While most of the recent strides in transportation technology have contributed in a positive way to carrier and 3PL operations universally, today’s supply chain continues to fall victim to destructive errors in the billing process, which are unfortunately widespread and often experienced repeatedly within the same organizations.
These data discrepancies may seem insignificant out of context, but they often cause undetected leaks in revenue that put your client satisfaction, brand reputation, and bottom line at risk.
These are the five most common types of billing errors that currently plague transportation providers.
1. Consignee Address
Oddly enough, the most common error that we fix for our partners is the consignee address. Simply put, people make mistakes. It’s easy for the shipper's consumers to enter the wrong city, state, or zip code; and it is even more likely if those end-users shop on a mobile app with an auto-populating feature, in which they store more than one shipping address. As difficult as it may be in your position in the supply chain, establishing proactive measures to ensure that all information is captured in your billing system correctly will mitigate the risk of delays, avoid conflict with your customer and help you get paid quicker.
Additionally, if the pickup or drop-off location is in an area with limited access, you may be able to apply penalties. Limited access areas can include camps, places of worship, educational institutions, construction sites, businesses located outside of city limits, rural locations, etc. If an employee of a commercial business isn't open to the public or is unable to assist with loading/unloading, this is also considered limited access.
2. Selecting the Correct Freight Term (Prepaid or Collect)
If the freight term is incorrect or not clearly stated on the bill of lading (BOL), it will be delivered to the incorrect consignee, causing issues for all stakeholders in the supply chain. In addition to jeopardizing the relationship with your customers (and likewise between them and their buyers), an incorrect freight term may have major implications on your inbound cashflow.
Two terms used to describe who pays for a specific freight shipment:
Prepaid: When a shipment is moved prepaid, the consignor or shipper, pays the freight bill for the shipment it is moving for its customer, then charges its customer after delivery.
Collect: When a shipment is moved collect, the receiver of the shipment is responsible for paying the freight delivery service. The receiver is often called the consignee.
In order to avoid delivery and accounts receivable interruptions, it’s equally imperative that the correct freight term is used when capturing the BOL in the bill entry system.
3. National Motor Freight Classification (NMFC) Errors
The classification system for transported materials may be standardized by the National Motor Freight Traffic Association (NMFTA), but that doesn’t mean it’s always entered correctly. With 18 separate classes being assigned a cost of shipping, mistakes are likely to happen.
Freight class is determined by:
Ease of handling
The NMFC code must always be listed on the BOL. If it isn’t listed, there is a good possibility that your shippers’ freight will have to be reclassified. Sub-NMFC codes which are denoted with a dash after the code must match the correct freight class. Inaccurate descriptions of the items being shipped can lead to dangerous situations and extreme inefficiencies. Proper classification can influence your profitability. In conclusion, always confirm the NMFC code, freight class, descriptions of your shippers’ cargo are correct.
To learn how to do this easily, read Quality (And Budget) Assurance: How To Confirm The Right Class For Your Shippers' Freight.
4. Inaccurate Number of Pieces & Total Weight
If your customers approximate the weight of their shipment and it ends up being incorrect, it may have to be reweighed. Reweigh occurs when the weight on the BOL does not match the scaled weight and will likely lead to a series of delays.
To avoid this, encourage your shippers to:
Include the weight of the pallet in your total weight written on your BOL
Ensure accurate weight prior to shipping
If you would like to dispute with your customer, use manufacturer specifications in your defense
The shipment is priced out by analyzing the dimensional weight or gross weight. You can charge the lighter items by dimension, as their dimensional weight is greater than the actual weight. This is calculated by multiplying the length, width, and height in inches and dividing it by various factors to ultimately determine the cubic weight of a given shipment. Alternatively, you may charge per gross weight, which is meant for heavier items.
5. Overlooked Discounted Rates
Shippers often take advantage of any sort of discounts that they can claim for processing their shipment. It’s imperative that you watch for and honor the discounts that apply. This will help all parties maintain confidence levels in the reflected rates and prevent delays (in both your customer’s deadlines and your DSO).
A deliberate effort to overcome hurdles in your back office is required to improve your customer service levels and accelerate your accounts receivables.
These inaccuracies will impact your profitability. Instead of micromanaging your internal billing staff to uphold quality metrics, you may want to consider trusting a third-party billing expert who specializes in accuracy and speed.
For example, DDC’s partners report record-high accuracy rates, 40% cost savings on average, and rapid processing times. Additionally, our carriers and 3PLs are able to reap the benefits of reallocating their previous billing resources to more strategic initiatives for business goals.