Fulfillment Billing Pro Tips to Avoid a Vicious Cycle

January 23, 2019
4 min read

When it comes to billing your customers every month, do you get lost in the black hole of combing through data? How did we get into this mess anyway?

Oh yeah, we want to make money! Let’s start at the beginning. Landing a new fulfillment account is challenging and often ends up in negotiation and customized terms and pricing. Long after the deal is done and the inventory shows up at your receiving bay, many teams suffer the consequences of customized pricing schedules for years.

Without the right tools, these complex custom pricing terms require pulling data from many sources including your WMS, shipping system, order files, labor management, etc. Now that you have your data, you must get it all into Excel and the real fun begins!

Like a number crunching gymnast, you must flawlessly execute your combination routine of sorting, filtering, and pivoting. Once you’ve organized the data, you must rack your brain to apply those pesky custom 3pl billing calculations with horrible nested IF statements or other manual calculations.

Now that you have gotten the numbers right and stuck your landing, the data has to go to accounting. The Accounting team must take that data and manually key it into your accounting system. Invoice preparation, approval, and distribution is followed by journal entries and manual reconciliations.

For a mid-sized fulfillment company who bills monthly (and without using automated billing), the painful, tedious and error-prone process described above could easily cost over $100k per year.

Sound awful and close to home? Don’t worry, there is a better way! Here are some pro tips to break free from this vicious cycle.

a. Evaluate the Capabilities of Your Fulfillment System

Make sure you know how the billing features of your fulfillment software work and that your business terms line up, so you can automate invoice generation. If they do not, you may want to align your agreements with your customers to better match your system, so you can automate this process.

b. Make Sure You are Not Leaving Money on the Table

Many companies who use Fulfillment Service Providers game the system to avoid costly storage fees and plan their inventory replenishment to avoid charges. Some fulfillment systems allow you to bill for average or peak storage levels, so you can maximize your monetization.

c. Configure Your Billing Rules in Your Fulfillment System

Spend time with your fulfillment software and learn how to configure billing rules for each of your accounts. This will allow your system to automatically analyze data and calculate fees every month.

d. Make Sure You Integrate Freight Data

Make sure you have an integration between your shipping and fulfillment systems so that most of your data is in one place. Even better, some fulfillment systems allow you to ship directly from your WMS! Make sure to check with your fulfillment service provider.

e. Don’t Forget Accessorial Fees

With any luck, your system can also incorporate your accessorial activities like packaging, palletizing, etc. in this automated bill. You should make sure you get paid for this costly and time-consuming work.

f. Automatically Generate Invoices and Send them to Customers

Based on the rules defined above, generate your invoices and send them to your customers via email.

g. Keep Backup

In a perfect world, customers would take our word for it that their fulfillment billing numbers are complete and accurate. Unfortunately, this is not always the case. To CYA, make sure you keep backups of your detailed data that proves the invoice lines.

h. Integrate Your Fulfillment System with Your Accounting Software

Push your billing data across all accounts from your fulfillment software to your accounting system to avoid tedious data entry. This can be done using a direct integration or by converting files in a format that can be consumed.

While this may sound like a lot, the return on investment is worth it. Start small with one customer account to iron out the process. Once you have the automation down, set up all new customers for automated billing out of the gate. Last, tackle the rest of your existing customers and work your way free.