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24


Issue 6 2014 - Freight Business Journal


///FREIGHT AUDIT & PAY Information hunger drives demand


Speaking before the an- nouncement that it was taking over the nVision’s EMEA operations, VP sales at enVista, Doug Kahl (pictured, right) sees an increased interest in freight audit and payment (FA&P) services in the UK and Europe. it stems from the desire for better data quality, to move from paper to electronic information, from manual to automated, and make business process improvements.


“All in


all to be in a position to improve supply plan planning, make efficient transportation decisions, and comply with duty and tax requirements in a more timely and accurate manner.” Clients need a global


overview, “and this added to the requirements for accurate accrual information and immediate identification of VAT liabilities is driving the increase in clients who require FA&P services.” EnVista offers services throughout the world and


“is moving in the direction of providing a global framework that encompasses the local fiscal and cultural requirements; this means an ability to not only interpret the data provided by the client and the service provider but also to improve communications between both parties.” Kahl adds: “What we are seeing


more of is a collaborative effort across business units around the world. Global companies are increasing their team approach to integrate these services rather than having a decentralised/ regionalised approach as many have done in the past.” EnVista’s offering in the UK


and Europe is predominately the same as in the US, he continues, based on its proprietary audit and reporting platform, myShipINFO (MSI).


It is a soſtware as a service,


SaaS-based model and is available on-line, from anywhere, at any time.


All transportation modes are audited through MSI; units of


measure, currencies, and language translations are built into the tool. However, “our global offerings


also include the ability to provide accurate accruals and real time information to include VAT liabilities. It is our policy to not short-pay any invoice but to resolve and identify and variances within the invoicing process. This is not standard with the FA&P industry. In addition, we have always looked at a three-way communication to ensure the service providers are included and aware of the process.” There is definitely an evolution


taking place in FA&P services, Kahl continues. “The importance of the data can’t be overemphasized. Companies are finding that the leading providers can give them more comprehensive, more accurate data that they can in turn use to make better decisions upon which to manage their supply chains. It’s no longer just about ensuring a freight invoice was billed correctly per contract


terms - now we are seeing the audit database used as a key source for network design projects. “It’s one thing to save a few cents


or Euros on last week’s invoice, it’s another to use this information as the data source upon which long- term, multi-million Euro decisions are made.” There been a few issues with


less scrupulous freight audit and pay services in the US lately and standards should be tightened up, he believes. “There were two organizations that made the headlines here in the US last year in what was a recurrence of a situation from a decade past. What I’m preparing for is a higher level of due diligence from the marketplace. Multiple


departments and business units are involved, there is need for a greater level of disclosure, greater importance on references not only from clients but also the carrier community. Those are just a sample of the steps we see the marketplace taking as businesses expand their sourcing practices of engaging audit and payment service providers. “There will also be a greater


degree of transparency in the processes, particularly as it applies to the payment function. Verification of authorized carriers to pay, distinct accounts, no comingling of funds, and limited account access - of both provider and customer personnel - are coming more into play. While


the recent circumstances were unfortunate, especially for


the


clients affected, the requirements are becoming more stringent and every audit and payment provider must be ready for it.”


Horses for courses


There in fact three main types of service that come under the heading of freight payment or freight audit and pay services, says US-based Soſtware Solutions Unlimited (SSI) in its paper, ‘Global freight Audit and Payment: Real Solutions for a Complex World’. The first type it describes


as ‘No Pay Only.’ A No-Pay Transaction is one that is audited, allocated, and paid by a decentralised system and then forwarded to the global freight audit and payment system (GFA&PS) for global reporting. This is the most basic programme, but does provide the most important benefit, namely


global reporting and it allows


a business unit to retain the decentralised alternative where that is preferable to a centralised system. It may be the best way for smaller business units who don’t have the economies of scale to make centralised payment cost effective or who handle their small volume in ways that can’t be cost effectively done by a large centralised payment system. The second model SSI


describes as ‘Pay Core Carriers – No-Pay Others’. Each business unit is typically represented by a small group of core carriers as well as a list of smaller ones. The core carriers are typically larger companies with more


sophisticated EDI (electronic


data interchange) billing and electronic banking options making them better candidates for payment by the GFA&PS. As well as meeting the global reporting objective, it allows a business unit


to selectively


enjoy the benefits of lower cost and more consistent audits while retaining payment control. The third type is Full


Freight Audit and Payment and represents the complete outsourcing of the freight audit and payment functions to a third-party provider for all freight carriers. This option has been popular in the US for many years.


Cass sees growing interest in Europe


Cass Europe managing director in the EU, Kees de Jongh sees an increased interest in freight audit and pay in Europe. He explains: “The main drivers are the continued globalisation of supply chain management by the companies in the markets that we serve. This has created more centralised decision making and US companies, where outsourcing these services is more prevalent, are seeking the controls and information that freight and audit and pay provide for their US businesses.” He says that while freight audit


and pay services are still not widely known in the European shipper and carrier community,


nevertheless “there is an increased familiarity and acceptance of the value that these services provide.” He adds that Cass’s service


offering in Europe reflects the uniqueness of individual countries “as opposed to the standardisation that exists in the US. In addition, unlike the US, our services have been modified to accommodate the VAT and how payments are applied by the carriers.” Looking at how freight audit and


pay services might evolve in future, he says that there is a definite need for the information provided from such services. There is also a trend for more web-based collaboration among the freight audit and pay company, the shipper and carriers


to ensure the acceptance of freight invoice amount to be paid. As


regards standards in the


industry – there have been a few issues with less scrupulous freight audit and pay services in the US lately – he agrees that several US companies have been cited for alleged use of shipper funds for company operational expenses. However, “our company is a publicly traded financial services organisation that has transparent financial reporting and is subject to numerous audits by the US Federal Reserve and banking regulatory agencies. We have also met the control and capital requirements of the Dutch National Bank to make payments in Europe.“


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