Universal Billing
Freight payment firms support shippers' globalization efforts

REPRINTED FROM TRAFFIC WORLD
By Kathleen Hickey
June 21, 2004


The decision to go global turns out to be the easy part. Figuring out how to pay your suppliers in a dozen countries with different currencies and banking rules is another matter.

As shippers and consignees demand more and better shipment status information, freight payment services are moving beyond auditing and processing bills to provide shippers with additional technology-based services.

For example, Data2Logistics is introducing a new service, Data2Rates; to help shippers identify the lowest cost carrier for point-to-point moves. "A lot of people can't afford a transportation management software system," said Harold B. Friedman, senior vice president of sales and marketing at the company. Yet at the same time, "shippers continue to get smarter. They are asking for, and receiving, new tools," he said.

Shippers enter their shipment characteristics into Data2Rates through the Internet and the service then displays available carriers and rates specific to that shipment. A bill of lading and shipping labels can be prepared and printed from the Web site.

Shippers also want help assessing truckers' surcharges and accessorial fees. As freight capacity constraints increase, shippers are finding more and higher accessorial fees and surcharges added to their transport bills, and tracking them is becoming more difficult.

"We're seeing more types of accessorial charges as part of shipments outside of linehaul," said Tom Zygmunt, manager of marketing for Cass Information Systems. These charges have proliferated in the past few years, especially for package shipments, he said, and shippers increasingly want freight payment services to track these charges for them as they have become a greater part of the freight bill. Cass breaks out every accessorial charge for customers. Its accessorial reports help shippers reduce transportation costs and improve negotiations with carriers, Zygmunt said. Other firms provide similar services. "With accessorials . . . we will break out every single fee for every single customer,” said Mason Kauffman, CEO of Accuship.

And did we mention agreeing on terms of payment and determining exactly what services you're paying for?

As more and more U.S. companies manufacture products or source materials and components globally, they are finding they must change freight payment practices to keep funds flowing to more complex networks of carriers, forwarders and suppliers. They also must cope with a confusing array of national and international regulations, currencies and customs.

Shippers need to be able to pay carriers in currencies ranging from the U.S. dollar to the euro to the Chinese yuan. And they need to be able to track payments - no longer can you call business partners and say, "The check is in the mail."

Shippers also need to be able to calculate duties and surcharges worldwide and to analyze financial data from disparate sources around the globe. That's a task that becomes increasingly difficult as supply chains involve more business in more nations in far-flung locations.

All that poses a challenge for U.S.-based freight payment companies. Some freight payment firms are following their customers overseas to help them handle complex international transactions. Others are handling international transactions for shippers from processing centers within the United States.

Regardless of their location, these companies say they can provide shippers with a single repository for incoming financial information while giving them access to financial expertise, allowing them to reduce staff and focus on their core businesses. And they can deliver this data through the Internet.

As the economy heats up and international trade expands, more multinational shippers are turning to freight payment firms to process and audit freight bills, said Randy Wheeler, executive vice president of international freight forwarder SEKO Worldwide, Itasca, Ill. He said the transition from in-house billing to outsourced freight payment has been rapid.

The change is part of an established trend. Many domestic shippers use freight payment services primarily to process payments for domestic less-than-truckload shipments, wheeler pointed out. In recent years shippers, especially large companies, have expanded their use of freight bill payment and auditing services to include a variety of other modes, including international ocean and air moves, he said.

As they become multinationals, shippers have had to change the way they do business with freight payment service providers, Wheeler said. Shippers have "had to upgrade the quality of (freight payment) companies they work with," because international freight moves are far more complicated than domestic moves, he said. That means smaller freight payment companies either must ratchet up their capabilities and levels of service or lose business to larger firms.

As a forwarder, SEKO often finds itself involved in freight payment transactions on behalf of the shipper and the shipper's customer. SEKO adapted to the situation by "forming a tripartite relationship" with freight payment firms and shippers, said Wheeler. "We have to service the customer, the shipper and the freight payment company," said Wheeler. "The tendency used to be toward an adversarial relationship and we don't want that. We want to service (the shipper) as best we can and give them the information they need."

Freight payment services often open offices overseas because their customers want them to be there and to win new customers overseas, said Mason Kauffman, CEO of freight payment firm, Accuship. Germantown, TN-based Accuship is planning to open offices in Europe and Asia, "because it makes good sense for global expansion," he said.

Another freight payment firm with global marketing plans is Data2Logistics. "We just formed an organization in The Hague in the Netherlands for consulting and support services and ultimately processing," said Harold Friedman, senior vice president of sales and marketing for the Fort Myers, FL-based firm. International transactions aren't new to the company, he stressed. "We have been processing for years in foreign currencies." Friedman noted that global freight payment represents 10% of Data2Logistics' business and is a new and growing interest in Europe.

Friedman sees Data2Logistics offering its services to European companies as well as U.S. companies with business in Europe. "The goal is not to replicate what we do in the Unites States. We will provide a local product, he said. The freight payment company chose the Netherlands because of the high concentration of logistics companies centered around Amsterdam's Schiphol Airport and the Port of Rotterdam.

However, it's not always necessary to have a physical presence overseas to process international freight payments. Cass Information Systems, which handles more than $12 billion in freight and utility invoices a year, has seen more and more of its customers go global but isn't in any rush to open offices outside North America.

"We still view it as a developing situation," said Tom Zygmunt, manager of marketing at St. Louis-based Cass. For many multinational firms, freight payment is a function that can be handled from headquarters, he said. Nearly 15 percent of the freight payments processed by Cass - worth more than $1 billion annually - are international transactions, but "we haven't seen anybody asking us for a physical presence in China," Zygmunt said.

For shippers expanding internationally, working with a freight payment service provider to establish a centralized freight payment system may be the best way to deal with cross-border issues, said David Atkins, chairman of global business consultancy Atkins International, Garden City, New York. "A centralized payment program can affect discounts, can review paperwork for accuracy. It's an opportunity to have an objective opportunity to review those payments," he said.

Working with a freight payment company eliminates the need for in-house staff to process and audit bills, he points out. Atkins recommends shippers have two freight payment firms rather than one so that "not all your eggs are in one basket. It is a problem if you outsource only to one firm and that firm collapses or gets too busy."

Concern over the stability and security of freight payment services is a major issue for shippers today, said Zygmunt. "Some of this could be the direct result of bankruptcies," he said, referring to the failure of firms such as strategic Technologies and Computrex in recent years. Other security concerns stem from the new Sarbanes-Oxley accounting law that requires greater corporate accountability over finances. The same rules apply to shippers managing their freight payment providers, said Zygmunt.

Accuship's Kauffman said global shippers have four key issues to deal with: converting units, for example, weights from pounds to kilos or miles to kilometers; currency conversions and the ability to store the information in a "currency of record" yet convert as needed; duties and taxes and terms of shipment. Zygmunt lists another concern: language.

With currencies, "you might be paying in euros but you want to report it in dollars or in another currency," said Kauffman. "You have to have the ability to store or extrapolate out any currency. And you need the ability to do currency conversion at the ship date or at invoicing or at time of payment or projecting into the future. You have to really think the process through," he said.

Even with duties and taxes, shippers simply can't lump these items together. "You need to be able to clearly separate out all national and state taxes," he said. "There is likely another guy paying the tax bills separate from the one paying the freight bills." With good tax information, shippers can determine their refunds and duty drawbacks they are eligible for, he said.

Shippers have other freight payment concerns beyond globalization. Kauffman identified several issues or problems companies have with freight payment services, all centered on obtaining information. Shippers want their freight payments system to integrate and work with all their internal systems, with their banks and with their consultants' systems, he said.

At the same time, they don't want to be inundated with information. The ability to consolidate invoices "is huge," he said.

Accuship consolidates bills, audits and sends them to the customer. Flexibility to allow either the shipper or freight bill processor to pay the carrier is another demand.

Perhaps the biggest issue outside of information and globalization is security. "Right now there is no security," said Kauffman. It's too easy to bill third parties for shipments they aren't even involved with, he warned. "That's the amount of security we have today - zero. It's scary."

For more information contact:
Mason Kauffman, Chairman & CEO
AccuSHIP
901.271.1936
mkauffman@accuship.com