Technology aims to help truckers benefit from automated payment.
There’s an oft-repeated mantra when it comes to paying invoices: the guy who writes the check gets to make the decision about how the payee is going to get paid.
And so it has mostly gone in the world of freight payment. Freight audit and payment vendors run their businesses by attracting freight buyers (i.e. shippers) with the lure of reduced administrative costs, increased accuracy, and pre-audit services that prevent shippers from paying invoices that are incorrect. It’s a potent offering.
The trouble is, carriers (i.e. the payees) are often afterthoughts when it comes to these shipper-FAP vendor relationships. It makes sense—FAP vendors are concerned with helping shippers hone their payment processes by automating the match between the rate agreed in the contract and the rate actually billed by the carrier.
But carriers often see an alternative side to this relationship. Most truckload and less-than-truckload carriers have dozens, if not hundreds or thousands of individual customers. Some customers are transactional and some are relationship-based, but the volume of bills produced is staggering even for a midsized or regional carrier.
Now layer on top of that the reality that many of those customers will be using an FAP vendor to pay their bills, and here’s where the real work begins for carriers. For those customers using payment vendors, carriers often have to send invoices, manage disputes, and check status of payment via electronic data interchange on web portals set up by the vendors.
And keep in mind, each payment vendor has its own web portal. So carriers are tasked with logging into numerous portals on a regular basis to check the status of pending payments. The situation becomes more fraught when payments veer past due dates and into collections territory.
Over the years, companies have tried to address this imbalance—either carriers themselves, or sometimes FAP vendors interested in keeping happy a carrier that serves a wide swath of its customer base. As a number of freight-pay veterans who spoke to American Shipper for this article said, the concept of making the outsourced freight payment model easier or more palatable for the carriers is not necessarily a new one.
But success stories centered round a carrier-centric view of freight payment technology aren’t easy to find. Sure, payment vendors (the scrupulous ones) help carriers get paid quicker, or in a more consistent timeframe, or electronically rather than via paper checks. These are all clear carrier benefits of the FAP vendor-shipper relationship.
However, most of those relationships result in some sacrifice for the carrier. And it’s no small task to manage payments through a number of FAP portals.
On the second floor of a row office in Richmond, Va., Gallium Technologies is trying to help carriers with this burden. Gallium’s value proposition is pretty straightforward—relieve the carrier of the onerous task of scraping data from all of the FAP vendor portals of its customers by conducting those searches on behalf of the carrier and aggregating that data in one hub.
Gallium is processing millions of transactions a week for its carrier customers, President and Chief Executive Officer Jeff Jones told American Shipper in an interview at the company’s office, near the Virginia Commonwealth University campus.
“[The carrier] will send a file on Monday of every invoice they have from a third party (i.e a payment vendor),” Jones said. “We go out and check the status of any dispute, check why it’s in dispute, and go out and convert it to common language for the carrier. We’re going to take that short pay status and give that back to the carrier in a number of ways.”
That includes providing it in a format to flow into the carrier’s collection systems. Which leads to Gallium’s second value proposition—helping its carrier customers understand who among its book of customers are good and bad payers. It’s not just scraping data, it’s converting it into intelligence the carrier can use to better focus its collection efforts, and decide if a customer is worth pursuing for future business.
Gallium is even building tools to help its customers benchmark themselves against industry averages.
Jones knows all about what carriers think of outsourced freight payment. He spent years with FedEx’s less-than-truckload division before moving to Gallium five years ago.
“The carrier is absorbing all this work, but they’re not really seeing a relationship with the third party vendors,” he said. “Across the board—46 to 50 percent of accounts receivable dollars are being handled by third parties. When you include third party web portals, it’s probably 50 to 60 percent. Some of the bigger retailers pay through web portals.”
Complementing FAP Vendors. Gallium is not positioning itself as an antagonist to FAP vendors—quite the contrary, in fact. Jones and his team are pursuing partnerships with the payment service providers to help them extract more value from their relationships with carriers as well.
Case in point: Gallium is in discussions with one of the major FAP vendors to find a more efficient way of conveying the status messages that Gallium generally has to go and find each day. One such way would see this FAP vendor essentially providing a data dump related to the carriers that are Gallium’s customers.
The benefit to the payment vendor (and its shipper customers) is a more proactive, healthy relationship with those specific carriers. The benefit to Gallium’s carrier customers is that Gallium can spend less time scraping data off portals and more time providing analytics around paying behavior patterns of the carriers’ customers.
That type of analytical look into a carrier’s AR process is going to be increasingly critical, especially in the LTL world, where the number of invoices far outstrips truckload due to the number of shipments handled in a single truck.
It’s also an interesting wrinkle on the shipper side, since it theoretically enhances a carrier’s ability to discern which customers pay in a timely manner. With a long-expected driver shortage expected at any time, it will increasingly pay to be a customer that pays on time, and one that doesn’t require a carrier to engage its collections department.
Jones said Gallium’s offering stems largely from the still contentious relationship carriers have with payment vendors, and from the idea that carriers need to make themselves more desirable for the payment vendors to serve.
“[A lot of carriers] remember the days the payment vendors charged every time [the carriers] looked at an invoice,” he said. “They look a lot of times at payment services as the enemy. Payment vendors are trying to build relationships with carriers, but that means the carrier needs to have a standard.”
More Carrier Access. Cecil Bryan, president of freight payment consultancy Logistics Alliance Network, said there’s been an enormous shift in how much access payment vendors give to carriers.
“It was very common for carriers to fax over invoicing aging lists that had to be researched manually,” he said. “In addition, invoices that were rejected by the freight payment providers had to be mailed back to the carriers. One of the most common reasons was for a missing bill of lading. In some instances the rejected invoices were not entered in the provider’s system, which meant there was no visibility if a carrier called to check on the status. All of this led to a very inefficient and costly process.”
Bryan said virtually all freight payment providers have web-based portals that allow carriers to research the payment status of invoices.
“This eliminates the need to call the provider’s customer service department for basic payment inquiries,” he said. “However, not all web portals are created equal and they are all different in some manner. Some portals are very basic and only allow carriers to research a limited number of invoices at one time. Others are very robust and also facilitate a collaborative process where both parties can exchange information back and forth.”
It’s this latter group of payment vendors that has taken carrier relations to its next evolution. For instance, Cass, one of the more well-known payment vendors, says it engages with carriers via a 15-person carrier services group whose only mission is to provide payment information and support to carriers. Cass said it recognizes it is seen as an extension of its customers.
U.S. Bank, another prominent freight-pay vendor, offers carriers through its portal payment status reports to show if shippers have approved their invoices for payment to help determine cash position, and daily customer management reports include invoice aging by customer and remittance information to ensure payment times are meeting expectations.
Another vendor, A3 Freight Payment, has a model it calls “proactive resolution” for exception transactions. This essentially is built on A3 proposing adjustments (via a managed online process) to billed amounts to the carrier and shipper so that pricing exceptions can be resolved prior to settlement. This prevents short payments, and what A3 CEO Ross Harris called “the endless loop of balance due transactions.”
Harris said this often fixes the root cause of the exception rather than just one transaction. He also said carriers have access to the same data and applications as their clients, allowing them to query all data for a specific client.
While it’s clear some of the top providers are clearly structuring their model with carriers more in mind, that doesn’t negate the issue that carriers face in managing all these portals. Carriers are essentially dragged into relationships with third party vendors by necessity, not by choice.
“Solid Value Points.” Richard Langer, a pioneer in the FAP vendor space and now managing director and president of consulting firm Quetica, said the Gallium model reminded him of billing service bureaus, which eventually evolved in the Internet age into billing portals. He said he sees the value for carriers in such an approach because “there are a lot of portals out there, and the more customers you have, the more you have to use portals to check exceptions.
“This allows the carriers to outsource the process, so they can create connectivity with the shipper and 3PL, and FAP, or the shipper themselves that has an installed software package,” he said. “There’s no doubt some cost savings when you think about what is my back-office cost to support this. Do I trust that I’m getting paid for the service I’m giving?”
Langer said the value to carriers could come not just from efficiency, but from greater accuracy.
“Carriers don’t just under-bill, they sometimes lose the bill of lading and don’t bill at all,” he said. “Carriers often don’t have the tariffs or mileage data to bill effectively either, or sometimes aren’t working off the correct tariff. If they can ensure the carriers are billing for 100 percent, that would be a bigger value-add than just taking out the back-office costs.”
Langer added that aside from the back-office cost reductions and decreasing incorrect billing, carriers could benefit from accounts receivable turns (through more timely billing) and better understanding how to create credit and collection relationships.
“These are all solid value points they can create for carriers,” he said.
Langer said other such consolidators that work on behalf of carriers are more common in the household goods movement industry and in cross-border shipments, both of which generally involve more complex billing than domestic moves.
APIs? There’s another dynamic at play—EDI. Most of the electronic interactions between carriers and payment vendors occur via EDI, which is a perfectly adequate means of communication for information going in one direction. The trouble is, exception and resolution management is, by its nature, a two-party process.
Using an EDI portal to resolve billing discrepancies is timely and inefficient. Jett McCandless, founder and CEO of the carrier consulting firm CarrierDirect, called it an “easy fix” to allow carriers better access and resolution management capabilities if application programming interfaces (also known as web services) are added to the mix.
“API rating and invoicing will greatly fix the causes of these problems,” he said, because APIs allow for more iterative two-way communication between systems.
Bryan said that certain carriers already built APIs to achieve the same goal as Gallium does for its customers.
“Some carriers have deployed technology solutions that aggregate data from the freight payment providers,” he said. “Since they already have the credentials to access the provider’s web site, APIs can be set up to make web calls that extract invoice information. This automates the process and eliminates the need to have to manually log in to all the different websites. Due to the differences in all the provider’s web tools and security protocols, there will be some limitations in the amount of data that can be extracted. However, for basic information related to the status of invoices that should be relatively straightforward.”
Jones noted that Gallium’s engines process 15,000 to 20,0000 transactions in an hour.
“Whatever is not paid-in-full status, we check it every day until it becomes paid in full,” he said.
The reality today, however, is that carriers connect predominantly via EDI, and that can create a time-consuming error-resolution loop.
Logistics Alliance Network’s Bryan said the collaborative environments created by most vendor portals these days focus primarily on pricing errors.
“This is the most troublesome billing error, it’s difficult to resolve and creates past due issues,” he said. “Some providers short-pay carrier invoices and deal with the subsequent balance due later. Others use the collaborative approach, where the disputed invoices must be reviewed in the web portal. The carrier is required to approve the short payment, correct the invoice or dispute the pricing error.”
A typical payment vendor portal will have the following capabilities:
• Upload spreadsheets of open invoices to check payment status.
• Invoice dispute resolution (collaborative environment).
• Upload missing documents like bills of lading, weight and inspection reports, etc.
• Email invoices for processing.
• Download payment remittance information.
• Carrier scorecards and metrics reporting.
“While these new self-service tools have made it easier for carriers to access information online, they also have to train personnel on how to use them,” Bryan said. “Today, virtually all companies have some type of web portal where suppliers are required to access their system to perform some type of task. It’s very common for all of the major retailers to require suppliers to access their system for things like routing instructions.”
He also added that some carriers have company policies against using web portals for freight payment.
“Some of the rail carriers have their own portals that must be used for invoice disputes,” he said. “Neither FedEx nor
UPS will use portals to resolve invoice disputes.”
Burden Or Opportunity. The extent to which FAP vendors see their web-based interactions with carriers as a burden or opportunity depends largely on the individual vendor.
“Some freight payment providers have embraced the process and created some exceptional tools, while others provide just basic research tools,” Bryan said. “I’ve seen instances where some freight payment providers charge carriers for certain services they consider to be value-added.
“Many providers now have a carrier-relations manager who is responsible for working with carriers on new initiatives that can help both parties. Working in a partnership-type relationship facilitates best practices that benefit their common customer, which is the ultimate goal,” he explained.
Bryan harkened back to a time when, at a previous company, he hired a FedEx revenue specialist to handle all billing, pricing and past due issues related to the carrier.
“We were able to justify the additional overhead because FedEx was our largest volume carrier and were used by the majority of our multi-national customers,” he said. “As a result, we were able to implement a number of best practices related to the FedEx billing and collection process that was a win-win for all parties involved.”
Of course, not all carriers are FedEx and represent a significant chunk of a payment vendor’s business.
“Most of the web portals have been well accepted as it relates to accessing or researching payment information,” Bryan said. “The more robust web tools that require collaboration where the carrier must perform a task have not been well adopted. In a perfect world, if a carrier can get everything they need using a portal then there would never be a need to call the freight payment provider.”
But we’ve yet to reach freight payment utopia, particularly the carriers that are often an afterthought in the payment process.
“Most carriers don’t want to look at the third party sites,” Jones.
On the Road to Payment
