge each other. It makes teams more productive, more competitive, more confident with both genders working together. I think that’s why more women will be promoted within our industry as well.

Ecommerce and the internet have just absolutely changed the way the supply chain network operates. I think that’s why there’s going to be so many great positions that continue to open to so many more people.