Why outsource to a freight bill Audit and payment service?
There are several Advantages; the most popular being the possibility of reduced costs and re-allocation of resources.
On average it costs a medium to large company between $10 -12 to pay one freight
bill. Now take that same bill and have it processed by a freight payment company.
The cost charged to the shipper for the same bill to the shipper is between $0.50-$1.00
The cost savings is significant. Shippers can reduce their processing expense by over 90% in most cases. A good freight bill payment company uses Business Intelligence, audit experience, and technology to manage costs more effectively. Web-enabled services and tools include:
Complete freight bill look-up and visibility throughout the process
Improved process controls and data integrity
24/7 access to Data warehouse
Freight bill payment companies have the advantage of seeing literally hundreds of
different transportation environments. This allows a provider to leverage their
large and diverse client base, your freight expenses can be benchmarked against
those shipping comparable products.
Also a comprehensive rate library and the information available to each company enables a provider to offer a broad range of consulting services without expensive data collection.
Choosing a Freight Payment Provider
Identifying providers is the point in the process where due diligence becomes critical.
Today more and more business’s are turning to their sourcing or purchasing department
to make the selection. Before your company can issue a Request for Proposal (RFP)
or Request for Information (RFI), it is absolutely vital that you have a clear understanding
of the available providers and their suitability for your needs. Once
you identify potential providers, it is time to begin a careful evaluation and selection
process. Each company's needs will be unique. Below are certain basic criteria against
which potential freight bill companies should be measured and questions that should
Financial security and stability
The potential outsourcer should know the provider’s business practices and whether it has the resources to survive economic downturns.
Also, if your company is publicly traded, you are bound by the Sarbanes-Oxley Act (SOX). While freight bill payment providers are technically not bound by the Act unless they are publicly traded, you still want to make sure they are SOX-compliant.
Are carriers paid promptly?
What type of fiduciary responsibility and protection does it provide?
Is an audited financial statement available?
Is the company SAS 70 compliant?
Is there an independent audit of the provider?
What type of risk coverage does it provide?
Is the company public or private?
Is it part of a financial institution?
Research the provider carefully to determine its experience in the industry.
How long has the provider been in business?
What are the backgrounds of the key personnel?
How many bills does it pay annually, and for whom?
Providers must be clearly committed to investing in the most current technology
for their own operations. They must have an ongoing ability to serve your company's
unique needs as they change.
How much involvement will a provider need from your IT?
Is the provider using the latest hardware and software technology?
What are its future plans for handling data processing requirements?
Does it handle all EDI standards, as well as proprietary EDI formats?
Does it have a separate EDI implementation staff?
Are Internet database applications available?
Is there a formal disaster recovery plan in place?
How long does the provider keep historical data within the system?
Your transportation and accounting departments are going to be directly affected
by outsourcing this part of the business. It is important to understand what a provider’s
commitment is to your account.
Are individual account representatives assigned to your company?
Are all inquiries recorded or documented?
Is there a dedicated EDI implementation group?
Does the freight payment provider offer Internet services/tools specifically targeted to your needs?
Is the provider knowledgeable about logistics best practices?
How can the provider help your company identify logistics opportunities based on the data it captures from your invoices?
Can the provider benchmark your current transportation contracts and pricing against industry averages?
The best substitute for personal experience is the experience of other freight bill
payment clients. Potential providers should offer a client list with contact names,
email addresses, and telephone numbers. Ask for a diverse range of clients in size
to see how the provider performs in both static and dynamic environments.
Carrier relationships are vital part of your business. Since the freight payment provider will be acting on your behalf to manage carrier bill processing and payment explore at least three carrier references.
Understanding how each provider pricse and charges for their services can be tricky.
Banking institutions are once again a large part of the industry. They often use
“float” as a way of determining cost of services. While it is not necessarily
last in importance, neither should cost be your first consideration when choosing
a provider. Often in a bid situation pricing becomes a central focus.
Remember you are not purchasing a rate or a discount but rather a service where quality and experience can create much higher value by identifying opportunities and providing the information to act on them. Cost should be a factor only in deciding among providers that meet or exceed your other criteria.
Is the company using “float” based pricing?
How are payments disbursed and how often?
What is the difference in price between hardcopy invoices and EDI?
Does the provider charge for exception management of invoices?
There is a significant commitment to time and resources that will be effected with
a transition of providers or to an outsourcing model. Implementation is a critical
stage in a long-term and successful relationship.
Are their start-up costs charged? How much?
Are roles and responsibilities clearly defined?
How long does a typical implementation take from start to finish?
Does the provider have a sample implementation plan to be reviewed?
Can you contact recent client startups and discuss their experience?