Top Third-Party Logistics Billing Challenges
We at Extensiv have seen thousands of logistics professionals struggle with the same widespread billing challenges that impede 3PL warehouse growth. Manual billing processes and creating invoices using spreadsheet data slows billing cycles and leads to costly errors, contributing to lost revenue for your third-party logistics (3PL) warehouse. This raises the question, what exactly within the billing workflow causes this lost revenue?
As a company that has helped thousands of 3PLs, we can tell you, culprits include time-consuming, manual billing capture at month-end close, inaccurate charge capture, and lost opportunity cost from using customer service representatives for billing activities rather than customer service and revenue-generating activities. This post shares billing best practices to help 3PLs automate charge capture, grow their bottom lines, and ultimately free up their staff’s time for customer service.
3PL Billing Best Practices Overview
The most important best practice recommendation is to implement billing automation. Automate when you can and capture real-time charges by using mobile devices or PCs. You want to automate billing and invoice management to reduce errors, ensure all charges are captured, improve billing accuracy, and accelerate painful end of month billing processes. The 3PL Guide to Calculating Return on Investment for Warehouse Management System Software estimates that missed billable events and errors account for 3% of your monthly billing revenue.
As such, it comes as no surprise that the 2022 3PL Warehouse Benchmark Report found that 47% of 3PL warehouses named the need to automate billing as a key driver for implementing warehouse management system (WMS). Warehouses that automate billing can reduce the time it takes to send out invoices from several days to several minutes, drastically reducing days sales outstanding for services performed or recurring storage charges. What are some specific ways that warehouses can automate their billing?
3 Easy Steps to Automate 3PL Billing
Warehouse Management Systems such as Extensiv 3PL Warehouse Manager help operations managers adapt their current billing processes to automated workflows. Follow these three easy steps to automate shipping, receiving, and recurring inventory storage charges:
Step 1. Adapt Current Billing
First, you need to evaluate all service processes. Since one of the biggest billing issues is uncaptured charges, you need to walk through all of your processes and make sure that you are charging for everything you can possibly charge for. After all, 3PLs make money on labor, so money is lost when labor is doing something, and your customers are not getting charged for it.
Second, modify your standard rate sheet so that new customers are easily automated. Standardization is the first step in optimizing your billing workflows. Traditionally, 3PLs will have different billing workflows for different customers, but standardizing rates with consistent charges across all customers makes billing less complicated, so it is no surprise that the industry is starting to move toward having consistent rates charged to all warehouse customers.
Third, negotiate with existing customers to encourage them to adopt new rate sheets. All charges are immediately accessible through the 3PL billing platform.
Step 2. Set Up Automation
Charges can be set up with billing rates that automate how much to charge for custom services such as breaking down or assembling pallets and recurring storage fees. Implementing this billing automation can take time to setup and test properly, but we have seen warehouses boost profits by 3% on average every month after automating their billing processes.
Step 3. Run in Parallel
Test in parallel with your existing billing methods during the transition period, so you can clearly see the efficiency improvements and revenue impact during this period. This avoids any interruption to your current operations and gives your warehouse time to adapt to the new billing workflows.
Capture Value-Added Billable Services in Real-Time
For warehouses looking to boost operational efficiency and improve billing accuracy, implement real-time charge capture. You can accomplish this in two ways:
- Implement Mobile Scanning Capture: Capture value-added services as they occur in real-time for the best results. Mobile charge capture enables staff to capture receiving charges as services are completed, reducing the need to search for manual receipts.
- PC or Tablet Capture: For those 3PLs who don’t have mobile devices, set up a warehouse PC station for team members to capture value-added services on the warehouse floor.
The benefits of this approach are two-fold. First, mobile charge capture provides 100% billing accuracy. Second, staff no longer have to track down past charges written on paper or stored in an Excel file on somebody’s hard drive. All charges are immediately accessible in the cloud through a WMS as soon as the service is performed. This substantially frees up your staff’s time for customer service and eliminates time-consuming reconciliation processes. For 3PLs who service ecommerce customers and need to manage large volumes of receipts and orders, implementing these processes can save substantial time and dramatically improve billing accuracy.
On a related note, you will want to try to avoid human interaction in your billing workflow. There are still a lot of human processes that occur even with automation, but reducing human input will help the system run better, so utilize scanning and capture as much as possible.
Integrate Your WMS with Accounting Systems
A majority of the 3PLs we work with use QuickBooks to manage their accounting. It can be tedious to work with two separate applications: a WMS for warehouse operations and another window for managing accounting. Implement a WMS that integrates with your accounting system to create a seamless 3PL billing process.
With the new Extensiv Billing Manager, the system now handles the entire billing workflow from charges to invoicing to payments to keep the billing workflow in one system as much as possible before exporting to accounting. You can now do everything within one system, without using Excel and other accounting software, to keep everything as streamlined as possible, making billing easier and more efficient because all the components of Extensiv’s one system are meant to work together. By using Billing Manager to handle everything from charge generation through payments, you can decrease mistakes, prevent disconnect from systems getting out of sync, and reduce need for excessive integrations.
You should still integrate with an accounting system for accounting purposes; however, you can and should do your entire billing, invoicing, and payments processes in the Billing Manager system.
Automate when you can and capture real-time charges by using mobile devices or PCs. By applying these billing best practices, you will get paid faster, reduce human error in billing capture, and save your staff’s precious time for billable activities. To learn more about billing automation, request a demo today.