Freight Billing for transportation companies may appear as a simple process without much complexity, however any error or mistakes in billing even at 1% of total revenue can lead to significant losses on the company’s net profit.
Detailed below is an example of losses a company may incur if it incorrectly under bill its customers by 1%.
Example:
Trucking Company A has 50 units with a net profit margin of 5%. On average each unit delivers 5 loads a week and 5 invoices are issued a week for one truck. This translate to 250 invoices that will need to be issued a week. (50 trucks x 5 invoices a week).
In this example this company is entitle to $50 claim for every approved hour of detention time at the customer warehouse. Assuming if 10% of the loads delivered had issues on detention time, averaging 2 hours a week. The detention claim for a given week would amount to 25 loads x 2 hours = 50 hours. This will translate to 50 hours x $50 = $2,500 a week. If extrapolated to a year, the detention amount will sum to $2,500 x 52 weeks = $130,000.
If 20% of the loads have detention claims averaging 2 hours a load, the total possible detention claim in a year would amount to $260,000!. If this company does not have a systematic process to manage its claims on detention time, it will incur a substantial loss.
Detention claim when reviewed on an individual invoice level maybe seen as insignificant however when reviewed on yearly basis, under billing of 1% of revenue can have an impact as much 20% to 25% on the trucking company’s net profit.
