The Road to Revolution: Driving Change in AP for Freight and Logistics

While accounts payable (AP) as a department functions similarly across many industries, each vertical does have its own unique challenges or nuances when it comes to invoice processing and bill pay. Transportation, freight, and logistics industry is not immune to time-consuming processes and manual work, and could be considered more complex due to the comprehensive supply chain required to conduct business. 

According to an AP automation guide by PYMNTs and Routable, 31 percent of transportation and logistics companies process an average of 1,000 to 2,499 monthly payables, and 39 percent process 2,500 or more payables each month. With the volume continuously increasing (at a minimum of 11 percent per year), transportation, freight, and logistics companies have to adapt their approach and adopt reliable automation solutions to stay efficient, profitable, and competitive.

Some of the standard AP automation challenges in transportation, freight, and logistics include:

Complex PO matching requirements

Beyond traditional purchase orders (POs), transportation, freight, and logistics companies often have additional documentation that requires complex matching during invoice processing. These can include bill of lading (BOL) documents, repair orders (ROs), certificates of origin (CoO), dangerous goods declarations, and other statements that need to be paired with an invoice before payment can be made. 

Beyond simply matching these documents to the invoice, AP teams are often challenged with variances in data quality and document formats, incomplete or inaccurate information, exceptions such as partial deliveries or price variations, lack of system integrations with the enterprise resource planning (ERP) platform, and inconsistent standards across suppliers and vendors. 

Manual payments with low visibility 

With many touchpoints and complexities across the supply chain, one transportation, freight, and logistics company often leverages many vendors to fulfill orders. Vendors could include manufacturers, raw material providers, shipping companies, equipment operators, transportation agencies or regulators, and retailers. Everyone requires a payment, and each payment requires an invoice. The paper trail can be extensive, and with semi-manual or fully manual invoice processing and bill pay, this work can be highly time-consuming for the AP team. Lack of visibility and limited payment options also present challenges, with slow or complex approval flows further delaying the process. 

According to PYMNTS.com, transportation, freight, and logistics companies are processing invoices at high volumes — 71 percent process an average of at least 1,000 invoices each month, and 72 percent of those businesses expect their invoices to rise by 11 percent or more over the next three years. With this much volume, manually writing and mailing checks is not a viable solution. 

Multi-entity or multi-location operations

While deal activity has slowed, many transportation, freight, and logistics companies are likely dealing with the operational ramifications of mergers and acquisitions (M&A) activity fueled by the COVID-19 pandemic. During the pandemic, when supply chain execution emerged as a critical strategic capability, the transportation, freight, and logistics industry experienced unprecedented M&A activity. Many logistics players and financial investors did deals to expand capabilities and acquire high-performing assets. Deal value soared from $51 billion in 2020 to over $150 billion in 2021 before dipping to $95 billion in 2022, according to McKinsey and Company.

Managing AP processes across multiple entities and locations poses additional complexity for finance leaders, remarkably increasing vendor management, supply chain logistics, available payment options, and ERP systems in use.

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Consolidated invoices

It’s common for transportation carriers to consolidate invoices with hundreds — and sometimes even thousands — of transactions for many different jobs. While this has some practical advantages, this information often must be separated and sorted before it can be processed as a journal entry or matched to a PO in a financial system. As a result, countless hours may be devoted to separating and coding this information for consumption by an ERP. 

Unknown costs

It’s not always possible to understand all the costs involved with a logistics operation ahead of time. Factors such as the cost of fuel, import duties, highly variable tax rates based on goods shipped and origin, and fluctuating carrier charges may not be definitively known ahead of time. This poses some unique challenges, especially when POs with fixed or defined costs are used to estimate these expenses. Understanding and consolidating the true cost of delivering a service is also crucial to measuring the profitability and, ultimately, the viability of a logistics business. Having a true system of record that can accurately and quickly match many different documents is critical to mitigating and better managing cost fluctuations.

How AI can automate AP in transportation, freight, and logistics

Finance leaders can leverage AI technology in AP to increase operational efficiency and reduce manual work. Manual invoice processing and bill pay are expensive, time-consuming, and risky for finance teams, CFOs, investors, and organizations. They drain resources, increase the likelihood of errors and fraud, hinder audit and compliance processes, and lead to employee burnout. 

Manual accounting processes can also impede business performance in a complex and rapidly shifting industry where transportation, freight, and logistics companies are pursuing mergers and acquisitions, managing multiple locations or entities, or shifting supply chains. And, technology systems may not integrate with each other for rapid exchange of key business information.

AI is advanced automation that can replace or augment manual processes in data analysis, expense management, payroll processing, invoice processing, invoice payments, reporting and forecasting, fraud detection, and workflow automation. 

But where to start? While there are many problems advanced AI may someday solve, today’s best AI solutions are trained to address particular pain points, and business leaders can use AI to replace mundane tasks and fill efficiency gaps. 

Repetitive tasks are the best place to begin. If finance leaders can automate and offload data-entry or validation tasks to an AI agent or “copilot,” they can refocus talent resources on the next level of value for the organization. 

According to a Gartner CFO poll, four of five finance leaders expected to devote more money and effort to deploying AI over the next two years. Invoice processing and bill pay is an ideal place to start, with manual, error-prone work, massive data sets, and process repetition. Over time, AI use can expand within an organization and be applied to operational, more strategic, and complex decision-making tasks.