Learn how e-Invoicing is reducing freight billing errors
Learn how e-Invoicing is reducing freight billing errors
Freight costs will often account for 10% or more of total business expenditure. But what you pay isn’t always as it should be. In fact, one-in-ten freight bills include an error – and in the majority of cases, those errors will favor the carrier. We spoke to Jan Verbreuken, Chief Commercial Officer and Partner at Quyntess, and Sam Purches, Senior Solutions Consultant at Tradeshift, to understand more about how businesses can tackle this growing problem by utilizing e-invoicing.
e-Invoicing reduces errors and increases transparency
A freight bill, like any other invoice, informs you of what your business owes a logistics company for moving goods from one point to another. Quoting on freight costs is rarely an exact science, however. What a cargo owner is initially quoted is often different from what they later are asked to pay.
As Jan Verbreuken, Chief Commercial Officer and Partner at Quyntess, explains: “If you’ve ever seen an ocean freight contract, you’ll have a sense of the sheer complexity involved in calculating the cost, and the number of variables that can come into play that can affect the final amount you’re asked to pay. Add multi-modal transportation into the mix, and things become even more difficult to predict.”
Companies will often have tolerances in place to account for additional charges in the invoicing process. Many will also have specific rules written into contracts governing everything from rates to liability for extra charges. Keeping track of all of these variables is a huge challenge with a high potential for error and even, in some cases, fraud.
“Errors often creep in,” says Sam Purches, Senior Solutions Consultant at Tradeshift. “The vast majority of these errors are fairly innocent and more to do with the complexity involved than anything else. Where there’s any doubt, however, discrepancies will usually favor the carrier sending out the invoice.”
According to the National Shippers Strategic Transportation Council, errors occur in up to 10% of freight bills. Organizations with a large logistics footprint will often have highly sophisticated auditing systems and teams of full-time employees to identify and query potential errors and discrepancies. But these organizations represent just a portion of a transportation and logistics industry worth $2 trillion in the US alone.
Manufacturers, Wholesalers, and Freight Forwarders Are Particularly at Risk
Businesses with a lighter freight footprint, notably manufacturers, wholesalers, and other shippers that are the end customers of freight services, are far less likely to have solutions in place to prevent costly errors in the billing process.
Freight forwarders that work with large numbers of sub-contracting carriers may also face a similar set of challenges matching orders with the final invoice, including gathering evidence to support any additional charges.
“Some simply aren’t aware of the scale of the problem, but far more see it as too difficult and time-consuming to deal with,” says Sam Purches. “For the sake of efficiency, they’d rather just write the cost off.”
Lack of Digitalization Fuels a Growing Problem
The cost of doing nothing has increased significantly over the past three years as freight costs have soared. Supply chains may well be normalizing once again, but other external factors are likely to continue pushing up costs for the foreseeable future. All of this means that a small error, or a rogue extra charge here or there, can quickly add up to a nasty surprise.
“We’ve just recently partnered on a live project which was triggered by an internal audit,” says Sam Purches. “They described an over $100m spend on freight forwarders as an ‘honesty box,’ and the CFO was adamant a solution must be found.”
A significant part of the issue stems from the continued reliance on heavily manual and often paper-based processes. The resulting lack of real-time transparency means that customers will typically only become aware of additional charges when the final invoice reaches the accounts payable department. At this point, the AP team may decide to query charges directly with the carrier. In a significant number of cases, however, they will simply pay the bill.
“When the underlying processes aren’t digital, the only option is to conduct post-bill audits on invoices that have already been submitted,” says Sam Purches. “There are solutions that can help manage this post-audit process, but it’s treating the symptom rather than the cause. It’s also likely to cause further delays for both the carrier and the shipper.”
Addressing the Issue at Source
Tradeshift and Quyntess believe achieving alignment on unforeseen charges prior to the submission of a final invoice is by far the most effective way to eliminate costly errors and time-consuming disputes.
Transparency and Compliance From the Outset with e-Invoicing
The Quyntess Logistics Collaboration App builds on Tradeshift’s e-invoicing and accounts payable automation platform to deliver a fully digital environment where carriers and their customers can exchange relevant information and collaborate in real-time.
Carriers create e-invoices using a pre-configured template that factors in contractual terms and rate cards specific to their agreement with each customer. If they then need to add extra charges or change the cost level per line item to a level that’s outside pre-negotiated tolerances, they’ll receive a prompt to secure relevant approvals and provide supporting documentation before they add the cost to their e-invoice. The final e-invoice cannot be submitted without this information.
e-Invoicing – Collaboration That Benefits All Sides
From a carrier’s perspective, enhanced transparency delivered through the Quyntess Tradeshift solution can also greatly reduce the time it takes to process and settle outstanding invoices.
“Very often, invoices will be put on hold for payment until the proof of delivery (POD) comes through from the carrier together with any additional comments or extra costs from the driver,” says Jan Verbreuken. “Digital PODs are becoming more common, but it’s often a paper-based process. It can take a while to gather all the appropriate information, which can result in delayed payment. If you’re getting updates of everything along the way, and digital collaboration around unplanned cost approval is improved, it reduces the need for additional POD documentation before the invoice is released for payment.”
Find out more about how your business can reduce costs by building truly collaborative relationships with your logistics providers at www.quyntess.com.