Freight Bill Payment Outsourcing – Trend with Large Companies, Opportunity for SMB’s

An enlightening survey report addressing the state of freight bill shipping processing, the money and motivation behind technological advances utilized, and widespread usage of outsourcing some or all of the processes involved was recently conducted and released by American Shipper, in partnership with the Retail Industry Leaders Association. Transportation Payment Benchmark Study: A Step Forward, written by James Blaeser, Publisher of American Shipper, reveals engagement levels of large companies, along with small and medium businesses (SMBs) in their quest for visibility to billing/payment data, improved operational efficiency and awareness of cost with achievement of savings.

The publication highlighted:

“Payments to logistics service providers (LSPs) are moving to electronic means, such as automated clearing house (ACH), at a noticeable rate. Considerably more transac­tions are settled electronically this year as compared to last. Progress in terms of the dollars transacted is a bit slower but evident nonetheless suggesting that some companies are still hesitant to electronically transfer large sums of money.

“It is difficult to argue that the transportation industry is still behind the curve when it comes to conducting basic online transactions. However, to ensure progress, LSPs and their customers must move payments to an electronic environment. The benefits of e-banking are clear and will become impossible to ignore as the business community at large moves in this direction.”

To the numbers – 2011 payments via ACH: 45% of total transactions, 41% of total dollars transacted, up from 31% and 36% respectively in 2010. In 2011, 60% of large companies outsourced some or all of their payment processes, with 66% of SMB utilizing this practice, providing an extension to shipper’s internal abilities.

Decision drivers for payment systems technology utilization, as deployed by independent outsourced entities, included visibility to data (85% of large companies, 77% of SMBs), improve operational efficiency (74%/77%), visibility to costs (70%/62%) and cost savings (56%/85%). Of all large company and SMB’s responding combined, 60% indicated that they plan to increase their levels of outsourcing of some or all of their payment processes in the near future.

A central technology enabling outsourcing is ACH ability. ACH payments are electronic transfers from one account to another; shipper deposits funds with freight bill processor’s banking network, processor pays carrier once billing had been audited for accuracy. ACH payments can help reduce errors and save resources (people’s time and paper waste).

The payment accuracy component, auditing of freight billing, is a multi-step practice consisting of both pre- and post-payment processing. Preformed properly, substantial cost savings result; as unwarranted costs and fees are discovered and eliminated. An additional benefit is improved carrier relations, as payment processing is improved between shipper and carrier.

This study highlights fiscal needs trending towards tangible results. For organizations who seek to maximize shipping billing payment accuracy and efficiency, an effective way to optimize the entire process is to form an alliance with an independent freight bill processor that has the necessary technology to provide thorough pre- and post-payment auditing and payment services, to maximize accuracy and resulting cost savings. Manufacturers, distributors, retailers and etailers who utilize freight bill auditing-payment outsourcing benefit by enhancing shippers’ internal functionality, with removal of a non-core function of their business to an independent entity specializing in this field.

– Tim Nissen, Data2Logistics http://www.data2logistics.com/ + http://twitter.com/Data2Logistics