A benchmark study on freight payments was released by the Journal of Commerce (JOC). It examines the payment, invoicing, and other administrative practices of shippers.
The study “Driving Strategic Value Through Outsourcing” is based upon survey responses from 77 shippers in all major freight modes. Approximately three-quarters of the respondents were associated with companies with more than $1+ billion annually.
Who Outsources their Invoice and Payment Processes
Two-thirds of respondents indicated that they outsourced audit, payment, or both. This group is dominated by larger shippers with more invoices and carriers to manage. We are a freight factoring company and see many savvy owners as well as fleets of small to medium size taking advantage of outsourcing their billing.
Findings: Significant Cost Savings through Outsourcing
This study revealed that large shippers, who are more likely than small shippers to outsource some or all of the audit and payment processes, pay less in invoice processing costs than smaller shippers. Shippers who outsource some or all of their audit and payment functions report an average invoice cost that is approximately one-third less than those who do the same tasks in-house.
“Our carriers are paid quicker without having to worry about billing or collections. Even if the person collecting the money is the carrier or a partner, they save overhead. We have built relationships with our clients, and have a team that can handle all aspects of billing and collections. Our Carriers find that we collect more quickly. We also offer a free credit check service to our carriers so they can assess the creditworthiness of the client before taking the load.
The Study’s Key Takeaways:
- Shippers who outsource audit or payment processing pay significantly lower per-invoice costs than those who do everything internally
- Shippers reported an average inaccuracy rate of 20.8 percent across all modes. Nearly 80 percent of shippers claim they are invoiced for parcel movements along with other modes. This is a significant increase from industry estimates which were in the 60 percent to 70 percent range until 2017.
While the impact of the coronavirus virus 2019 (COVID-19) has caused disruption, less than 10% of respondents believe that the pandemic will change the nature of their existing freight audits and payment relationships.
- Larger shippers are more likely than smaller ones to outsource a component of their audit or payment process. They also have access to products with longer payment terms and roughly half the processing cost per invoice.
- The primary purpose of payment data is to provide shippers with better analytics that can be used for rate negotiation and to reduce freight spending.