A recent Freight Broker Pulse Report says that freight brokers spend too much time on back-office operations, including invoicing, auditing, collections, and payments. Over half of the survey respondents (52%) report spending 25% or more of their time handling paperwork. That’s 480 hours a year based on the average 40-hour work week. Calculate the labor cost of that. This is a considerable time and budget investment. In that same report, 78% of brokers agreed that their business would be more successful if they spent less time on broker operations and more time on business development.
However, another recent poll by FreightCaviar revealed that 71% of brokers say processing incorrect carrier invoices or paperwork is their biggest pain point. The study also found that these mistakes could cost a broker between $11 and $77 per mistake, which is, too, a significant expense.
Collecting and auditing the paperwork needed to bill a customer can be time-consuming and tedious. As important as this process is, it can be full of inefficiencies, often completed manually by your busy reps. Yet, this step is necessary to maintain accurate cash flow. Any barriers to completing the collection and auditing steps cause more delays in invoicing and payment. There is often a 30-day difference in payment terms between your customers and carriers, leaving you (and your cash flow) in limbo. The sooner your invoices are released, the faster that gap closes. If you notice customers late in their payments, look back upstream to see if they are late because your reps are waiting for carrier paperwork.
In this challenging market, there is a silver lining: the potential for improvement. By thoroughly evaluating and refining your internal processes, you can create a more efficient workflow that not only increases cash flow but also scales as your business grows. With the right strategies and tools, this tangible goal can be achieved.
The Eight Areas of Improvement
Gathering paperwork, auditing carrier bills, and invoicing are the last three of eight (8) common areas of improvement in the freight broker process. How your team manages (or doesn’t manage) these tasks can lead to sluggish cash flow, wasted labor hours, lost sales opportunities, and impatient carriers waiting to be paid.
This blog will focus on evaluating your paperwork processes, from gathering paperwork to invoicing your customers and everything in between. Let’s get started.
Evaluating the Paperwork/Audit/Invoicing Process
When evaluating these tasks, there are several questions to ask yourself and your team. The answers to these questions help you know where to focus on enhancing and scaling the quoting process. The questions fall into four categories: process, time, tools, and improvements.
Collecting Paperwork
Standard practice dictates that brokers must wait to invoice a customer until all delivery documentation is received, including receipts, proof of delivery (POD), bills of lading (BOL), and rate confirmations. Every minute spent gathering load paperwork delays payment collection and can be costly.
Using the questions above, evaluate how your team collects and stores the paperwork for each load. If there is no standard process, ask your reps if they share paperwork or if everyone does their own thing. Measure how much time your reps take in chasing down paperwork. Analyze the average time to collect all the paperwork for one shipment. Ask if they collect paperwork individually or in batches. Check if they’ve ever lost paperwork in their email box or TMS. If your team uses a centralized platform or TMS for paperwork, ensure everyone has access to it and is easy to use.
Streamlining paperwork collection can save significant time. Consider investing in TMS platforms that automate paperwork sorting from emails. Evaluate whether such tools are available in your current software solutions or if adopting new tools could enhance efficiency.
Auditing Paperwork
According to the National Shippers Strategic Transportation Council, errors occur in up to 10% of freight bills. The most common discrepancies include incorrect rates and charges, duplicate charges, and unauthorized accessorial charges. None of this is because of intentional bad behavior by carriers but because the shipping process leaves much room for error. An audit is a necessary step in your paperwork process. With an audit, you may recover between 1% and 5% of your transportation costs.
Accurate records of payments to carriers and from shippers are crucial for compliance with federal regulations, which grant all parties the right to review transaction records. Reps must be able to provide relevant paperwork, including payment records, upon inquiry.
Document your audit process, including the efficacy of the process and the time it takes your team to not only audit bills but also resolve discrepancies. Thoroughly document how your team gathers, stores, and audits the paperwork for each load. Check to ensure every document is audited. If not, ask the team how they decide which document to audit. On average, how often does shipping documentation need further review? Ask your team how they communicate discrepancies with carriers and how long it takes, on average, to address the problem. In addition, review how your reps amend incorrect paperwork.
Sometimes, it helps to look upstream for inefficiencies. For example, if your quoting process isn’t based on a standard pricing model, your team may inadvertently generate inaccurate shipping quotes and BOLs. As you review the tasks involved in this step, look for opportunities to speed up the process by using your existing tools or new resources. As always, the goal is to understand your labor and resource cost for this step so that you can make it more efficient and scalable for future growth.
Invoicing
Congratulations! You’ve navigated through collecting and auditing paperwork. Now comes invoicing. Although it might not be the most exciting task, it’s crucial.
For many brokers, invoicing can be just as challenging as the earlier steps. Many still use manual methods, including paper invoices. Consider whether this is the best use of your reps’ time. Evaluate the benefits of using an invoicing tool integrated with your TMS. Measure the time to create and email invoices and analyze any payment delays due to lost invoices or bottlenecks.
Remember, invoicing isn’t just about collecting money owed; it’s also about managing cash flow effectively to avoid disruptions between carrier payments and shipper receipts. Addressing these inefficiencies can enhance your team’s efficiency and scalability, ensuring better cash flow management and a more productive workflow.
Wrapping Up Your Back-Office Evaluation
It’s clear that the inefficiencies in back-office operations, such as invoicing, auditing, and paperwork processing, are significantly impacting your team’s time and budget. The findings from the Freight Broker Pulse Report and the FreightCaviar poll underscore the urgency of addressing these challenges.
To combat these inefficiencies, evaluate and refine your internal paperwork workflows. By standardizing paperwork procedures, leveraging automation, and integrating practical tools, you can reduce errors, save time, and boost cash flow. Streamlining these processes minimizes delays and costs and allows you to focus more time and budget on business development and growth opportunities.
Today is the day to take proactive steps to optimize your back-office operations for a more efficient business poised for success.
For more detailed strategies on improving your freight brokerage operations, download our eBook, “Don’t Let Inefficiency Eat Your Bottom Line: 8 Areas to Improve Your Freight Brokerage,” and begin transforming your business today.