It’s a catch-22. As a shipper, you know paying invoices on time is important for maintaining good working relationships with third-party logistics providers (3PLs). But you also need as much working capital on hand as possible at all times.
How do you optimize your billing process to achieve both?
Using 3PL billing software allows you to verify invoices and make payments automatically. Unlike outdated and time-consuming manual processes, this software is built to handle the complexity, scale, and speed of modern shipping requirements.
Working capital is too valuable to lock in processes that can’t keep up.
AI-driven logistics software, in particular, helps boost profitability and lets you take control of your 3PL costs.
What is 3PL billing software?
3PL billing software manages the invoicing and billing process for shipments handled by third-party logistics providers. The agility of this software helps finance teams like yours keep up—especially when your sales or transportation teams are at their busiest and you’re shipping high volume.
Before you try this type of technology, though, it’s smart to learn about the top challenges in 3PL billing processes. That way, you can pinpoint the biggest hiccups in your operations and use software to resolve them.
What are the biggest challenges facing 3PL billing operations today?
Modern 3PL billing workflows and Supply Chain 2.0 don’t mesh.
True, the cloud-based systems and manual data-keying workflows of Supply Chain 2.0 are a step up from the Stone Age. In other words, using nothing but paper documents and physical folders that are only accessible to a few people.
However, for more reasons than one, these systems won’t cut it in 2024 and beyond.
To illustrate, there’s a good chance you’ve run into one or more of the following obstacles:
Complex billing structures.
When working with thousands of carriers and customers, shippers and 3PLs have to manage dozens of payment structures.
In addition, each mode has a unique structure. For example:
- Truckload (TL) often has a rate-per-mile structure.
- Less-than-truckload (LTL) uses a tariff with a discount based on weight, volume, or linear feet.
- Ocean freight charges per container side.
- Parcel uses a matrixed model that can consider 10+ factors depending on the provider.
With so many moving parts, billing errors are inevitable. If you don’t catch issues in time, you’ll overpay your 3PL and cut into your profit margins.
Disorganized documentation and disparate systems.
Handwritten notes, photos, spreadsheets, and PDFs are just a few of many places where logistics data lives. It’s tough to organize—let alone use.
If you also have disconnected systems, you’re facing another level of difficulty. Many shippers use transportation management systems (TMS), warehouse management systems (WMS), and other tools that don’t connect. As a result, information is siloed and inaccurate.
All of this prevents you from making informed business decisions. Plus, it costs you money. If you can’t get a clear understanding of billing workflow inefficiencies, you’re more likely to overspend.
Time-consuming legacy processes.
If you’ve ever performed or seen a manual invoice audit, you know what a pain it can be. It can take days to cross-reference a single freight or parcel bill with your 3PL contract and supporting documentation.
Multiply this process by several hundred shipments and it’s unmanageable, to say the least.
No wonder shippers’ transportation and finance teams often resort to spot-checking invoices. The downside is a greater chance of errors slipping through the cracks. The result? Overpayments galore that cut into your working capital and profits.
Late payments lead to poor working relationships.
Most 3PLs rely on bank credit lines to keep operations running smoothly. Often, they have to float money to carriers while they’re waiting on payment from shippers. So, if you pay an invoice late, it hurts their working capital and cash-flow projections. As a result, they have to lean on credit and deal with high interest rates.
Not honoring payment terms hurts 3PL-shipper working relationships, so mutual respect and trust are essential. Billing accuracy and operational efficiency should be top priorities.
For your part, an automated billing system is invaluable for spotting errors so your 3PL can fix them quickly and get paid faster. Luckily, intelligent software like Loop can handle this with ease.
4 ways 3PL billing software impacts your bottom line.
1. Streamlines the invoice auditing process.
Automation enables you to complete invoice audits in hours instead of days. How?
Logistics-AI learns the nuances of your supply chain, including your 3PL contracts and shipments. When you receive an invoice, the software verifies it instantly. It flags errors and extra charges that require manual intervention.
Loop in particular has root cause analysis so you know exactly what the issues are and can resolve them fast. This ultimately means faster payment processing, as well as more predictable cash flow for you and your 3PL.
2. Enhances data accuracy and transparency.
Besides ensuring accurate billing, intelligent logistics software provides real-time visibility into your logistics spend.
For example, Loop’s self-serve analytics drill down to the SKU, shipment, and lane level for max visibility. The software extracts network info from where it’s trapped across documents and accounting systems.
Next, the software centralizes and cleans that information. Any department within your organization can then get insight into your network performance across carriers, 3PLs, lanes, facilities, and so on. You’ll have all the info you need to make smart decisions that drive profit and improve customer satisfaction.
3. Reduces manual work and errors.
How would you like to pay 100% of invoices with zero risk? While this isn’t possible even with a large finance or accounting team, it is possible with logistics-AI.
With Loop, 99% of invoices are approved with no touch, and the software helps answer settlement questions quickly in the other 1%. Not only does this eliminate manual work, but it also makes the risk of human error a non-issue.
This frees up teams like yours to focus on higher-leverage activities. These might include things like determining which loads to outsource to 3PLs or handle in-house. (More often than not, LTL or smaller shippers preserve more profit by working with 3PLs.)
With a baseline of operational accuracy and efficiency, you can turn your attention to optimization.
4. Accelerates the billing cycles.
3PL billing software also automates the process of verifying, aging, and paying invoices.
In other words, if you agree to 60-day payment terms, the software will instantly pay at that time. This helps you avoid bad debt and keep working capital on hand for as long as possible.
Plus, it allows you and your 3PL to plan ahead based on when payments will occur. You’ll know when a payment will transfer to the 3PL and can budget accordingly.
Transform your 3PL billing with Loop’s automation solutions.
Loop’s billing software is among the best in the logistics industry because it covers all the bases. It fast-tracks invoice auditing and payment. And it extracts and centralizes your network data from various sources so you can make informed decisions about third-party logistics.
Discover how Loop can help you streamline your 3PL billing processes and boost your profitability today.
