6 min read

Only pay what you agreed on

By Jonathan Raemdonck on Dec 17, 2020 5:00:21 PM

Investing in a modern TMS will help you reduce your costs significantly. But be cautious, if you don’t cover the whole financial flow, a portion of these savings might go down the drain.

Why? Because the error rate on carrier invoices can range between 1-2% up to 25%, often not in your benefit.

So, how can you secure your freight cost savings?
It’s simple: you only pay for what you agreed on.

The difference

Modern TMSs are great in making sure the best, and cheapest carrier is always selected. So you optimize your freight costs and make sure you have a detailed view on all costs related to a specific shipment, including surcharges and extra/accessorial charges.

If you don’t have a TMS, or your TMS isn’t capable of registering all shipment related costs, you might want to reconsider looking for a modern TMS. You can’t reconcile a carrier’s invoice if you don’t have a reliable calculated shipment cost at your end.

On the other side, the carrier has its own systems to keep track of costs and how these add up to the sales order and eventually the invoice.

The sooner you can align both systems of record, the faster you can detect anomalies and resolve them. And that’s where invoice matching comes into play.

Once resolved - you can proceed with payment.

What can go wrong?

But, why is 25% of all carrier invoices not matching what you expected? Well, there are multiple reasons, but the most common ones are:

Type

Description/Example

Unexpected costs

We're talking about fees or service charges added to a shipment due to unexpected delays, or additional "services" provided by the carrier, in order to complete a shipment.

Incorrect rates

If for some reason your carrier rate cards aren’t aligned with the carrier this will lead to incorrect freight costs calculated at your side - or vice versa.

A common error we see is that companies didn’t take into account the validity dates of the rate cards, and are still calculating the costs based on the old ones.

Surcharges Fuel surcharge might not be applied, or the percentages changed.
Duplicated shipments Shipments that are billed twice.
Other errors Incorrect exchange rates used, wrong currency, wrong calculation of weights, parcel/pallets numbers, incorrect VAT and so on.

 

Avoid: Manage unexpected costs as they occur

Manage unexpected costs as they occur and not when they suddenly show up on the invoice. For example, if you’re doubting certain waiting hours on the carrier’s invoice, you’ll have to check with the transportation planner if the extra costs were justified or not. But trying to recall what happened that day is like trying to remember what you ate 3 weeks ago for lunch. Chances are you can’t.

The consequence: endless discussions with your carrier.

Check this article on how to manage unexpected freight costs by implementing an ‘Extra Cost Approval’ process.

Detect: Automatically surface anomalies on your carrier’s invoice

Checking carrier invoices can be a tedious task when performed manually. You often receive them in different formats, like email, mail, digitized via OCR or, if you’re lucky, via e-invoice.
A modern TMS is capable of centralizing all invoices in one repository.

Next step is to check:

  • Is all required invoice data available?
    Checking fields like carrier code, currency, invoice date, …

  • Can you match the invoice to a shipment or pre-bill?
    This allows us to compare and validate the invoice later on in the process.

  • Is the data correct?
    Can you identify the carrier, is it the right currency, gross amount correct, …

  • And then finally you can check if the costs are matching with what you’re expecting.

 The key to success in this whole process is:

  • automate as much as possible

  • so you can focus on managing only the exceptions

  • and the system should guide them throughout the whole process.

Resolve:

So great, the system is automatically detecting and flagging anomalies. But now these need to be resolved by your team.

A modern TMS like ours is designed in such a way that for each anomaly a task is created, and all tasks are centralized and assigned to a team of people. 

Why? Because we believe that different teams can be responsible for different steps in the invoice matching process. For example, you might have a team focusing on data gathering and validation, and a separate team with more operational knowledge focusing on the cost validation and confirmation. 

By defining and assigning roles to the users, you can easily and automatically divide the work among them. When they log in, each user has her own todo list with all tasks that need to be resolved.

But to resolve certain anomalies (tasks) you might require more context on that specific shipment. A modern TMS links the ‘invoice matching’ capability with the operational TMS. The benefit is that you can easily drill down to the shipment details, where you can find the complete history of conversations, documents, extra charges, … so your people can make informed decisions based on data.

Approve or Dispute

The final step in the process is to approve or dispute the invoice. Disputing an invoice will automatically inform the carrier why the invoice is rejected. Approving the invoice will automatically send it towards your accounting system for payment processing. 

All from within the system and without having to use spreadsheets or emails. 

No, this ain’t rocket science

But it does require you to streamline the financial flows in your transportation management process. I’ll be honest, invoice matching on its own doesn’t work. It only works if you have a good, modern TMS in place that keeps track of all costs on shipment level.

Invoice matching is like the icing on the cake, but first you need the cake.

WATCH THE RECORDING OF OUR 15 MINUTES TMS INSIGHTS ON "ONLY PAY WHAT YOU AGREED ON"

Jonathan Raemdonck

Written by Jonathan Raemdonck

Head of Growth at SupplyStack

 

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