Any freight broker, carrier, or third-party logistics provider (3PL) knows that a standard part of their business is the freight audit and invoicing process. While a necessary part of any business operation, it has yet to be known for simplicity. In fact, for many organizations, the complexity and the costs of managing only increase as they continue to grow.
Every operation has its own defined approach for addressing this critical business function. The three most common that we see with the companies we speak to are outsourcing, internal management, and automation. Since this process is not going anywhere, it is important to know which approach is right for your business. Below, I have detailed each of these approaches to help you determine which approach is best for your business and why you should perhaps consider a change.
Outsourcing
Many organizations turn to outsourcing for their freight audit and invoicing process. This becomes a viable option especially as organizations experience growth and the volume of invoices and the ability to manage variances and exceptions becomes too much for their internal team to handle.
While outsourcing does alleviate some of the challenges organizations may face that are common to freight invoicing, it does have its drawbacks including the following.
A loss of control: Outsourcing raises the risk of quality which can impact your customer and carrier relationships. While performing the process internally may not be an option, organizations must ensure that the outsourcing partner can adhere to the standard timeline and deliver a great service and experience.
Data Access: Outsourcing also increases the likelihood that data will not be immediately accessible, which impacts the agility of a business. Critical business decisions need to be informed by data and if getting access to the data is delayed, it may negatively impact your business.
Internal Management
Another approach to the management of the freight audit and invoicing function is to keep it all under one roof. While this does provide more control over the day-to-day management, it still prevents its own series of challenges including.
Increased labor costs: As your 3PL or brokerage grows, so does the volume of invoices and along with it the volume of exceptions or discrepancies that need to be resolved. This becomes a time-intensive process that at some point will require additional headcount, which only adds more cost to the business.
Decreased Efficiency: Even with the right number of people to manage the freight audit and invoicing process, it is often wildly inefficient due to the manual nature that is used by some organizations. Many will use technology that is not developed to manage this process and because of the lack of features, requires a person to be involved. I recently spoke to one organization that said, in order to resolve an invoice error, it took a minimum of 15 emails. This is by any definition inefficient.
Automation
Logistics organizations continue to adopt automation for a variety of reasons and use cases and now can do so to manage their freight audit and invoicing process. Rather than use a TMS or other technology in an attempt to streamline this process, logistics companies can adopt automation specifically for their audit and invoicing process.
More and more organizations are adopting automation for their freight audit and invoicing and as a result, are seeing the following business improvements.
Improved Cash Flow: Because automation can resolve disputes dynamically, it lowers the days to bill and reduces days sales outstanding. All of this results in an improved cash flow which enables organizations to reinvest in business growth.
Improved Efficiency: Automation reduces the need for human intervention and enables organizations to reassign personnel to other strategic areas of the business.
Profitable Growth: Automation means you no longer have to add more headcount to scale your organization. Automation enables the ability to increase the volume of invoices and help manage the scale effectively and efficiently.
As organizations look ahead to 2024 and strategize on how they can grow their business, taking a look at maximizing the effectiveness of the freight audit and invoicing process is a great place to begin. As seen here, there are various ways that organizations can address this, but it is clear that automating the process is far more beneficial than trying to manage internally or outsourcing.