• ITVI.USA
    15,909.400
    -330.930
    -2%
  • OTLT.USA
    2.776
    0.014
    0.5%
  • OTRI.USA
    21.610
    -0.170
    -0.8%
  • OTVI.USA
    15,915.300
    -318.010
    -2%
  • TSTOPVRPM.ATLPHL
    3.520
    0.380
    12.1%
  • TSTOPVRPM.CHIATL
    2.960
    -0.660
    -18.2%
  • TSTOPVRPM.DALLAX
    1.610
    0.250
    18.4%
  • TSTOPVRPM.LAXDAL
    3.340
    -0.130
    -3.7%
  • TSTOPVRPM.PHLCHI
    2.100
    -0.250
    -10.6%
  • TSTOPVRPM.LAXSEA
    3.860
    -0.220
    -5.4%
  • WAIT.USA
    126.000
    -2.000
    -1.6%
  • ITVI.USA
    15,909.400
    -330.930
    -2%
  • OTLT.USA
    2.776
    0.014
    0.5%
  • OTRI.USA
    21.610
    -0.170
    -0.8%
  • OTVI.USA
    15,915.300
    -318.010
    -2%
  • TSTOPVRPM.ATLPHL
    3.520
    0.380
    12.1%
  • TSTOPVRPM.CHIATL
    2.960
    -0.660
    -18.2%
  • TSTOPVRPM.DALLAX
    1.610
    0.250
    18.4%
  • TSTOPVRPM.LAXDAL
    3.340
    -0.130
    -3.7%
  • TSTOPVRPM.PHLCHI
    2.100
    -0.250
    -10.6%
  • TSTOPVRPM.LAXSEA
    3.860
    -0.220
    -5.4%
  • WAIT.USA
    126.000
    -2.000
    -1.6%
NewsSponsored Insights

Don’t Let The Trees Block Your View of The Forest

By Thomas Whaley, President, Level One Technologies, Inc.

In the 1946 movie titled “It’s a Wonderful Life”, George Baily, the movie’s main character considers committing suicide, after learning that his family’s savings and loan is missing a large amount of money, which threatens its very existence. To save him, an angel appears and convinces him to continue his life’s work, by showing him that many other lives would suffer in his absence.  

This movie has always intrigued me, because it used a retrospective approach to show the value of George’s life, and the importance of his business to his friends and neighbors, by focusing attention on the negativity that would have been created, if George was never born, and his business never existed.   

That premise inspired me to use a similar approach, to describe how current Epay brokers would suffer, if one day they learned that Epay was never developed, or it suddenly disappeared. 

For those who are not familiar with Epay Manager, or its functionality, in the mid-2000s Level One Technologies began developing a less costly and more efficient way for freight brokers to pay their carriers and invoice their customers.  That led to Epay’s launch in 2009, as the transportation industry’s first fully electronic invoice presentment and payment system, that allowed brokers to use their own transaction data to begin the invoicing process.  

This “proactive” approach succeeded in reducing a broker’s processing costs, by automating many activities that are typical of traditional processing methods. But in addition to lowering these costs, the system also improved relationships between brokers and their carriers at an unprecedented level.   

Although I’d like to discuss the entire range of Epay’s functionality, in the interest of time I’ve shortened the list to the top 4 benefits, because I believe they would be the most difficult to replace. I’ll begin with the loss of processing cost savings that every broker immediately benefits from when they join the system.  

What many brokers fail to understand about electronic processing, is the degree to which it replaces human interaction with automation. As an example, few people are aware that a typical Epay user can process up to 5 times the number of transactions, compared to any one of their counterparts, using a traditional processing method. 

This comparison means, that Epay is able to turn any back-office employee into a “super processor”. But it also means that processors who lose access to Epay, would no longer be able to process transactions at an accelerated rate. As a result, their companies would be forced to hire additional staff. 

Based on the experience of brokers of various sizes, who by converting to Epay were able to reduce staff, by anywhere from 1 to 20 employees, it’s logical to assume that if the same companies were forced to revert to previous processing methods, a similar number of people would have to be re-hired. 

Such a requirement would clearly impact their bottom lines; because in addition to paying each individual’s salary, each broker would also incur the cost of the employees’ benefits, their unemployment insurance, and the cost of matching their FICA contributions. 

Based on regional differences in salaries, and variances in the cost of each state’s unemployment insurance, on average the new employees would increase each broker’s processing costs by $4 to $7 per transaction. 

In addition, an unexpected conversion from electronic processing, would also require brokers to re-absorb a second category of costs, that traditional processors often refer to as their “hard” costs. 

Generally speaking, this category includes the cost to purchase invoices, check stock, stamps, envelopes and file folders. It also includes the cost of making copies, and the cost to store transaction records, either in filing cabinets, or by imaging each transaction’s documents and storing them electronically.  

Since the majority of these costs do not vary by location or broker, the combined total typically falls in the $2 to $3 range per transaction, especially when the costs to create and store customer bills are included.     

Although each of these savings’ categories is important, because they collectively increase a broker’s profitability, they don’t tell the entire story of Epay’s savings potential. That’s because they don’t include the direct cost savings that would be lost, if Epay’s unique early payment module was no longer available to current brokers.  

For those who are unfamiliar with this module, brokers use it to offer multiple, pre-approved early payment options to their carriers, in exchange for discounts. Since the module was first introduced, brokers who use it to offer competitively priced discounts, have experienced reductions of up to 1% of their total carrier spend.  

One way to demonstrate what the loss of these savings would mean to current Epay brokers, would be to calculate the loss of discounts, for an average broker who processes 500 transactions per week, with an average carrier payment of $1,000.  

In this example, the broker would lose $10 in discounts for each transaction it processes, which in weekly terms would be a $5,000 loss of savings, that would grow into a yearly loss of $260,000.  

Although I haven’t discussed the fourth category of loss, the first three categories show a combined potential loss, that could exceed $20 per transaction. That means the broker referenced earlier, processing 500 transactions per week, could easily see its bottom line reduced by more than $500,000 each year.       

Before I discuss the final benefit, I want to preface my comments by saying that a growing number of brokers believe it’s the most important benefit in the group. What I find interesting about their comments, is the fact that they’re being made by brokers who do not share the same demographics.   

As an example, some of the brokers who share this belief, are new to the industry and need Epay’s credibility with carriers to help them cover their loads.  At the other end of the spectrum are experienced brokers, who have strong reputations, but in order to attract enough new carriers to achieve their intended growth, they use Epay to differentiate themselves from their competition.  

Because carriers think of Epay as a “carrier friendly” system, over time its attributes become associated with the brokers who use it. Because of that, when brokers join Epay, their reputations with carriers almost immediately improve.  

One feature that contributes to this improvement, grew out of the design team’s decision to ensure that carriers had full transparency on every transaction they processed in the system. This was accomplished by building Epay with a “dual view” interface, to give brokers and carriers equal access to each transaction’s progress, as it transitions through the broker’s approval and payment process. This feature is important, because it also gives carriers the ability to obtain their own updates on any transaction, after it’s been invoiced to the broker.  

Another feature that’s important to carriers is the system’s accuracy, as reflected by the fact that on average, only 1 transaction is disputed for every 100 transactions that are processed in the system. This low number, combined with the simplicity of Epay’s dispute resolution process, allows carriers to resolve any financial differences they have with Epay’s brokers in minutes, rather than in hours or days.  

It’s worth pointing out, that carriers credit these features and others like them, for reducing their days sale outstanding, which they say significantly strengthens their ability to manage their cash flow.  

After making the decision to use the movie’s “look back” technique, I recognized the risk of promoting the benefits of Epay, by describing what could be lost in its absence, rather than what could be gained by its adoption.  

With full disclosure, I made the decision to use this approach, because I believe that asking someone to focus on the loss of something that’s real and valuable, sends a more meaningful message, than asking them to consider an idea, or in his case a software application, that has potential, but is not yet real to them.

In any event, my purpose in writing this article is to make you aware that Epay has many unique cost savings and relationship building features, that make it a true “net-savings” tool for any broker who elects to join the system.

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Sponsors occasionally contribute content tor FreightWaves.com. To qualify, the content must be properly labeled as the sponsor's content, and it must not conflict with FreightWaves editorial policies. Contact Preston Brown at pbrown@freightwaves.com for details.

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