Third-party logistics providers or 3PL businesses face complex and unique challenges when it comes to billing and invoicing. The days of manual invoicing are slowly fading, with many 3PL logistics switching from a manual to a digital process in order to streamline their invoicing. However, it’s not as simple as introducing software to your system and hoping it will solve all your billing-related issues.
In this blog, we talk about why your business needs software that’s built, keeping in mind the distinctive nature of 3PL businesses.
3PL Invoicing is a Whole Another Beast
Invoicing, when you are a third-party logistics, is different than when you are a warehouse shipping your own goods to clients. Standard software assumes that you own the material at a cost, and it is by selling at a margin that you can use the profit to pay your bills and employees.
Since a 3PL is not invoicing the material shipped to a customer, it can’t use standard software for invoicing.
When a 3PL provides services to more than one customer at the same time, they should have the ability to differentiate one client’s material from another, whereas customers need to be able to use the same sales order number, purchase order number, and item number in the same warehouse. They need to separate each customer transaction not to create confusion on the warehouse floor.
A good 3PL WMS should allow you to bill by activity. It must utilize service contracts, pricing of logistics services, and activity data in WMS to generate an itemized invoice based on the services performed on its clients’ behalf. This process takes care of the exact space and volume used and transacted. Such a WMS offers billing sources for basic logistics functions such as order receiving, put-away, storage, packing, picking, staging and shipping goods.
The Issues with Using the Average Cost and Not True Cost
A standard system will not discriminate service pricing according to the unit of measure of the material movements. You, then most likely, will be invoiced using the average cost. This could be counter-productive and impact the growth of your business negatively.
Using the ‘average cost’ will distort your business. It is a losing proposition. The customer will find that large or small volumes are expensive to process in your warehouse and will give you only their cheapest business.
The bottom line is that you can grow your business in these two areas and optimize your space-volume usage only if you invoice accordingly.
If you’re looking to put your 3PL invoicing issues to rest and implement a software that actually works for you, PL Solutions has the answers for you. Schedule a free consultation today to discuss your requirements and how we can help.