[ 3613, The perfect Invoice - a vision on how to improve invoice accuracy between rail carriers and shippers Hanna Gradzka, Solution Manager Transportation & Logistics, SAP AG Bernd Lauterbach, Senior Solution Architect, Transportation & Logistics, SAP AG [ Learning Points What are the actual problems that railways and the payment parties of their shippers / customers are facing in terms of correct and comprehensive invoices SAP solutions to prepare and present invoices from forwarder/carrier to customer and how this can be a first step towards better invoices and settlement Visions on utilizing SAP TM to bring invoice creation, and bill presentment at carrier side into sync with settlement and matching at customer side to head towards a perfect invoice Real Experience. Real Advantage. [ Shipper-Carrier Interaction and Invoice Accuracy Shippers Customer Shipper Set data foundation for invoice: Requested data Receive customer order Manage order acceptance Simulate shipment options Carrier Order Acceptance Shipment Proposal E2E routing proposal for shipper order Delivery proposal Delivery decision Placement of transport requests Shipment Placement Allocation of capacities Confirmation of transport requests Enhance invoice data with events and actual master data / transactional data Prepare deliveries for shipment Logistics Operations Prepare and execute road haulage and rail movement Create and match invoices based on complete events history, actual data, acutal conversion rates and taxes Happily pay invoice Shipper Invoicing Invoice freight to shipper Rail Order and Operations Processes Planning Real Experience. Real Advantage. Order Management Execution Planning Subcontracting Operations and Control [ ISSUES AROUND FREIGHT INVOICES AND PAYMENT Real Experience. Real Advantage. 4 [ General Info – North American Logistics (USA) • • Business logistics costs $1.21T in 2010, 10.4% increase from 2009 Logistics as percentage of GDP 12,00% 10,00% 9,40% 8,30% 8,00% 9,90% 7,80% 6,00% 4,00% 2,00% • Transport Modes 0,00% 2010 2009 2008 2007 • Trucking – revenue rose 5.7%, not enough to reverse losses; 16% capacity removed; when demand rebounds may not be able to respond • Rail – revenue posted 21.8% gain due to success in raising rates; carloads increase 7.5%, intermodal volume increase 14.2%; sector is in very strong and in very good shape on capacity • Ocean – Revenue rose 14.1%; suffering from overcapacity; spot rates dropped 40-50% over Q4 2010 • Air – revenue rose 11.2%; air cargo capacity however has shrunk 12% Source: 22nd Annual State of Logistics Report Real Experience. Real Advantage. [ Freight Bill Payment & Audit Issues • Freight Bill Payment Issues: • Cost to process freight bills internally (due to administrative overhead , dispute settlement, etc): $4 to $12 dollars per freight invoice, average $8 per freight invoice • It used to be common for carriers not to be paid for 45 days because of manual processing delays. That put tremendous financial stress on carriers. • If problems go unresolved for months, the carrier is effectively lending the shipper money. • Trend: to outsource Freight Bill Payment and Audit to 3rd Party • Cost savings offered by outsourcing to freight auditing companies is about 2-5% of total freight bill derived from • invoice errors – wrong rate authorities used, duplicate invoices, etc • Carriers’ service level infringements • Rate & Service Visibility • Years ago, shippers could go to a tariff system and see the cost of shipping from point A to point B. Today they can’t do that because every carrier has its own rates. • Historically, 4% to 6% of freight services went unbilled. Transactions fell through the cracks or problems dragged on unresolved because of inaccurate or incomplete information. Source: http://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-finances -in-ship-shape Real Experience. Real Advantage. [Jobs in Freight Transportation Arrangement (USA) Management Occupations All Jobs in Freight Transportation Arrangement Business and Financial Operations Occupations Computer and Mathematical Occupations Architecture and Engineering Occupations Legal Occupations 8% 20% 5% 1% 8% 1% 57% Arts, Design, Entertainment, Sports, and Media Occupations Arts, Design, Entertainment, Sports, and Media Occupations Protective Service Occupations Compliance Officers Cost Estimators 1% 1% 6% 1% 6% 31% 14% 1% 3% Still a very labour-intensive and paper-based business: Office and admin support (57%); Transportation and material movement (20%); Sales related (8%); Mgmt (8%); Business and Financial operations (5%) Business and Financial Operations (5% of total): Accountants and auditors (31% or 2,580); Business operations (28% or 2330 ); Logistics (14% or 1220) Note: there are more accountants and auditors than logistics employees! Source: U.S. Bureau of Labor Statistics 2010 NAICS 488500 - Freight Transportation Arrangement; http://www.bls.gov/oes/current/naics4_488500.htm Real Experience. Real Advantage. Management Analysts Training and Development Specialists 4% 28% Human Resources, Training, and Labor Relations Specialists, All Other* Logisticians 4% Building and Grounds Cleaning and Maintenance Occupations Personal Care and Service Occupations Sales and Related Occupations Office and Administrative Support Occupations Installation, Maintenance, and Repair Occupations Transportation and Material Moving Occupations Purchasing Agents, Except Wholesale, Retail, and Farm Products Business and Financial Operations area of Freight Transportation Arrangement Market Research Analysts and Marketing Specialists* Business Operations Specialists, All Other* Accountants and Auditors Financial Analysts Financial Specialists, All Other [ Freight Audit • Freight audit is the process of examining, adjusting, and verifying freight bills for accuracy • Freight costs • Costs incurred by the merchant in moving goods, by whatever means, from one place under the terms of contract of carriage. In addition to transport costs this may include such elements as packing, documentation, loading, unloading, and transport insurance • Complexity of Freight Cost Calculations and Freight Audit • Rising freight costs: freight costs can make up 10% of an organization’s expenditure; drivers: volatility in fuel prices, uncertainty of demand, complexity of freight quotes • Freight cost calculations are vulnerable to human and process errors hence requires proper auditing to ensure that the organization does not overpay for services it did not incur • Forwarder freight rates are usually maintained in multiple spreadsheets and usually each forwarder has a different freight rate format to the customer. Shippers also try to maintain their own freight rates tables which may not be up-dated Recipe for dispute • Freight rate calculations – complex and error-prone • Freight audit – tedious process; done either in-house or outsourced to 3rd party Real Experience. Real Advantage. [ Freight Audit Trends • Outsourced Freight Audit Some companies don’t have the resources to do the freight audit hence outsource to 3 rd party • A freight bill payment company receives its clients’ freight bills directly from the carriers. • When the bills are received, either via EDI or manually, they are entered into the contractor’s system, providing immediate visibility. • Once the bills are entered, they are audited for accuracy. Auditors verify the bills’ validity, mileage, duplicate payments, accessorial charges, and use of correct tariffs. • After auditing, the charges are coded and reconciled, and the bills are paid. • Self-billing Some companies have gone forward with a process to pay freight bills. The customers calculate their freight cost themselves and instruct the freight forwarders to invoice using credit notes. This process transfers the responsibility to correct freight calculation from the customer to the forwarder. Real Experience. Real Advantage. [ Dispute causes Waybill Missing data has been defined / completed by carrier Different source of events Master Data Different master data used as base for calculation Accessorials Freight transportation rates Demurrage Switching Charges Fuel Surcharges Domestic Reposition Weighing Storage Charges Handling Charges Real Experience. Real Advantage. Touch Points and Dispute Causes between Shippers and Carriers Quote/Contract High complexity Different source of influencing master data Invoice Wrong rates calculated/expected Distance between O/D – different base Unclear accessorial charges Rate Effective Date varied Exchange Rate Date Wrong events as base for calculation Missing transparency [ Dispute Impacts Impacts …on Process Efficiency Complexity Factors Different communication channels Many parties and opinions involved Lots of information to gather and take into account Complex to evaluate the "real" reason It‘s a money issue No clear responsibilities No predefined escalation rules No monitoring of process and duration No process control Long resolution cycles Progress in resolving not measurable Not all involved parties have access to all relevant information …on Customer No clear status reports - not "one voice” Decreasing satisfaction …on Cash-Flow Late cash-flow (liquidity, interest) No partial payments possible No partial dunning locks possible "Incorrect” posting in General Ledger (Revenue vs. Doubtful Revenue) …on System Real Experience. Real Advantage. Support of multiple channels [ Disputed Invoices – Pain Points High DSO (Days Sales Outstanding) Difficulty in predicting cash flow High cost of solving disputes Disputed invoices can indicate issues in the customer relationship due to Quality problems Pricing Account relationship … Real Experience. Real Advantage. [ SAP Components BETTER INVOICES AND BILL PRESENTMENT Real Experience. Real Advantage. 13 [ SAP Solutions with Improved Invoice Transparency SAP offers several components which support an enhanced invoice flexibility and transparency Convergent Invoicing (invoice creation) FSCM Biller Direct (bill presentment) Financial Customer Care (dispute & collection management, dunning) Preparation and presentation of invoices in a customer centric way Real Experience. Real Advantage. 14 [ Customer-Centric Transportation Solution with SAP Customer Focus Product Standardization Global Service Product Catalog Service Configuration Customer Proximity Operational Excellence Proactive customer information Standard and Customer Operating Procedures 360° Customer Information Rules Compliance Customer Exception Excellence Customer Financial Care Incident Management Full Invoice Control Exception Solution Knowledge Sharing Dispute Management Multilevel Visibility Interaction History Solution Excellence delivered through component activation, extension, and integration SAP Standard Transportation Solution Platform CRM Real Experience. Real Advantage. TM EM ECC / CI [ Convergent Invoicing – Billing Functionality Convergent Invoicing is a Solution for High Volume Billing and Invoicing Invoicing consolidates billing streams coming from multiple systems Freight-related charges to be billed Event-based accessorial charges to be billed Any other charges to be billed Flexible control of the way how billing is done by utilization of contract accounts Control of billing cycles and invoice convergence Control of billing forms and communication paths Control of payment terms Convergent invoicing allows to create customer invoices that meet the SLA’s of a customer Real Experience. Real Advantage. [ Convergent Invoicing – Billing Functionality (2) Convergent Invoicing is a Solution for High Volume Billing and Invoicing Business related, pre-configured invoicing functions for: Calculation of interest, account maintenance, charges and discounts Time and event based deferred revenues Invoice Cycle Management Pre-defined offsetting of credits Credit Card payments with direct clearing Collective Bills and Invoice lists Tax calculation Bill print out / interface to print systems Standard interface to FI-CA and FI-GL, CO, CO-PA Full RM-CA functionality for posted invoices Extract of billing and invoicing details to BW Real Experience. Real Advantage. [ Charge Calculation to Cash Covergent Invoicing Other Legacy Systems Additional Charges Other Charges Contracting & Charge Management Contract Order revenue Customer Order Billable Item Billable Item Billable Item Draft Invoice to customer Billable Item Billable Item Order Settlement Transfer Charge Calculation Logistical context Finance Draft Invoice Data 1) Basic Sea Freight 1253,00 USD 2) BAF 221,20 USD 3) CAF 163,88 USD 4) Terminal Handling 189,70 USD 5) Demurrage 211,30 USD POL: CNSHA, POD: USSPQ Container type: 42GP Container ID: EASU7777779 Commodity: 5270 Charges 1) Basic Sea Freight 2) BAF 3) CAF 4) Terminal Handling 1253,00 USD 221,20 USD 163,88 USD 189,70 USD Accessorial Charges Real Experience. Real Advantage. Invoice 1 31.03.2011 Invoice 2 14.04.2011 Invoice 3 30.04.2011 [ Draft Invoice in SAP TM Charge calculation in TM Charge item details for long haul charges Real Experience. Real Advantage. 19 [ Billable Items and Invoice Display in SAP CI Logistical context data for each billable item available Real Experience. Real Advantage. [ Financial Customer Care Financial Customer Care is a composite application (based on ERP and CRM), which integrates FI-CA processes into the CRM Interaction Center Web Client. The processes are grouped in the following scenarios: 1. Financial Customer Care: Financial Fact Sheet, Account Balance Overview Dunning History, Payment Search 2. Collection Management: Triggering of collection process and Collection Fact Sheet Payment (credit card, debit memo, ...) and Installment Plan Deferral and Promise2Pay 3. Dispute Management: Wrong Invoice Missing Credit Memo Real Experience. Real Advantage. 21 [ Dispute in IC WebClient Dispute can be created on bill, (bill line item level). Dispute contains: Customer master data, order/contract data Disputed objects and their disputed amounts Related objects attached as information Correspondence Status /Priority Notes Adjustment Requests Routing capabilities, action triggers, ad-hoc or automated correspondence Creation of adjustment request with relation to the dispute Disputed bills are marked with an icon Real Experience. Real Advantage. 22 [ Dispute Management Functions at a glance Business case: IC agent is empowered to answer a low-value dispute positively Load and display invoices from (external) billing systems in IC, including invoice line details Create adjustment request for a complete invoice, an invoice item, or a single billable item Real Experience. Real Advantage. [Dispute: Example with Adjustment Request on BIT level Direct adjustment of charges billed to customer in an invoice can be done Real Experience. Real Advantage. 24 [ SAP Biller Direct (FSCM) SAP Biller Direct is part of SAP Financial Supply Chain Management and provides functions for Electronic Invoice Presentment and Payment (EIPP) Using SAP Biller Direct, invoice recipients can see their account balance with the biller and look at their bills, credits or payments Invoice recipients can initiate payments or download bills into their accounts payable system Invoice recipients can dispute bills from the Internet and collaborate with the biller SAP Biller Direct enables real-time integration between the SAP backend system and the Internet without any data redundancies Real Experience. Real Advantage. 25 [ Advantages for the Biller Billing Lower cost of billing with no printing and postal charges Use of open communication and data standards (HTTPS, XML) Customer participation in electronic business without EDI Payment Processing Efficient processing of payments and exceptions More precise cash management and improved liquidity planning Faster invoice approval and payments by customers Better explanation of payment deductions Integration Data integration with accounts receivable and cash management Integration with other business processes, e.g. dispute and collections management Real Experience. Real Advantage. 26 [ Advantages for the Bill Receipient Payments Simplified and secure processing of electronic payments using 365/24 access to the Internet Control over the time of payment and management of the outgoing cash flow Favorable payment conditions can be better exploited Payment details can be easily analyzed Invoices Fewer accounting and settlement errors Comprehensive data analysis is possible Immediate access to invoice copies (no archiving necessary) Integration No changes of existing business processes Only Web Browser needed Real Experience. Real Advantage. 27 [ SAP FI-CA– Financial Customer Care / Biller Direct Real Experience. Real Advantage. 28 [ Added Transparency in Disputes with CI / FCC Waybill Missing data has been defined / completed by carrier Different source of events Master Data Different master data used as base for calculation Accessorials Freight transportation rates Demurrage Switching Charges Fuel Surcharges Domestic Reposition Weighing Storage Charges Handling Charges Real Experience. Real Advantage. Touch Points and Dispute Causes between Shippers and Carriers Quote/Contract High complexity Different source of influencing master data Invoice Wrong rates calculated/expected Distance between O/D – different base Unclear accessorial charges Rate Effective Date varied Exchange Rate Date Wrong events as base for calculation Missing transparency [ OPTIONS TO GET CLOSER TO A PERFECT INVOICE Real Experience. Real Advantage. 30 [ Visions to Get Closer to a Perfect Invoice External Rating Service of Carriers called by Shippers Rating with synchronized Contracts Pain Points: Master data Commodities Distances Services Shipping conditions Real Experience. Real Advantage. 31 [ Integration Options between Shippers and Carriers Shipper/Customer 1 2 Shipper with own Transportation Planning Capabilities Shipper w/o own Transportation Planning Capabilities Real Experience. Real Advantage. SAP ERP Rail Carrier / LSP SAP TM SAP TM Integration Infrastructure(s) (e.g. Crossgate) SAP ERP SAP TM [ 1: External Rate Determination by Carrier Shipper creates a freight order and calculate charges according to own contract data Freight order is sent to the carrier Carrier receives order, calculates expected charges and responds with charge list Shipper does a rate matching to discover discrepancies or takes over carrier rates Shipper/Customer Carrier SAP ERP SAP TM SAP TM Order Object Order-based Transport Request Freight Order Charge 1 Charge 1‘ Charge 2 Charge 2‘ Charge 3 Charge 3‘ Rate Matching Functional extension required Real Experience. Real Advantage. Forwarding Order External Rating Service Dlvy-based Transport Request Charge parameterization Charge 1 Charge 2 Charge 3 Charge Calculation Engine [ Rate Detemination by Carrier: Benefits and Coverage Benefits Master data synchronization can be kept minimal Synchronization of utilized charge elements simplifies rate matching Rate information of carrier can be received at an early stage Disputes and payment delays can be avoided by early agreement on deviating charge elements Coverage Process to a certain extend supported by TM standard Freight order transmission and external charge calculation via external service Missing functionality: Parallel capture of own and external rates Rate matching of carriers vs. shippers calculated rates Preacceptance of carriers rate not available Real Experience. Real Advantage. 34 [ 2: Synchronized Contract Information Contract and rating data is synchronized from carrier to shipper Freight order rating is done using the synchronized contract data Carrier sends execution updates to stay in sync on events and actuals Shipper/Customer Carrier SAP ERP SAP TM Execution updates Order Object SAP TM Order-based Transport Request Dlvy-based Transport Request Freight Order Forwarding Order Charge 1 Charge 2 Charge 1 Charge Calculation Engine Charge 2 Contract Rates Master Data Real Experience. Real Advantage. Charge 3 Contract, Rate & Master Data Synchronization Charge 3 Charge Calculation Engine Contract Rates Master Data 35 [ Synchronized Contracts: Benefits and Coverage Benefits Rate information of shipper and carrier can be kept in sync Disputes and payment delays can be avoided as both parties use the same rating process Full transparency including rate drilldown Coverage Rating process in TM is covered in standard Master data synchronization required e.g. for Commodities, equipments, Service levels, shipment conditions and accessorials Missing functionality: Master data synchronization Contract, rating guideline (TCCS), and rate synchronization Use of rating templates could ease the synchronization problem Real Experience. Real Advantage. 36 [ Other Ways Forward Use of 3rd party invoice matching services Continuous financing of 3rd party service required Establishing an invoice clearing house with master data and rate harmonization Clearing house provides service for master data harmonization, invoice conversion, and dispute management Rail industry has an organization up and running which provides such services within the industry (Railinc) Real Experience. Real Advantage. 37 [ Key Learnings Customer invoice mismatches due to various factors are still a serious issue in transportation industry Handling of disputes and outstanding payments are a …. SAP offers various tools to support higher transparency, customer proximity, and invoice accuracy Convergent invoicing Biller direct Financial customer care SAP Transportation Management provides a flexible foundation to create better customer invoices Furthermore, extensions to SAP TM and extended integration mechanisms offer the chance to remove most invoice mismatches between carrier and shipper Real Experience. Real Advantage. 38 [ ] Thank you for participating. Please remember to complete and return your evaluation form following this session. For ongoing education on this area of focus, visit the Year-Round Community page at www.asug.com/yrc [ Real Experience. Real Advantage. SESSION CODE: 3613 39
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