How to Get Finance On Side and in Support of Your Freight Decisions

With budgeting and tendering season upon us, finance and procurement teams are both under pressure to set and execute ambitious goals. But without clear visibility, shared priorities, and open communication between the two, tension festers. And that can lead to outcomes where no one’s happy. 

In Xeneta's latest webinar, I was joined by Hugo Grimston, Chief Financial Officer at Xeneta, to discuss freight decisions from a Finance and Procurement perspective — diving into how you can build budgets, forecasts, and strategies that align with business objectives and withstand financial scrutiny.

You can watch the full webinar on demand, or read on for the highlights.

Your CFO’s perspective 

The majority of a CFO’s time is spent optimizing three key areas: 

• Profit and loss: The main priority of the CFO is delivering stable and growing margins. Freight either sits in Cost of Goods Sold (COGS) if it’s inbound, or operating profit if it’s outbound. That means, for example, a 10% increase in freight costs can equate to a roughly 0.5-0.8% impact on margins for Fast-Moving Consumer Goods (FMCG) organizations. 

• Inventory: CFOs want to stay in the inventory ‘goldilocks zone’. If inventory is too high, your organization ends up with cash tied up in obsolete stock. If inventory is too low, you’re at a higher risk from delays and disruption — as you may not have enough stock to put on the shelves. In times of high volatility like today, many tend to prefer sitting nearer the higher end of the goldilocks zone. 

• Budgeting: When it comes to budgeting, CFOs prioritize budget accuracy and the avoidance of any surprises. This is especially important for public companies, which can be punished in the markets if they do miss guidance. Here, the goal is always to under promise, over deliver, and never miss targets. 

Procurement’s effect on an organization’s financial position can be significant, and at times, damaging.

For example, US retailer Target released an earnings guidance in Q3 last year where it missed on all three of these areas because of port strikes and worse-than-usual weather. Its gross margin dropped to 27.2%, reflecting its higher supply chain costs. The company also reported inventory levels 3% higher than in the previous year and missed earnings expectations by about 20%.

The impact was dramatic. On the first day of trading after this announcement, Target’s share price fell by 21%. And even a year on, their share price is down significantly from its peak — while Walmart is faring much better, showing a huge difference in results for two companies which are widely exposed to the same market.

Understandably, a CFO’s natural focus on monetary figures and your procurement team’s more holistic view of what makes for a good freight contract can often cause conflict within an organization.

Perhaps your CFO has set a concrete target for low freight rates that doesn’t allow you to contract carriers that have slightly higher rates, but also deliver higher performance, shorter transit times, and increased reliability. Finding the balance and securing CFO buy-in can be complicated if you don’t have the data to back up your decisions.

One of the things that was most difficult for me as a procurement professional, was to forecast the risk and opportunities of a budget. How can you know what the risk of a port strike will be? And how would it impact your freight rate? Or how can you know what opportunity might come along in the future if you're so far in advance of when the budget eventually goes live?

These were always the instances where constant conversation between finance and procurement became a little bit tough. So I turned to market intelligence to support scenario planning, budget forecasting and tracking the ripple effects of supply chain disruptions. 

How can you defend fluctuating freight spend to your CFO? 

When we asked webinar attendees about the biggest source of friction between procurement and finance in their organizations, nearly 70% pointed to rate increases or unexpected surcharges as the top issue.

Because in freight, when rates suddenly spike or new costs are introduced, the risk isn’t just overspending — it’s losing control.

Long-term, fixed-rate contracts might look like control on paper, but in practice they often aren’t. History shows that when markets turn volatile, carriers breach agreements, forcing shippers back onto the spot market at multiples of their budgeted rates.

We’ve seen this play out in multiple ways. Here are just a few examples from the last four years alone:

• In 2021, shippers who signed at $2,000/FEU pre-COVID watched carriers walk away from those commitments as rates surged past $12,000 (sometimes higher with premiums) on Asia–Europe and Transpacific trades.

  Result: shippers were left paying several multiples of their budgeted spend, despite “signed” contracts.

• When vessels were rerouted around the Cape of Good Hope (late 2023 into 2024), carriers quickly introduced Emergency Bunker Surcharges (EBS), Peak Season Surcharges (PSS), and Contingency Surcharges. Reported figures ranged from $500 to $2,500 per container, depending on lane and carrier.

  Result: these surcharges were often added on top of long-term contract rates, so shippers had no choice but to absorb extra, un-budgeted spend.

• In early 2022, many shippers signed notably high long-term contracts (Asia–Europe in the $8,000–$10,000/FEU range, Transpacific in the $6,000–$8,000 range). By Q4 2022 and into 2023, spot rates collapsed by 60–80%, falling back to pre-COVID levels (around $1,500–$2,000/FEU).

  Result: BCOs left stuck with contracts at triple or quadruple the spot price, often reporting to CFOs that they were “overspending” compared to the market.

So how do you defend freight spend in this sort of environment — when fluctuations are constant and contracts can’t always be relied on?

By showing you’re not gambling on a single bet — you’re actively managing risk. CFOs understand hedging strategies in fuel, FX, or commodities. Freight should be no different.

With Xeneta, you can:

• Benchmark both long-term and spot performance in real time

• See when your agreements drift away from the true market level

• Layer complementary datasets onto your existing historical data, supplier quotes, and market benchmarks
  
  

• Compare carriers not just on price, but also reliability — reducing downstream costs of delays and surcharges

• Clearly communicate market-driven shifts to finance with transparent graphs and analysis

Because when the CFO asks why freight spend has spiked, you need to show it wasn’t mismanagement — it was market turbulence. And with Xeneta, you can prove you had the intelligence, the benchmarks, and the strategy to minimize risk and defend the bottom line.

And crucially, you get clear graphs and expert analysis to simplify your conversations with finance and justify your spend with trusted market intelligence. 

Indexing can create greater harmony between procurement and finance 

The CFO goal to avoid surprises is becoming increasingly impractical to achieve. Since the Covid-19 pandemic, surprises have become the norm. Long 12-month fixed-rate contracts are no longer viable. If rates drop, you’re overpaying, if they rise you risk your cargo being rolled.  

Indexing can provide a solution and create harmony between Finance and Procurement. With an index-linked contract, your rates are linked to the market. If the market falls, your contracted rates will fall with it — and while market rises mean your rates will also rise, your cargo will still be shipped at a fair rate and, crucially, is far less likely to be rolled. 

While indexing may feel like you’re inviting in more surprises, if your procurement team can secure an index-linked contract, your finance team can hedge it. And this ability to hedge rather than simply sit at the mercy of the market provides predictability and limits surprises and their impact. 

Xeneta Indexing is a complete tool to help you create index-linked contracts that work for everyone within your organization — and the suppliers you are signing with. It offers educational videos, guides, and templates to help you understand index-linked contracts and how to achieve internal and supplier buy in. And it gives you the means to simulate different index rules and parameters so you can create the right contracts at the right time. Xeneta Indexing also supports you as you execute and monitor your index-linked contracts, so you can develop a procurement strategy based on the industry’s most trusted and comprehensive freight market data and insights and sell it to finance. 

“[Xeneta] helps in the tender process to ensure that you're getting a fair price. It also helps you look further forward. No one has a crystal ball, but we’ve got six months of forecasts on most of the major lanes… And it's not just the platform which is useful, it's the community of people, and the in-house experts we have who can give you true visibility into the way the market is moving which you will not get elsewhere. Because no one else has the strength and depth of data, plus the expertise, that we do.

Hugo Grimston, Chief Financial Officer at Xeneta  

To get a more detailed dive into CFO and Procurement conversations, watch the full webinar: Explain It to Finance: Freight Decisions That Hold Up Under Scrutiny. 

And if you want to try the Xeneta platform for yourself, including the Index Simulator, schedule a demo today.