Freight Benchmark Study Shines Spotlight on Shipper Payment Practices
The Journal of Commerce (JOC) recently released a freight payment benchmark study that examines the payment, invoicing, and related administrative practices of the shipper community.
The study, “Driving Strategic Value Through Outsourcing,” is based on survey responses from 77 shippers across all major freight modes, with approximately three-quarters of them belonging to organizations with $1+ billion in annual revenue.
Who Outsources Their Invoice and Payment Processes?
About two-thirds of respondents said they have outsourced either audit or payment processes or both. Not surprisingly, this group consists mainly of larger shippers that have more carriers and invoices to manage. Being a freight factoring organization, we see a lot of savvy owner operators as well as small to mid-sized fleets take advantage of outsourcing their billing.
Findings: The Significant Cost Savings with Outsourcing
One finding from this study that was particularly interesting is that large shippers (who are more likely to outsource at least part of the audit and payment process), pay less than half in invoice processing costs compared to those of small shippers. Further to that, those shippers that are outsourcing some or all of the audit and payment functions have reported average individual invoice costs that are approximately one-third of those reported by shippers handling the same processes in-house.
“Our carriers get paid faster without the burden of billing and collections. They save on overhead, even when the person doing the collections is them or a partner. Our Carriers have found that we collect faster because we have relationships with their clients and we have a team that is trained to handle all aspects of billing and collections. Additionally, we protect our carriers by offering a free credit check service, so that our carriers know before they take the load the credit worthiness of their client. Our carriers save time, money and effort partnering with Thunder Funding,” says Joy Hanawa, Marketing Manager at Thunder Funding.
Key Takeaways From The Study:
- Shippers that outsource some or all of their audit and payment process pay drastically lower per-invoice costs than those that handle everything internally
- Shippers reported an average invoice inaccuracy rate across all modes of 20.8 percent;
- Nearly 80 percent of shippers say they are invoiced for parcel moves alongside other modes, a substantial increase over previous industry estimates, which hovered in the 60 percent range as recently as 2017;
- Despite the disruption caused by the coronavirus disease 2019 (COVID-19), fewer than 10 percent of respondents say the pandemic will make them change the nature of their existing outsourced freight audit and payment relationships;
- Larger shippers are more likely to outsource some component of the audit or payment process, have access to products that provide longer payment terms, and pay roughly half the processing costs per invoice than their smaller peers;
- And the primary uses for payment data are tied to arming shippers with better analytics for rate negotiations and for reducing freight spend.
For more information about Thunder Funding and the importance of checking a broker’s credit be sure to check out this blog post: The Importance of Broker and Shipper Credit Checks