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Key Considerations for Freight Payment and Audit Process

By Michael Campese, Vice President, Customer Integration, Estes Express Lines

Michael Campese, Vice President, Customer Integration, Estes Express Lines

I’ve spent years studying and sharing best practices with peers in transportation revenue management circles. It will come as no surprise that one common sentiment we all share is: If we’re not going to get paid, let’s not haul the freight in the first place. I think that rings true in any industry. We all want to make sure we’re compensated for our services. In transportation, there was a time when non-payment of an invoice was primarily due to financial issues like a cash flow constraint or something directly related to a customer’s ability to pay. Today, so many of the challenges we face in the payment cycle are related to data requirements and invoice disputes, and much of that is impacted or influenced by the application of various technologies to these processes.

"At some point in the future, it is almost inevitable that every shipper will manage transportation with a Transportation Management System (TMS) of some kind"

Freight Audit and Payment companies play a significant role in the transportation payment cycle and represent some very large shippers. As service providers in a highly transactional business, these companies are investing in technologies to automate and extract cost from their internal processes. They have increased investments in automation, while at the same time creating more of a self-serve interface for shippers and carriers. Most, if not all, have built portals for all parties to access. One of the challenges is that these portals are not flexible enough to map to the needs and workflow of the AR (accounts receivable) processes of all carriers, which may involve very different models. So carriers do the best they can to self-serve, but it can be time-consuming and cumbersome and often does not offer sufficient information to resolve the issue. This prompts a phone call or email, but those critical human resources are getting harder and harder to reach. Thus the situation creates pain for all parties.

On the carrier or provider side, there is also an interest in reducing cost and increasing speed and accuracy in these highly transactional back offices. We are seeing more data integration with multiple systems, investments in RPA (Robotic Process Automation) and BPM (Business Process Management) software, and even outsourcing to companies that employ these technologies. Many of these systems require the development of APIs (Application Programming Interface) to make the connections. Those APIs rely on the underlying quality of the data and the real time availability of that data. We are seeing a great deal of focus and investment in shoring up the underlying data and processes that newer technologies rely on to be effective.

At some point in the future, it is almost inevitable that every shipper will manage transportation with a Transportation Management System (TMS) of some kind. Built into many of these systems is the functionality to compare the invoice to the original rate quote. Payment exceptions then occur if the rates don’t match due to circumstances such as a weight increase, a difference in commodity, or an unanticipated service being required. As more and more shippers move to systems like this, either directly or through a third party logistics company, carriers need to be prepared for an increase in payment exceptions, as there is now an algorithm catching each exception rather than a human.

Additionally, carriers are investing in technology like dimensioning systems, which allow them to be much more efficient in making sure the weight and commodity listed on a bill of lading actually matches the freight. They use outsourced data solution companies for identifying residential addresses or specific categories of delivery sites that are more costly. If shippers are not prepared for all of the new invoice exceptions and were rarely experiencing a rate change in the past, it may be a shock to their traditional payment approval process. There are more questions to answer, rates to audit, and communication that needs to take place to work through it all. All of that also flows right back to the carrier.

There are a few key points that all parties to the freight payment and audit process need to consider when adopting or interacting with some of these new technologies:

1. Empathy: Whether you are a freight payment company, software developer, freight carrier or a shipper, make a conscious effort to look through the lens of the other parties involved. If you write software for shippers as your primary customer, but just as many freight carriers have to live and work in the digital environment you create, go out and sit in those AR shops. Watch how they work. Listen to their struggles. Look at their organizational structure. Look back your own application through their eyes and honestly consider and address their needs in the development roadmap. It will pay off.

2. It takes a Village: The payment cycle is impacted by so many upstream processes and systems. Don’t neglect to address these as you look for new solutions or make investments in technology. The AR department wields a big stick in that; nothing else matters if you don’t get paid. Use that leverage to create process and systemic change where it is needed.

3. Get the Jackhammer: Much of what you can buy off the shelf looks pretty on the surface, but it often falls short of expectations because of underlying foundational issues with data or systems. Prepare to break up the foundation and do that hard work before you lay the shiny new system on top of it. This is not for the faint of heart, and means real buy-in from IT and other departments, but with genuine collaboration, you’ll see great results.

4. People Are Still the Most Important Part of the Equation: This is something we often lose sight of. As technology makes us more efficient and accurate and we train it to make some of the most basic decisions, we may grow in scale without having to add resources. Or we may overestimate the ability of our new technology to meet the entire need, when it often solves for the “happy path” but leaves the remaining work for a more skilled, complex, problem solving resource A.K.A. a human. Let’s make sure we have enough of those around, with the right skill sets to dive into the tough job of resolving payment cycle issues.

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