¶ Welcome to The Final Mile
All right , welcome back for the final mile . This is our segment where we answer your questions that you guys send to us each and every day , it feels like at this point , through YouTube , the website . We appreciate it , so we can't get to every single question .
We try to answer a lot of them on YouTube or on the show or via email , but we got some good ones that we'll get to today . Make sure to check out all of our other content at Freight360.net and on YouTube , and you can check out the Freight Broker Basics course on our website as well for an educational option .
And please check out the sponsors in the description box . That will help support our channel . All right , ben . Our first question Does a broker and a dispatcher play the same role ? And , if not , can one person be the dispatcher and the broker ? So I'm assuming the way that they're using the word dispatcher can be taken multiple ways .
¶ Brokers vs Dispatchers: Crucial Differences
What I want to say is if you're a dispatcher for a trucking company , like an independent dispatcher that represents trucking companies , you are not a broker . Those are two different things . Brokers are things . Brokers are licensed . Dispatchers are not licensed .
There is some um , tia , industry standard like guidance on dispatch services , but there's no like legal groundwork for at this point . Can you be both ? You could be both , so what's your ? How would you take this Cause ?
I want to make sure we're not talking about like the dispatcher inside of the brokerage who's actually like contracting the truck and tracking the truck .
When it says the same role I'm going to . I'm going to zoom into the word role and try to define it from there , right . So role could mean a few different things . Like if you're meaning the role is like what you're doing all day . Meaning like you are connecting a carrier with a shipper that has a load right .
Like that is different for a dispatcher than a broker right . So for a dispatcher , the way I always understand the guidance is you do not have the ability to choose between motor carriers for any given load as a dispatcher .
As a dispatcher , you are contracted with a trucking company and you are able to source loads for that trucking company and book their trucks on that load . You are not able to book of many multiple MCs for one given load . You work for the trucking company , you book loads for them as a dispatcher .
The thing that makes it a little confusing is under the guidance , my interpretation is that , like you are able to dispatch for multiple trucking companies but they need to have a distinguishing quality .
Meaning like , yes , like I have a reefer company I'm a dispatcher for and a van , so like if I have a van load it only goes here , a reefer load only goes there the guidance clearly states that , like you , can't be a dispatcher for six different dry van companies because now you're operating as a freight broker without a license .
So to me that is the distinction and rules . Distinction and rules . A broker allows you to work , with your license , any shipper and vet and work with any carrier to move that load right .
A dispatcher is constrained or only able to work with typically one trucking company unless that trucking company can't provide other services like maybe drayage , maybe intermodal or maybe like , or maybe like or different areas of the country .
Yeah , correct , what this trucking company only is a dispatch service , basically having a load from a broker and being like , hmm , I got these six truck companies available this one pays me this much and you know it's like , uh , if you're , if you're , they're then having some control over , um , you know , carrier selection , that is a freight broker's role and
that's our license .
The ability to vet and determine the carrier selection . You can determine the carrier selection , but it has to have differences Like to your point . Like I can use this trucking company and they're all vans because they only operate in the northeast . Oh , I need to move this load in the southwest .
I can use that trucking company I'm contracted with for that load because one can't do the other one's load .
If you could pick between the two . Yeah , the dispatcher cannot take paint . Money cannot run through the dispatcher .
Right , right . They have to pay the trucking company . The trucking company pays the dispatcher .
Yep Brokers , the money runs through us , so all right . Next question I think this is from a shipper , actually . So we recently found out that our broker booked a few loads with a fraudulent freight hauler so a fraud carrier . That broker still wants to be paid for the loads .
They paid the fraud motor carrier but doesn't know who the trucking company who actually delivered the load is and likely won't pay them if they come forward
¶ Handling Fraudulent Carrier Situations
Any advice . So , all right . This is a very common scenario in double brokering where , like , shipper gives load to , we'll just pretend that me and you are part of this equation , right ? So Shipper gives a load to you as a freight broker and I'm trucking company , right , you give it to me and you think I'm going to haul it . What do I do ?
Is I give it to I without a license or the authority to do so . I give it to some owner operator who then hauls it . I take payment from you and I just fall off the face of the earth , right ?
And you know whoever that carrier is to hold it at some point is going to come around and want payment and per , like the laws , like the , that you wouldn't have to pay them , right ? The actual shipper is responsible for freight payment , which , I tell you , lose a customer if you don't own up to your errors . Yes , so this ?
This shipper is asking for advice because the broker that they used let's see the broker wants to be paid but doesn't know who it was .
So , yeah , I mean I wouldn't , I wouldn't pay the broker , I'd freeze their pay , but I would try to work with them on a relational piece of like hey , if we want to do business together , like , we've got to have processes in place to make sure that who you're sending into us is legitimate .
Or I mean , depending on how bad this is like , just don't ever use this broker again . Like , because you are as the shipper , you are going to be held liable to pay whoever hauled that load of yours when they come around and if the broker says I'm not paying them , they're going to come to you . So yeah , I wouldn't pay . Yeah .
And again like I wouldn't pay . Yeah . And again like I would be curious how the shipper found out the broker paid a fraudulent company and still wants paid . I'm guessing because how that arose , like how the shipper found out the broker paid a fraudulent company Right , but hadn't yet paid the broker .
To me is probably like a whole lot of things were like the brokers like , yeah , I hired this Trucking company and a shipper , something happens , goes wrong . They can't get a hold of somebody . Next thing you know they're like who'd you load ? Oh , we loaded ABC Trucking . And it's like no , we contracted XYZ .
Like it was probably something along the line , like something must have happened . And when they started going back through the details they probably realized like who actually got loaded and hauled ? It was not the same as who the broker booked .
And the broker's like probably like , like , yeah , I clearly one slip past me type deal and I think if I'm the shipper , I , to your point , would work with a broker and try to gather as much information as you can , because what your real objective here isn't to screw anybody as a shipper , it's to just make sure the payment gets to the company that moved the
load Right . So , whether that's me as a shipper , it's to just make sure the payment gets to the company that moved the load right . So , whether that's me as a shipper , trying to figure out from my loading doc do we have any images , photos or documentation of the trucking company that we loaded ? Does my receiver have any of that documentation or images ?
Try to find the MC of the carrier that actually hauled it . Get them in the loop to contact them to make sure they're involved and the money gets to them .
Because the only scenario at which I'm paying that broker for that load is that the broker in writing is going to release the payment I give the broker to the actual carrier , which doesn't solve the broker's problem .
The broker , at the end of the day , if they want to keep the customer , is already out the money they paid the fraudulent person and even if they get paid from the shipper , they still have to pay the second carrier that actually moved the freight anyway .
So , regardless of how this works for the broker like , they're out that money if they want to keep the relationship with the shipper as the shipper .
If you don't get those funds to that trucking company that hauled your freight , they will come back eventually in the next few weeks or months and they're going to reach out to you because they know they picked a load up from you and they're going to shoot an email or call your facility and say , hey , who did you guys arrange this load with ?
Because we didn't get paid . You'll look up the load number and then you'll be able to close the loop on what actually happened . That's usually how these kind of play out .
Yep , all right . Last one Do you think an agent working as 1099 should buy some kind of insurance ? What insurance ? Do you think Bad debt is not a concern ? Okay , I actually get this question .
I've got this question from people within our because Pierce is agent based , so we get you know questions from agents about , like you know , agent based , so we get you know questions from agents about , like you know , do I need to have any insurance ? Blah , blah , blah . So here here's the breakdown . The brokerage that you're contracted with as
¶ Agent Insurance and Financial Protection
an agent will have insurance policies that any brokerage would have , right , like general liability , um , contingent cargo , contingent auto , things like that , um , you are cut , your the business that you're doing is covered under those policies .
What doesn't happen like so the the general liability policy , for example , like a slip trip or fall in the office , those do not trickle down and cover a contracted agent .
So if your agent pierce , isn't in charge or on the lease . If you had an office as an agent , you're right , you know my agents that have an office and have employees .
Well , usually their office lease is going to require that they show proof of their own general liability policy . But yes , that is an instance when you would want to have a policy to cover things of that nature . So if someone's in your office and you know falls and breaks their back , you're not going to lose your house over it .
So here's , but as far as you don't need like a contingent cargo policy or anything like that for your shippers . Let me throw . Let me throw a what if ? Scenario at you . Sure , I'm an agent for you say pierce does not have receivables insurance , okay , yep , but pierce and my contract is a 1099 agent . You guys pay me on loads delivered .
I'm not saying that is your setup , but like that's not uncommon for some agents we pay on invoice , sorry . Yeah .
The scenario you're going to give me has probably happened at our company or something , so I'm getting paid on loads delivered every week .
Right , I'm paying my employees as an agent underneath Pierce , employees as an agent underneath Pierce , but then my customer , of which Pierce approved credit for , because Pierce is funding the invoices and taking the risk between paying me and when they get paid from my customer , if my customer goes under , goes bankrupt and everybody did what they were supposed to and
it's just a risk , like Del Monte which came up recently , right ? Or like they just can't pay their bills and likely lots of these free bills don't get paid . Is there a scenario in which me as an agent wants to pay for my own receivables insurance , because if my customer doesn't pay you , pierce is going to withhold future money from me .
It's not like you're just going to eat that risk and be okay with my getting paid on all my loads and you being stuck for the invoices .
Yeah , so like the common agent world practice is like we we use a receivables insurance company , right , yeah , I know .
I'm just saying a lot other agents .
So right , so prior to that , when we didn't . And this is common in the agent world is like your contract will outline like your splits like we're 70 30 , which means like if there's profit , it's 70 30 . If there's loss , it's 70 30 . Right , and you know so .
If there's a lot of you know , customer goes out of business and leaves a ten thousand dollar balance and an agent's the 70% stakeholder in that like , well , they , they now have a $7,000 debt .
In that scenario , right , what plays out normally in that is that that agent's like yeah , I'm not gonna pay that back to you , so I'm just gonna quit and go to another company and then we'll try to invoice them , and then you know whatever . Um . So to your point about receivables insurance for the agent . If the company doesn't offer it , it's you know itself .
Um , yeah , I mean you , you might be able to , I don't even . I don't know if you can , though , because I don't think you can . Because if you're the , if you're the I'm a contractor .
I can't insure your receivables , you're not my company . If you're an agent , it's not your receivable , but I'm liable for them .
Yeah . So if I'm an agent for a company that doesn't have an insurance policy like that , if you've got a large customer and you want to protect that in that credit line , have the conversation with that brokerage and just say , hey , I'd really like to do x , y and z and here's an option .
So , like we use allianz , which is formerly euler , and I use them at a previous company as well , there's a , there's a price tag pro false is a good one .
Like we've looked at how to repulse it . Like there's a quite a few out there that you can get this with . Because , to your point , right , like I used to think about this a lot when I worked at , like TQO .
Okay , because my previous job , like I worked at a bank and I evaluated credit risk to lend people money , whether it was a business or real estate , right , real estate right . And I'm like , okay , like my job is to read through the financials , look at their credit reports , determine if this is a good bet .
Like , if I give this business or person money , can they pay me back ? Like I'm involved in that decision . But then at TQL , what I noticed is like , oh , as a broker , I am not involved in the credit allocation .
You just send over the company's information and TQL goes okay , well , you get a hundred grand in credit and then , if that company goes out of business , I don't get paid any commission , because I got to make sure I don't get paid commission until they pay their bills . And I always , I always felt like that is a misalignment in responsibility .
So I'm like , okay , well , like if I'm on the hook , then let me read their credit , let me determine how much credit we're going to give them , because I'm not even involved in this decision .
You guys decide to give them this amount of money and then they don't pay me and then I lose the money when I wasn't even involved in that and to me I was like that felt like a disconnect in how the but again , in a practical stance , you can't train practice so like correct , you can't train a bunch of freight brokers on how to run credit risk to the
extent your credit department can . So it makes more sense . But like I just have that unique perspective because I had both jobs and I'm like , wait a minute .
But also like to your point , like from a practical standpoint , like a broker is going to ask for more credit , almost always to push that limit because they're going to get more margin and that's usually what it is is there .
there's a push and pull game being played between the credit rep and the broker . I've had people like in the past that were
¶ Final Thoughts on Broker Liability
like you charge back a commission because a customer didn't pay the invoice , and they're like , well , what did I do wrong ? And it's like really nothing . But at the end of the day we , just as a business , you can't pay a commission on money that you never receive . Like it's just , you just can't Just sucks Cost of doing business situation . Good questions .
That's a . That's a unique one . I don't think we've ever had any kind of questions like that . That is a really good one , but yep , all right . Final thoughts .
Whether you believe you can or believe you .