Logistics services, especially in the warehousing/contract logistics sector, is not a simple business. Even if the operational challenges have been successfully managed, the service must be charged to the customer on time and correctly. The billing intervals and deadlines are contractually fixed, and the services to be billed and their prices are clearly defined. So, where is the problem?
Essentially, the billing must be accurate, complete, and traceable.
Accurate
The prices must be correct; more specifically, the rates must be correctly applied. Here it becomes apparent that the agreed price sheets are not always straightforward. During contract negotiations, special clauses, exceptions, or very specific calculation methods were established.
These calculation methods can also add complexity to the quantity calculation. Minimum and maximum values at the item level are summed up and then broken down…
Once the quantity is calculated, the question of traceability arises.
Traceable
Each invoice item must be understandable for the service provider, but especially for the customer, too. The more complex the calculation method, the more complex the traceability. A “simple” list of the data used is then no longer sufficient.
The services provided are often recorded in various systems within the complex IT landscape of the service providers, not as a service but with a focus on executing operational activities. Thus, reports are drawn, summarized, converted, and much more. Minor changes to the operational process can lead to (sometimes undetected) discrepancies in the billing lists. It would not be surprising if Excel remains the most used billing tool. Thus, the traceability is often only clear to the person handling the billing.
Complete
If the activities are not exhaustively billed, it either results in losses for the service provider or unpleasant additional charges to the customer. How can the completeness of the charges be ensured and even verified? Since it is necessary for payroll, the working hours of the employees are known. These must then be fully allocated to activities, whether billable or not. The activities are in turn assigned to the billing items, again those with and without customer relevance. This way, the completeness can be checked, and it is best to do so daily. In this case, it is not far from a profit and loss statement for each individual day. This does not necessarily have to do with accounting accuracy but is good feedback to check the commercial outcome of the personnel planning. Corrections can possibly be initiated during the billing period and not just after the month’s end. Gaps that have arisen through special services, e.g., clarifications on behalf of the customer, can be better observed and documented as additional services within daily reviews.
Finally, the period accrual should be noted. Started but not yet completed orders should often only be charged after completion, but they must also not be forgotten.
As shown, creating a correct service invoice is not trivial. Quality assurance often includes cross-checks with the previous months and multi-level approval processes.
The flumiq 3P model is an excellent basis for service billing. Activities can be consolidated from various systems, especially from the warehouse management system. Since the data is also used for other purposes, such as capacity planning, process mining, and productivity management, the efforts here are distributed, and data quality is enhanced with each new use case. Traceability can be established by linking each individual activity item or task with a billing item. This way, completeness can also be checked. Approval processes and comparisons with previous periods can also be implemented.
Lastly, it should be mentioned that the discussion focused on the perspective of a logistics service provider (3PL). However, an intralogistics operation can similarly set itself up with detailed cost accounting and the resulting benefits (see the article “How much does logistics cost?“).