Freight bill revenues get adjusted, sometimes many months after the shipment moved, for a variety of reasons: rating errors, service failures, accessorial charge disputes, etc., etc. Because this happens, and happens a lot, the revenue shown when processing the monthly Traffic/CIS database, which is the sum of the month’s freight bill revenue, can be materially higher than the general ledger revenue when the books are closed.
Traffic/CIS, the monthly costed database module of the Cost Information System,
provides for subsequent revenue adjustments via a download file called
PAYBACKS.DAT. This file has fields for both shipment by shipment revenue
revisions* and
for customer-based revenue revisions. The paybacks file is downloaded with the
other Traffic/CIS files each period, and should include all changes made, during
that period, to prior period bills, or revenue adjustments to customer’s
accounts which were not written to current period shipment records.
The paybacks file record layout is in appendix A of the Traffic/CIS Manual.
Once a paybacks file is developed, the adjustments can be applied in a variety
of ways as best fits your uses of Traffic/CIS.
In payback files containing customer-basis changes, the changes are
prorated to all of the customer’s freight in the current period, based on
revenue. Net revenue then reflects this adjustment, appearing on the database
viewer as an off-bill discount.
Payback files containing specific freight bill changes can be handled in
one of two ways:
·
The prior period bills can be
corrected. This fixes the revenue in older databases, but the current period
revenue gap remains.
· As revenue adjustments are applied, the differences between the prior period bill revenues and corrected revenues can be calculated and applied, customer-wide, to the current period, via the establishment of a “lag” period, at which point the customer-wide adjustments are erased and actual adjustments, held up and stored in a separate file, are applied to specific shipments. The current period will then have customer-wide adjustments reflecting the corrections made in that period, and older periods will have corrected bills. Bills in the lag period, and all prior periods, will reflect actual revenue.
The argument for using the lag period method is that the current period adjustments then reflect an estimate of future adjustments which will be made. The argument against it is that it can double-count adjustments. An analysis of your own experience (i.e., are adjustments generally made to the same customers over and over) would be helpful in determining which application method to select.
The choice of which method to use is up to your company. Each has strong points and weaknesses. But the important thing is to get a paybacks file established, regardless of the method of application ultimately selected, so that the Traffic/CIS database reflects customer profitability as accurately as possible.
* P&D dates, type of rate
and classification can also be revised with the paybacks file.