Digitize Invoicing to Eliminate Errors and Guard Cash Flow
In this article, we explore Invoice Reconciliation tools as a core piece of every digital 3PL/freight brokerage’s operations. This post is part of a series of posts that aims to shed light on the many new and innovative freight tech solutions that empower freight brokers to transform digitally.
This post was written in collaboration with OpenEnvoy, a leading automated invoice reconciliation tool.
For freight brokers and third-party logistics providers, efficiency is king.
Whether in packing a freight truck or tracking invoices, wasted time and resources can quickly eat into your margins. And in the example of invoices, the unwieldy process of cross-referencing and auditing means that fraud in the logistics business is all too common. According to a poll conducted by Deloitte, 39% of consumer and industrial products professionals found at least one instance of fraud or abuse in their supply chains in 2020.
In the logistics business, the pain points -- and the potential points of failure -- are numerous and come with very high costs. Freight brokers and 3PLs are exposed to risks on both the buy and sell sides: Depending on the supply chain, the process can involve multiple intermediaries: shipping lines, trucking companies, and charter companies, in addition to insurance firms and, of course, the customer who winds up receiving the goods.
There’s potential for fraud, abuse, or simple oversight at every step of the way, and there’s a lot on the line: margins are slim, and simply tracking the flow of cash traditionally involves a small army of workers checking invoices manually.
Many 3PLs and brokers just can’t afford that -- so in the interest of conserving cash and manpower, they may skip invoice auditing altogether. That amounts to billions of dollars lost worldwide every year. Invoice remediation is especially burdensome for small freight, “less than truckload” shippers that deal with multiple units of inventory, and thus multiple invoices, per shipment.
Challenges with current solutions:
Outsourcing accounts payable to a third-party provider. This is both limited and costly: It could involve a procurement company, which a freight broker or 3PL may actually compete with.
Outsourcing invoice reconciliation to a bank is more common, but that presents its own host of problems: Banks typically require a 3PL or freight broker to use the bank’s own payment network, charging a fee of up to 5% per invoice. Not only does that translate into lost leverage with suppliers, it also introduces a variable cost and potentially a circular problem if a need arises to re-audit those invoices.
The right software can remove these risk and save money
An Automated Invoice Reconciliation system not only eliminates fraud, but frees up your accounts payable team to focus on protecting cash flow, holding suppliers accountable, and making processes more efficient. It will automatically compare every invoice line item to its related estimate, contract, or proposal, validating every result before anything is paid.
For logistics companies, ease of use matters. A plug-and-play solution (which requires no code and no special technical skills to use) eliminates barriers to adoption for your team. By fully automating invoice auditing and remediation -- a process that can otherwise take hours per invoice -- 3PLs save money, manpower, and resources while also providing a bird’s eye view into cash flow, allowing your team to focus on higher-order goals like planning, strategy, and expansion.
Key Features:
Basic Auditing
Activity Logs & Analytics
Simple invoice & document setup (e.g. contract, bill of ladings)
Fast & accurate matching
Invoice status notifications
When your business operates under tight margins, ensuring that every freight bill is properly accounted for is critical. Track costs, identify issues and quickly resolve conflicts to increase your effectiveness, guard cash flow and grow your business with automated invoice reconciliation.
Each segment of the 3PL/Freight Brokerage value chain is becoming ever more digital. As brokers prioritize, investing in tools like OpenEnvoy can help amplify and secure the digital efficiency gains made up-stream in tools that accelerate buying and selling freight capacity.