Dealing with freight bills is a monumental headache for both the transportation industry and for businesses in general. In fact, the transportation procurement field might only have telecom billing to rival it in its complexity. This issue stems from many factors, some specific to the industry and others rooted in tradition. To an outsider, the freight bill auditing and payment process can seem utterly absurd. It begs the question: why so complicated, and why do you need transportation experts just to pay a freight bill?
Even for those in the transportation business, there’s another challenge beyond complexity. This problem is extracting freight bill data and its crucial insights from a carrier’s system is daunting for shipping managers. More often than not, valuable shipping data lies hidden within financial systems or, worse still, on paper documents or Excel spreadsheets. This article aims to highlight the issues with freight bill and payment processing. Moreover, it is my hope that this will spark more discussions on how to streamline this disjointed process. Also, by simplifying and making this process more transparent, shipping managers can get better access to insightful invoice data.
9 Ways Freight Bill Audit & Pay Complicates And Hinders Businesses
Throughout my career, I’ve seen many experienced transportation experts waste their time auditing freight bills with little to show for it. Their efforts would be better spent optimizing shipping operations in terms of cost and service. In the remainder of this article, I’ll describe the nine ways that freight bill auditing and payment can complicate and hinder both shipping operations and financial departments.
1. Disjointed And Incomplete Freight Bill Data – Both Billing Data And Shipment Status.
Generally, data in the freight bill industry is disjointed and incomplete. This modus operandi leads to billing challenges and limited visibility to service performance. For example, a shipper may not provide the carrier accurate dimensions for a very large package being shipped by an overnight express service. Next after package pickup, the carrier electronically scans and captures the package’s actual dimensions. As a result the carrier does not offer an express service guarantee for the large package. Worse, the next week the shipper’s accounting department receives the carrier invoice with an unexpected large package charge.
Indeed, disjointed and incomplete freight bill data is quite normal. This is because operational shipment data, shipment status, and financial data many times residing in different enterprise systems. For a more detailed discussion on this, see my article, Poor Shipping Data – Here Are The 4 Reasons Impeding High Tech Visibility And Actionable Analytics.
2. Manual Freight Bill Processes That Raise Costs, Reduces Efficiencies, And Limits Visibility.
Particularly for non-parcel shipping, there are too many manual processes. For instance, when paper-based documents are used instead of electronic ones, it will take longer to process shipments and audit invoices. This can lead to a labor-intensive process and more charge disputes. Additionally, manual processes can make it difficult to track and confirm that shipments were delivered on-time or delivered at all. Now, most companies are digitalizing their processes, however beware. This is because many digital transformations do not yield the results businesses need. For more details on this topic, see my article, The Way of Digital Transformation: A Business First, High Tech Reinvention 0f Processes and Culture.
3. Complex Contract Negotiations And Rate Structures.
Also, the transportation industry has extremely complex rate contracts. This results in many shippers not really understanding what they are signing, nor the specific costs that they will incur. Moreover, this makes it very challenging for the shipper to compare prices between carriers. Below are some examples of the complexity of contracts:
a. Complex Pricing Models.
Just think of all the dynamics that can occur when a contract has tiered discounts, peak charges, minimums, delivery area charges, and hundredweight pricing. Then there are the variable fuel surcharges, pickup charges, residential charges, and re-weight fees. This is then followed by dimensional weight pricing, return to shipper charges, zone pricing, large package charges, and so on.
b. Challenging Comparing Prices Between Carriers.
Moreover, carriers many times use different pricing models or surcharges that are not easily comparable between providers. For example, one carrier may have a separate residential or peak charge. Then, the other carrier just has a single freight charge for a particular type of shipment with no accessorial charges. As a result, shippers are challenged to determine which carrier offers the best value for their needs. For more ideas on how to simplify transportation contracts, see my article, Freight Payment Terms: A Painful Money Game, Its Purpose, Is There A Better Way?
4. Complex Electronic Invoice Charges That Obscures Billing Errors, Non-Value Charges, And Service Deficiencies.
Even if shippers are able to successfully import their shipment data into their systems, then the challenge becomes what to do with it. There are too many data formats and the too much data. For example, one $5 shipment can have 500+ data elements.
As a result of all this data, shippers become numb to the data instead of getting insights. This leads to missed billing errors, non-value charges, and service deficiencies. For instance, carriers may charge for services that were not provided. Or carriers add new non-value charges that are buried in the data. Additionally, with so much data available, it can be challenging for shippers to identify these issues without adding more dedicated resources. For more ideas on identifying billing errors and non-value charges, see my article, Package Delivery – See How To Stop Surging Costs And Make Your Customers Happy.
5. Limited Data Visibility Between Operations And Financial Systems.
Also, internal data silos prevent the appropriate decision-makers to evaluate carrier charges accurately. Thus, stakeholders cannot make informed decisions about their operations. For example, if financial systems do not have access to recent shipment activity data, it can be challenging to forecast and manage cash flow effectively. On the other hand, many times transportation operations do not have visibility to detailed shipping charges. This is a challenge. For example, without detail charge data operations have no effective way to know about excessive charges such as recurring address correction charges to the same delivery address.. Nor, can they evaluate ways to reduce charges and still maintain service levels.
One way to break out of these data silos is to adopt a data-centric business. For details, see my article, A Data Centric Business: The Best Way To Agility, One Truth, Simplicity, Technology Innovation.
6. Limited And Complex Data Integration Between Shipper, Auditor, And Carrier Systems.
Setting up external data interfaces is a technical challenge that often leads to poor shipment visibility, invoice processing delays, and inaccurate billing. For example, without up-to-date shipment delivery status from carriers, freight bill auditors struggle to conduct timely and accurate freight audits. Moreover, integrating invoice data and shipment status between systems is time-consuming and costly. However, without proper system integration, auditors resort to manual website lookups or downloading and importing data into Excel workbooks. As a result, auditors, key stakeholders, and decision-makers do not have an unified view of either their shipping data, nor their financials.
However, do not give up hope. There are many options to transfer data. For details, see my article, The Best Ways To Access Data – Tech Solutions To Unlock Your Data Silos.
7. Invoice Adjustments And Disputes Are Labor-Intensive With Low Financial Yield.
With freight bill audits, it is difficult for companies to resolve issues quickly and efficiently. For example, if a shipper disputes a charge with a carrier, it can take weeks or even months to resolve the issue. This can result in delayed payments and strained relationships between shippers and carriers. Additionally, there are significant labor costs. For instance, many times it takes an experienced transportation expert to catch errors. For ideas on how to simplify fright bill and audit processing see my article, Freight Invoice Audit & Payment: New Tech And Methods That Will Make It Better.
8. Hard To Onboard New Carriers Due To Shipper Requirements Such as Audit, Finance, and IT Integration.
Indeed, it is challenging for shippers to add carriers due to complex data integration requirements. Moreover, it is difficult for transportation carriers to service new customers due to these integration challenges. For example, many shippers requires extensive auditing or financial documentation as well as data integration before working with a new carrier. Thus, it can be difficult for smaller carriers to meet these requirements. For instance, I have seen cases where Fortune 500 shipping operations could not add a new carrier because finance was not ready or able to accept the carrier’s invoice data format.
Indeed, implementing a new data integration project such as onboarding a new carrier is challenging and a slow moving process. There is not necessarily an easy solution for this, but your business can get better at data interoperability. For ideas, see my article, Data Interoperability For Supply Chains: The Best Ways To Unlock Your Digital Assets And Empower Innovation.
9. Dysfunctional And Legacy Systems Constrain Operational Innovation, Decision-Making, And Flexibility.
I would suspect that most large companies are also constrained by dysfunctional and legacy systems that directly affect their transportation operation and corporate decision-making. For instance, take a shipper or 3PL that is using outdated software. They are hamstrung to integrate with more modern logistics platforms and API services. Thus, it is challenging for them to compete against more innovative competitors. For a more detailed discussion, see my article, Agile Supply Chain Decision-Making: First You Need to Know The Truth About Enterprise Software.
More References.
- TraxTech’s The Ultimate Guide to Freight Audit.
- Shipware’s Freight Payment Process 101.
- Also, for tips on reducing package delivery costs, see my article, Package Delivery – See How To Stop Surging Costs And Make Your Customers Happy.
- For more information on strategic sourcing, supplier selection, and supplier management, see my article, The Strategic Sourcing Process And Data Analysis: The Best Ways To Secure Unsurpassed Supplier Results.
- Also, for some ideas on how to get access to better freight bill data, see my article, Simple Data Access To Quality Electronic Freight Bills: Here Is How To Make This Less Painful For Shippers.
- Lastly, There are many benefits to improving your freight bill audit process. Indeed, it is a win-win for both your shipping and financial departments. For more tips, see my article, The Best Ways To Make Your Freight Bill Audit Process Better Benefit Your Shipping Operations.
Need help with an innovative solution to make your supply chain analytics actionable? I’m Randy McClure, and I’ve spent many years solving data analytics and visibility problems. As a supply chain tech advisor, I’ve implemented hundreds of successful projects across all transportation modes, working with the data of thousands of shippers, carriers, and 3rd party logistics (3PL) providers. I specialize in launching new analytics-based strategies, proof-of-concepts and operational pilot projects using emerging technologies and methodologies. If you’re ready to supercharge your analytics or if you are a solution provider, let’s talk. To reach me, click here to access my contact form or you can find me on LinkedIn.
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Greetings! As a supply chain tech advisor with 30+ years of hands-on experience, I take great pleasure in providing actionable insights and solutions to logistics leaders. My focus is to drive transformation within the logistics industry by leveraging emerging LogTech, applying data-centric solutions, and increasing interoperability within supply chains. I have a wide range of experience to include successfully leading the development of 100s of innovative software solutions across supply chains and delivering business intelligence (BI) solutions to 1,000s of shippers. Click here for more info.