Transport Weekly | Manual work – original cause of complex Freight Audit & Payment
Trucking companies in China face notoriously long payment cycles that forces them to maintain heavy capital reserves to support the business. Drivers need to paid virtually daily while most big shippers pay within 60-120 days from the date of official invoice (fapiao) issue. But that is only part of the problem, it also may take another 30-60 days to actually confirm pro-forma billing.
This process requires carrier and shipper to prepare, review and negotiate long list of shipments that includes complicated charging mechanisms, special ad-hoc charges, review exceptions, apply penalties & compensation for damaged/missing goods etc. The process is time and labor consuming and inevitably leads to errors that are hard to detect, especially for senior managers that don’t have capacity to check all details. Globally it is estimated that billing inaccuracy in transport can be as much as 8 % (source Wikipedia: https://en.wikipedia.org/wiki/Freight_audit)
Traditional solutions involve FAP – Freight Audit & Payment that is often applied post-fact and involves costly 3rd party services, often manual in themselves. The root cause is often legacy tariff and billing process that is highly manual and difficult to automate. XLS spreadsheet are flexible to design any fee structure and notorious for having often a long list of “remarks” and mechanisms that may look good when introduced during for example bidding or operation process but are often very difficult to execute consistently in practice.
Take for example already much more transparent and standardized ocean/air freight charge mechanism: do we apply minimum fee before or after volumetric conversion? Do we apply various surcharges like BAF, CAF, FAF separately to base freight or in certain sequence? The list and possible variations go on and on. Now imagine that challenge in trucking where nothing is standardized.
So can there be a better way? Yes. oTMS designed reciprocal tariff and billing ensures full integrity and automation of this process and it can even start from transport procurement – online RFQ to ensure no errors are made, any ad-hoc charges are transparent and process can finish within 1 day saving considerable cost and effort. Having good system in place and ability to model transport cost based on different tariff structure can help to control cost within expected range, something that is not possible or trackable for as long as XLS based process exist.