Freight Payment
Special Report
“ We ’ re a team of three people processing 125,000 non-parcel freight invoices a year ,” the logistics manager at an industrial shipper , who asked not to be identified , told the Journal of Commerce . “ No one appreciates that this is an accounts payable function . My team looks at this as a sourcing function .”
By that , the shipper meant that logistics teams are generally tasked with negotiating rates and ensuring shipments moved as contracted . But then they have the added layer of ensuring that freight invoices are accurate and paid on time because the accounts payable ( AP ) team doesn ’ t necessarily have the domain expertise to judge whether a freight bill , with amendments , complicated contract terms and accessorial fees added , is actually accurate .
Technology is helping auditors reduce the tolerance for inaccuracies in freight bills to zero . Shutterstock . com
Focus on contract rigor
As such , shippers need to focus on a few fundamentals , the source said . First , rate contracts with transportation providers have to be very clear around elements like invoice inaccuracy dollar thresholds and the final date by which an invoice can be issued .
Secondly , is a similar focus in place around accessorials so that any excess fees that are outside of the rate agreement are kicked out by the auditing program ? And thirdly , can using an audit provider — either services-based , software-based or a mix of the two — enable the process to be handled efficiently ?
“ It all starts with a contract and team that can enforce that contract .”
At the root of the persistent problem of invoice inaccuracy is the basic reality that rate agreements , whether in ocean , air , truckload , less-than-truckload or parcel , are inherently complicated . There ’ s just no getting around the fact that shippers will get different rates based on the lane , freight class , product type , service expectation and in some cases , external market dynamics . And the volume of afterthe-fact fees assessed is also not likely to go away soon .
That somewhat offsets the progress the freight industry has collectively made around making the audit and payment process more efficient .
“ An ocean carrier ’ s customer might have 50 different contracts , with 50 different exceptions on those contracts ,” said Dennis Monts , president and chief operating officer of payment technology provider PayCargo . “ It gets very complex very quickly . And it ’ s an enormous technology lift to meet that complexity on a global basis . The problems they face in India are not the problems they face in the US or the ones they face in Malaysia .”
The shipper source said , in his experience , carriers have not adequately invested in the teams or technology to invoice more accurately .
“ The most under-appreciated role at the transportation providers is the billing team and collectors ,” he said .
“ They don ’ t invest enough in that . I don ’ t want to be surprised by unplanned actuals and accruals building up .”
As such , the shipper said he ’ s built in certain expectations to put the onus on the carrier , across modes , to make his team ’ s auditing process more manageable . “ It has to be a clean invoice and it has to be issued within 180 days from the ship date ,” he said .
More invoices , fewer people
The auditing efficiency from technology doesn ’ t only allow shippers to manage more invoices with fewer people . It also helps the software providers themselves . Vaillancourt , whose company offers a hybrid of services and technology , said the technology RateLinx has built has enabled it to manage millions of invoices without adding headcount .
“ We have five auditors ,” he said . “ How we do that , with zero-dollar tolerances , is by using tech and it has to be purpose-built . I can justify the cost of the software development against what we would need to do in terms of headcount costs . We ’ d need hundreds of auditors to do what we do without our technology .”
PayCargo ’ s Monts said audit and payment technology should be seen as a conduit between the transportation and accounting systems of the shipper and their transportations providers .
“ The systems are not interoperable ,” he said . “ Technology can be a buffer , because when the reconciliation happens electronically , the exceptions immediately pop up and can be managed . Third-party tech should be thought of as a way to augment the core technology ,” used by the invoicer and invoicee .
“ To me , it all starts with a contract and team that can enforce that contract ,” the shipper source said . “ First , you get away from the process of ‘ see bill , pay bill ’ whether it ’ s accurate or not . But the most important thing is the data . If you pay accurately and on time , you have a lot of valuable data on your business .”
email : eric . johnson @ spglobal . com
34 Journal of Commerce | November 18 , 2024 www . joc . com