Transportation and logistics were thrown into the global spotlight by the 2021 supply chain crisis, the effects of which are still being felt. According to Bloomberg, the cost of shipping by truck increased by 18% over a 12-month period from 2021 to 2022, while ocean freight costs rose 29%. Rail and air cargo costs were also at a 10-year high, while the American Trucking Association reported that the nation’s trucker shortage had exceeded 80,000, which could grow as high as 160,000 by 2030. These combined challenges have made it more important than ever for logistics companies to optimize their cash flow and forecasting.
Transparency in the receivables process has become business-critical, particularly when it comes to the ability to anticipate payments. This is of particular importance to smaller carriers who often depend on a predictable payment schedule to better manage cash flow.
Looking Ahead with Predictive Analytics
Knowing when payments will arrive is key to success for AR departments in logistics, which makes predictive analytics one of the most useful technologies out there.
What are predictive analytics?
IBM defines it as, “a branch of advanced analytics that makes predictions about future outcomes using historical data combined with statistical modeling, data mining techniques and machine learning.”
Quadient AR uses algorithms that analyze past customer data, such as old payments and credit memos. The software then uses that data to project future creditworthiness and the possibility of late payments, with results that range from 84%-94% accuracy. This means that Quadient AR can correctly predict customer payment behavior at least 84% of the time and for logistics companies, this is transformational.
In addition to assessing whether or not a payment is likely to be made on time, the software also uses the algorithm to estimate when late payments can be expected, breaking them into buckets of 1-30 days, 31-60, 61-90, and 90+.
To provide an even better sense of your financial health at any given time, Quadient AR also uses the same approach on your company as a whole to provide a better understanding of your average customer’s payment behavior. All of the information is then formatted into easy to use and understand charts that not only inform you of when invoices are likely to be paid, but how much money you will receive on any particular day.
The projections provided can be tailored to suit your needs, displaying either the next 7, 17, 30, or 60 days, breaking down total dollar amount into ‘promise to pay,’ ‘projected to be paid,’ ‘projected to be unpaid,’ and ‘past due, no promise.’
While rising costs and a faltering economy remain outside of your control, the tool provides you with the data needed to safely navigate the choppy waters. Having an accurate idea of when to expect incoming money allows you to plan investments and cash distribution in a logical way.
Maintaining Invoice Accuracy
Invoice accuracy is of particular importance in the logistics industry, as any exceptions or discrepancies typically must be reviewed, which can lead to delayed payments from shippers to carriers or result in payment errors.
Adopting an AR automation solution such as Quadient AR provides tools that ensure the accuracy of invoices and gives both customers and accounts receivable teams the transparency needed to spot any errors early in the process.
By integrating with your ERP, CRM, and other back-office solutions, automation software ensures that customer and invoice data is shared quickly and accurately, reducing the risk of human error and ensuring that invoices are accurate when they are created. Because the systems communicate, the data is visible between departments, so that all employees are working from the same information. In addition, an internal dashboard allows team members quick access to the data in the event that questions or disputes arise during the process.
A self-service customer portal also enables customers to quickly access invoices on their own schedule and to assess them for accuracy. The system provides them with the means to ask questions or raise disputes and uses artificial intelligence to assess the query and direct it to the correct team member for swift resolution.
By providing a high level of process transparency, both customers and AR team members are able to ensure accuracy along each step of the credit to cash journey.
Maintaining Proper Documentation
Another key element in AR transparency that is particularly import to logistics companies is easy access to supporting documentation. This is especially important for larger logistics companies, who often not only require invoice information, but all relevant documents surrounding a transaction for reconciliation purposes.
Quadient AR’s integrations enable the software to access all relevant documents, and they can easily be attached to email communications. In addition, the solution keeps a detailed communication history, so that every touchpoint is traceable.
The customer self-service portal also makes it easy for customers to add requested documents to their accounts for review by the appropriate team members. This ease of use and transparency for both customer and AR team members ensures that both sides always have quick access to the data needed to quickly resolve invoices, leading to better and more predictable cash flow.
Together, all of these features help provide optimum transparency for both shippers and carriers, providing maximum benefit for both parties. To learn more about how predictive analytics can transform accounts receivable, read our blog What is Predictive Analytics and How Can It Benefit Your AR.