As the 2024 peak season approaches, a surge in consumer demand is anticipated, offering significant growth opportunities. However, this growth also presents the challenge of maintaining billing accuracy and running smooth financial operations. Two critical pressures will come into play: First, with rising borrowing costs and a renewed focus on profitability, both you and your clients will be scrutinizing every invoice to maximize margins and eliminate unnecessary expenses. Second, the expected increase in order volume will place unprecedented strain on your billing system. Without optimized and automated billing processes, errors could lead to substantial revenue losses—potentially tens of thousands of dollars in just a few weeks. Beyond the financial impact, these mistakes could erode client trust during their busiest time of the year, jeopardizing long-term relationships.
Here are some common billing practices that could negatively impact a 3PL during peak season:
Manual Invoice Creation
Relying on manual processes to generate invoices—such as exporting data from your WMS and converting it into bills via spreadsheets—can be costly. This not only consumes significant accounting hours but also increases the risk of underbilling clients due to miscalculations.
Fixed-Schedule Client Billing
For high-volume shippers, upfront costs for packaging materials and shipping labels can be substantial, while carriers often offer only 7- to 21-day net terms for bill settlements. Waiting over 30 days for invoice payments after services have been rendered can strain your cash flow or debt reserves.
Inflexible Pricing Agreements
Overly complex or rigid client pricing agreements can make it difficult to adjust rates to reflect increased costs during peak season. Additionally, a lack of flexible terms, such as volume discounts, may discourage high-volume clients from accepting necessary price adjustments, leading to profit leakage.
Inconsistent Charge Reconciliation
During peak season, suppliers like carriers often levy additional charges. Reconciling these charges can be complex, and failing to consistently review and reconcile your bills against the data used to calculate client charges may result in reduced margins as charge adjustments fall through the cracks.
To ensure a successful and profitable peak season, consider implementing these strategies to strengthen your financial operations:
Automate Charge Calculations
By automating the application of billing logic, 3PLs can eliminate billing inaccuracies that may arise from complex pricing structures or the scale of operations that need to be invoiced. Automation also ensures the timely delivery of invoices.
Charge Different Clients on Different Schedules
Implementing varied billing schedules for different clients can minimize cash flow strain and ensure funds are always available for settling bills. Consider weekly billing for high-volume clients while continuing to bill smaller clients monthly. Another option is to bill all clients weekly for services requiring earlier payment, such as fulfillment labor or shipping, and bill clients monthly for administrative or storage services.
Make Data-Driven Pricing Agreements
Automating billing allows for easier implementation of data-driven pricing agreements. For example, consider offering tiered shipping rates with discounts to incentivize higher volume shipments. Additionally, leverage the data stored in your WMS to charge clients differently for orders fulfilled for different retailers or channels that require extra care and attention.
Capture Supplier Charge Adjustments Automatically
Automate the capture and reconciliation of supplier charge adjustments to ensure that every additional cost is accurately reflected in your billing. By integrating your billing system with your suppliers' invoicing systems, you can automatically adjust client invoices for any surcharges or fees incurred during peak season, protecting your margins and maintaining transparency with your clients.
Implementing these solutions can be incredibly rewarding, driving significant improvements in billing accuracy, cash flow management, and client satisfaction. However, doing it alone can be costly and time-consuming. Instead, consider leveraging a modern solution like Rails. Rails offers seamless automation of even the most complex client pricing agreements across all forms of fulfillment services, including shipping, labor, storage, and receiving. Rails also automatically captures carrier bills to reconcile costs and charge clients for adjustments.
3PLs that have implemented Rails have reduced billing errors by up to 10% and have sent out invoices to clients within hours instead of days—all while enabling key functionality and implementing previously impossible-to-execute pricing agreements to maximize margins.
Reach out today to learn more about how Rails can help you ensure a profitable peak season and beyond.