As long as there has been a logistics industry, organizations have had the challenge of managing invoicing, auditing, and the cash conversion cycle efficiently. And, it seems as long as there have been these challenges, there have been some widely accepted myths in the industry leaving many with the belief that it is just the way it is.
However, these prevalent myths and the acceptance of them can hinder companies from optimizing their financial operations. In this article, we will aim to debunk five common myths about invoicing, auditing, and the cash conversion cycle that have been commonplace in the logistics industry. By dispelling these misconceptions, third-party logistics providers and freight brokers can gain valuable insights into streamlining their invoicing processes, enhancing auditing practices, and improving cash flow.
Myth 1: Paper Invoicing is Sufficient for Effective Financial Management
While traditional paper-based invoicing may have been the norm in the past, it is no longer sufficient in today’s digital age. The ability to automate your invoicing process has tremendous benefits which can be realized by a reduction in errors, speed to payment, and efficiency. Yet, many organizations are still not fully embracing automation for this process.
Electronic invoicing enables faster processing, minimizes errors, and provides better visibility into outstanding payments; all of which go a long way to improving carrier satisfaction.
Myth 2: Automating and Outsourcing Invoicing Services is Costly and Ineffective
Many freight brokers and 3PLs believe that outsourcing their freight audit and invoicing is an expensive and ineffective solution. However, customers are experiencing otherwise. Evans Transportation realized a reduction in its invoice error rate to nearly zero and reduced its order-to-cash cycle to under three business days.
Specialized technology companies that have advanced AI solutions and industry best practices, allow businesses to benefit from accurate and timely audits. Investing in these solutions will improve the efficiency of internal resources, and greatly improve the financial health of the business.
Myth 3: The Cash Conversion Cycle is Beyond Our Control
Reality: Many logistics professionals believe that the cash conversion cycle is beyond their control. We have heard from many operations and IT professionals as well that the cash conversion cycle is something that only the CFO needs to worry about. Both of these ideas are inaccurate.
Cash conversion is critical to the health and growth of any business and all roles need to be attuned to its importance and how they can optimize the process. Using AI and machine learning to accelerate the order-to-cash process will help logistics organizations optimize growth and improve their cash flow position, both things that every organization needs.
Myth 4: Delayed Payments are Inevitable in the Logistics Industry
It is a common misconception that delayed payments are an inherent part of the logistics industry. While this is a common thought in the logistics industry, many other industries have been impacted by payment delays which impact cash flow.
By implementing proactive measures such as electronic invoicing, offering incentives for early payments, and establishing clear payment terms, logistics companies can significantly reduce payment delays. Moreover, fostering strong relationships with customers and providing exceptional service can lead to optimized payment processes which will improve cash flow.
Invoicing, auditing, and the cash conversion cycle are critical aspects of financial management in for all freight brokers and 3PLs. By debunking these common myths and embracing best practices, organizations can optimize their invoicing processes, enhance auditing practices, and improve their cash position. Embracing AI, outsourcing when appropriate, actively managing the cash conversion cycle, and implementing proactive measures against delayed payments will lead to improved financial performance and give you a competitive edge.