The Check is in the Mail

The Check is in the Mail American Shipper's transportation invoice processing and payment benchmark.

Executive Summary

American Shipper, in partnership with the National Industrial Transportation League, the Retail Industry Leaders Association, and the Transportation Intermediaries Association, has successfully benchmarked more than 250 payers and payees on their transportation invoice processing and payment practices and systems.
      In the context of this study payers are shippers and intermediaries who pay for transportation services. Payees (also known as billers) are carriers or intermediaries who collect money for their services. The 40-question survey covers all modes of international and domestic freight transportation.
      This is the third and final report in a series designed to explore the life cycle of freight transportation spend in three segments ' procurement, execution (ITMS) and settlement. Each report separates successful firms ' or 'winners' ' from the average in an attempt to highlight best practices. All reports are made available for download at www.AmericanShipper.com.
      American Shipper approached this benchmarking exercise with a set of assumptions to prove or disprove. These include:
      ' The domestic transportation invoice processing and payment market would be far more advanced and automated than their international brethren. International transactions are more complex, which makes them more difficult to automate.
      ' Payments with hard-copy checks would account for a considerable portion of payments made for transportation services both international and domestic.
      ' The market for processing and payment systems would be very active with a considerable percentage of payers budgeted and planning to buy or upgrade.

Incomplete. The common theme in American Shipper's benchmarking reports is the notion of 'winners' and the best practices that make them successful. In the case of invoice processing and payment we are sorry to report that there are no clear winners in freight transportation. Rather American Shipper gives the transportation industry ' all modes, international and domestic ' an incomplete.
      Extensive review of the data distilled in the study shows that both payers and payees are using strategies to cope ' or get by ' rather than succeed. But in their defense, the environment in which these companies operate is not set up to allow companies to succeed individually.

Gap Between Domestic And International. This study set out to measure the gap between domestic and international payment practices. That gap was clearly there, but it was not quite the chasm that was initially hypothesized. The domestic market is more automated but not by much.
      Further it is remarkable that both segments struggle to streamline the dispute resolution function. Knowing that many invoices are disputed there is no wonder the back end of the process ' approval and payment ' end up in the hands of people making phone calls, sending e-mails, and eventually signing and mailing checks. A cycle that started in an electronic environment has derailed into a manual exercise.

Payment Terms. With respect to payment terms it is remarkable how aligned the payer's estimates of its average days payment outstanding is with the payee's estimate of its days sale outstanding. On average, transportation bills are paid 30 to 45 days from invoice date.

The Check Is In The Mail ' Literally. American Shipper calculates that an astonishing 65 percent of transportation payments in terms of dollars transacted are paid with a hard-copy check. This accounts for 69 percent of transactions representing a huge sum of money.
      In a report in American Shipper ('Insomnia,' July 2008, pages 68-85) MergeGlobal Inc. estimated the global container shipping industry brought in $205 billion per year in revenue. Clearly the precipitous drop-off in volumes and rates that occurred over the course of 2009 diminished the figure, but the point remains, there are billions ' potentially hundreds of billions ' of dollars trading hands each day; and most of it is happening with checks delivered in the mail, the 'old-fashioned way.'

Auditing. Payees and payers demonstrate a large commitment to auditing invoices prior to issuing or paying the bill, and after receiving or making the payment. By their own account 47 percent of payers, and 45 percent of payees, audit invoices both before and after the transaction.
      Payees and payers agree invoices and payments are accurate 90 percent of the time. Bear in mind this includes domestic transportation payments that tend to be more straightforward than ocean bills with surcharges and accessorial charges. Certainly accuracy will suffer in a more complex market.

Plans To Buy Or Upgrade. Survey results show the market for invoice processing and payment systems is heating up. Buyers with budgets to spend in the next 12 to 24 months tend to be retailers that are in the market to replace manual processes and legacy applications. It is noteworthy that small companies polled show little interest in adopting a systems-based approach in the future.