Freight Payment: How it Works, Benefits & How We Can Help
Shippers reach out to 3PL’s for multiple reasons – including handling freight payment services. Whether it’s managing the direct payment to carriers, to reviewing and auditing freight bills and shipping charges, trusting a dependable 3PL to handle the complete freight payment process can save a shipper a lot of money, time, and reduce stress.
Below we’ll outline how freight payment works, the benefits it provides a shipper of any size, and how LTX Solutions can help a company navigate this complex world.
How Freight Payment Works
The concept of freight payment is rather simple in nature – it’s the execution that tends to be complex. Essentially, freight payment is an accounts payable service for transportation industry invoices. The freight payment provider (typically a 3PL in this instance) will act as the ‘middle man’ or intermediary between the shipper and carriers that will receive, audit, process, and pay the invoices on behalf of their clients. The great thing about freight payment is that it can be customized to meet the needs of each individual client.
There is a proven process that is typically followed by a professional 3PL to complete the freight payment – efficiently.
• Receipt of an Invoice: When a shipper sets up a shipment, they will receive an invoice in a wide variety of formats to be processed and eventually paid. Typically, invoices are sent to carriers via EDI if processed electronically or USPS or other trackable parcel shipment method.
• Validation of the Invoice: When the 3PL receives the invoice on behalf of their clients, the freight payment provider will verify and validate the legitimacy of the invoice. There are several steps involved in this process including checking for duplicates, verifying the invoice details (for proper billing) and reviewing the supporting documentation. The critical portion of this step is for the 3PL to verify every detail to ensure proper billing – not just for their client’s benefit.
• Collect and Record Freight Billing Data: After the initial validation has been completed, a good freight payment provider will complete an additional step – which is data capture of the invoice. This will include the use of business intelligence and reporting technology to record specifics of the shipment including destination, the carrier used, and other vital details for future freight processing.
• Exception Management: If a mistake or error has been found by the freight payment provider, the exceptional management process occurs. In this step, the 3PL will contact the carrier directly for either clarification of invoicing, making corrections to the invoice, or to explain certain charges. The best 3PL’s will always keep their clients in the loop of each step in the payment of freight invoices.
• Service and Rate Audits: The freight payment audit is typically an additional service that 3PL’s can provide. This is often completed after the invoice has been verified and is being processed. This detailed audit compares invoice details such as the service type, total costs, rates, and contract data to ensure that their customer is getting the best value. While some 3PL’s will charge additional for the freight payment audit – it is often money well spent as the future savings can be enormous.
• Payments: The final step in the freight payment process is actually paying the bill. Depending on the contact between the shipper and the freight payment company, the invoice will be paid by either the shipper or the 3PL.
Why Companies Outsource Freight Payment & How LTX Can Assist
There are several reasons why a shipper will utilize a professional freight payment provider – but generally, it falls into one of these two categories:
The use of a professional freight payment company can significantly save a shipper money – in multiple areas. First and foremost, the cost of processing a freight invoice in-house includes allocating payroll and employee resources. Second, is the cost associated with paying duplicate invoices or invoices that have hidden mistakes, not found by an inexperienced employee. There are several individual steps that a proven 3PL like LTX can assist a shipper with freight payment services associated with saving money including:
• Receipt of Freight Invoices
• Validation, Keying and Data Capture, General Ledger Coding
• Freight Invoice Auditing, Rate, and Contract Adjustments, Exception Handling
• Disbursement, Reporting, Customer Service, and more…
An experienced 3PL like LTX Solutions can help a growing shipper expedite and improve their logistics profile through opportunity cost. This permits a 3PL to help a shipper allocate their resources smartly – for improved shipping efficiency, cost savings, customer service, and more. Specifically, this includes allocating the shippers resources to focus on core competency, reallocate staff to improve supply chain operations and implement a plan that is scalable.