Smart Ways to Handle Operational Billing Challenges in Logistics
A Logistics Service Provider (LSP) has multiple operational nodes like Sales, Transportation, Warehouse Operations, Billing, and Finance. The billing department is considered as one of the critical nodes as they engage with customers and vendors to ensure that cash cycle flow is maintained at an optimal level. Additionally, it is important as it is about managing the account of your customers, and also since it has financial repercussions.
It is a well-known fact that Logistics businesses are complex and dynamic in nature, and when it comes to logistics billing, the same aspect is applicable, perhaps with multi-fold challenges. In a transportation business, for example, the customer order can have multiple bills – each leg of the order billed separately, freight advance cycle, exception billing in terms of penalty, execution advance, and expense cycle. When we couple these parameters with the business volume, billing becomes even more complex. Keeping track of transaction-level bills, which is critical for the business, then becomes a challenge. Similarly, in a warehouse business, at the customer location level, the billing models may vary – one customer may opt for warehouse activity-specific billing, and another may chose not to charge for activity, but to collectively bill only against the contract.
To cater to this complex business, every billing team has three vital challenges to handle during its billing cycle, which are:
- On-time and accurate bills/ invoices: In the world of LSP, each customer/ vendor may have different terms and conditions, so the key here is to align with the stakeholders’ billing cycle and raise the bills on time without any delays or follow-ups. Whenever bills are raised, the accuracy of the bills is another area of concern. Repercussion because of any of these factors may affect your business relationship with stakeholders.
- Validate the bills for payment: The volume of transactions in a medium-sized 3PL in an e-commerce business cycle is enormous, and it consumes a huge amount of time to validate the correctness of the bills. To get this done, more often than not, one depends on the memory of an employee from the billing team. This always has an impact on the time consumed to validate, and the correctness of approved bills.
- Bill all transactions: This is the third and most critical question which a billing team asks themselves - were all the qualified transactions billed as per the contractual agreement? Having visibility into these transactions is a key challenge. Given the volume of transactions and multiple qualifying criteria, the billing team has a tough time ensuring that all the transactions were billed.
Imagine the daily routine activity of the billing team members where employees would be chasing after the sales team to get documents for billing terms, operation team for billing data, and internal team for clearing the bills daily. For a low, mid-sized 3PL, with an average of around 500 transactions per day, the billing team could expect the same number of bills or more due to vendor engagements, daily. Despite this volume, the function depends on the employees' efficiency to clear the bills. In their absence, the outstanding bills grow. On similar lines, imagine a courier/ parcel or an e-commerce business where the transaction can hit even 100K or more per day.
Those mentioned above are real challenges for a billing team. Considering the ever-growing transaction volume in LSP businesses, the need for on-time and accurate billing, LSPs need to embrace the right partner who can offer a sophisticated billing solution that is closely integrated with the operational cycle and is easy to operate. Ramco Logistics Software offers a flexible billing solution to automate and scale up operations, while also serving as a solution that will support new technology adoption within the logistics business.
- Raise on-time bills/ invoices: Adoption of an automated billing solution will help identify the operational billing stage, to raise the bill for customer/ vendor.
- Validate the bills for payment: It will be advantageous to have an integrated technology solution that utilizes AI/ML to adapt specific rules which can validate the bills and highlight any exceptions.
- Bill all transactions: Automated billing solution will also help to plug the billing leakages. Users need to get visibility into the range of appropriate reasons, which will help the billing team to take appropriate action for the billing exceptions or anomalies.
Automated, "No-Touch" billing solution is certainly the way forward, where a billing team’s involvement is necessary only to deal with billing exceptions. When business usage improves and matures, these exceptions will gradually reduce.
The integrated billing solution will support the billing team to overcome the identified challenges and maintain healthy, long-term relationships with customers and vendors. Also, it will give the billing team the time to focus on stakeholder engagement, while the LSPs can focus on business development.
About The Author
Shankar has 15+ years of industry experience, revolving around business analysis and project implementation, across different countries like UK, Sweden, US, Australia, Singapore, etc. He loves to share his insights on supply chain logistics and other related areas in which he has a vast experience.