Understanding the Facts About Freight Payment Companies

Accounts payable is a vital component of any professional business. Whether you’re in transportation, warehousing, manufacturing, or retail, those involved in the supply chain depend on efficient processing of invoices for services rendered to keep their doors open. This responsibility typically falls on an accounting or transportation manager within a company – who has the skills to pay a bill – but may not have industry-specific experienced to navigate the hurdles and find those hidden fees that magically appear on invoices occasionally.

Since overcharges and mistakes with logistics invoicing can cost a company thousands of dollars annually (or more), proactive logistics organizations are beginning to reach out to a freight payment company to handle all aspects of reviewing, paying, and auditing their freight-related invoices.

There are hundreds of freight payment companies who provide ethical and experienced invoice payment solutions specifically for the logistics industry across the globe. However, there are some misleading facts about freight payment companies and the services they offer, which makes it difficult for many businesses to make an informed decision.

In order to clarify the role and duties of today’s modern freight payment solutions providers for logistics companies, here are some facts about the services they offer.

How Freight Payment Works

Freight payment providers or third-party logistics providers (3PL’s) act as the intermediary between two parties in the receiving, processing, payment of accounts payable. While each 3PL provides unique freight payment solutions, generally speaking, invoices are processed and paid directly by the 3PL, then reimbursed by the client. Essentially, the outsourced freight invoice payment company eliminates the need for an account payable division within companies or organizations. This saves the company money on payroll and allows them to allocate those employees to more productive business growth or operations roles.

Invoice processing is a rather complex series of individual steps to ensure prompt and accurate payment of invoices. Noted below are the common steps that professional 3PL’s use to review, process, and pay freight bills on behalf of their clients.

• Receipt of the Invoice: When a partnership has been created between a shipper and a 3PL, all carriers are notified that the freight payment company is acting on behalf of their client. At this point, all carriers will submit invoices to the 3PL or intermediary in multiple formats for processing. In most cases, the typical method of invoice submittal includes USPS mail or electronic invoices sent via EDI.
• Validation of the Invoice: Once the invoices from carriers have been received by the 3PL, the freight payment provider will validate each invoice to ensure that duplicate charges are not appearing on the invoice, are charges that have been incurred by the shipper, and include all required documentation.
• Capturing Data: This is a service that makes a 3PL stand out above competitors. Freight payment companies capture comprehensive amounts of data elements from the freight billing invoices and the supporting documentation to establish a report-based database. The shipper can use this data to fine-tune their supply chain operations.
• Service & Rate Auditing: When the invoice is being reviewed for errors, the auditing of rates and services will begin. Freight auditing also includes negotiating better rates from the carrier to the shipper. 3PL’s maintain exceptional relationships with multiple carriers, which provides them the expertise and experience to secure base rates or special service rates. While the auditing process is first and foremost a mistake-finding mission, it’s also a great time to optimize service rates between shippers and carriers.
• Accounting: Before the invoices have been paid, the professional freight invoice provider will utilize accounting methods to correctly document and ledger through correct general ledger codes that are provided by the shipper to keep all charges correctly documented.
• Exception Management: There are always exceptions to processing invoices in logistics. When an exception occurs, the 3PL will act ethically but swiftly on behalf of their shipper clients to resolve it – with as little hassle as possible.
• Payment: When the invoice has been completed audited, documented, and ensured for accuracy, the 3PL will either pay the invoice or submit a final invoice report to the shipper – so they can submit funds to the 3PL to pay the carrier.

Above all, the number one service that 3PL’s provide for their clients is exceptional customer service. Third-party logistics providers who provide freight payment solutions employ customer service superstars – most of whom have worked with carriers or others within the supply chain. They utilize the latest technology such as cloud-based TMS and CRM solutions to help improve the communication and customer relationship process for their clients.