How to Outsource Freight Bill Payment

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As transportation costs continue to soar, some businesses are looking to reduce operational spend by outsourcing freight payment audit and reconciliation to third-party companies.

An estimated 65 percent of major corporations currently outsource their freight payment function as a result of prohibitive labor, processing, and technology costs, as well as the complexities of coordinating internal resources to develop systems that efficiently meet a company's unique audit needs.

The benefits of outsourcing fall into four categories:

  • Developing decision-support functionality to aid in strategic planning and execution.
  • Reducing expenses to provide tangible savings.
  • Automating processes such as EDI, exception management, online reporting, and electronic payments to create internal efficiencies.
  • Enhancing operations through tactical performance improvements and use of metrics.

Businesses can realize these benefits through a number of ways. Studies have shown that it can cost a company up to $10 to process an invoice through internal payables systems. With a freight payment provider performing the payment and reporting function, these processing expenses can be streamlined considerably.

Outsourcers can also reduce overages up to five percent by utilizing a provider's pre-audit services and eliminating duplicate payments. In addition to these tangible savings, taking a more proactive approach to managing freight payment reconciliation allows businesses to mine better information - from carrier usage and customer lanes to accounting processes - about their supply chain. The accessibility and connectivity of web-based technologies enable better communication of data between corporate departments and within the extended supply chain. Businesses can leverage this information to streamline shipment planning and negotiate better prices with carriers.

Equally important in the decision to outsource is finding the right type of provider. While cost is a top priority, businesses must be mindful that service and reliability are commensurate with what they spend - both in time and capital - during the due diligence process. A lack of quality and stability in a business partner can produce unexpected costs far outweighing the mistaken savings of a low-price provider.

What To Consider When Choosing a Freight Bill Payment Provider

FINANCIAL STABILITY AND SECURITY. Due to the large dollar value of processed transactions, the freight payment firm's financial stability and the security it can provide are key factors in the outsourcing decision.

DEPTH OF SUPPORT SERVICES. The depth of customer service support, along with the enabling processes - including process improvement programs - are important in making the freight payment service a true extension of your operations.

TECHNOLOGY. Does the freight payment firm use the latest technology and continually enhance its systems and services? Is the technology scalable? Does the provider have the financial resources for additional technology upgrades? You want to ensure that your needs are met today as well as tomorrow.

MANAGEMENT DEPTH AND EXPERIENCE. It is important that the provider has the resources to sustain its business, so stability and depth of expertise are important selection criteria. Also, make sure the audit, payment, and information processing of freight invoices is the firm's core competency and that its personnel are experienced and understand transportation. Does the provider have experience implementing complex processing systems that meet the unique requirements of large companies?

COMPLIANCE. Make sure your service provider keeps up to date with evolving industry protocol. For example, corporations are requiring their providers to be Sarbanes-Oxley compliant. This includes providing SAS 70, Type II reporting, which also requires a documented and tested business recovery plan that facilitates resumption of processing within 48 hours of a disaster.

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