Maximizing Your Settlement Potential: 10 Best Practices to Follow

Imagine being a logistics manager with a mountain of settlement documents to sift through at the end of each month. As the clock ticks down, you're forced to work late into the night, sipping cold coffee and sorting through the scattered piles of paperwork that cover your desk with a fine-tooth comb. All because improvements to the settlement process weren't prioritized enough to keep things running smoothly. 

It's a logistical nightmare that no manager wants to face, but unfortunately, it's all too common when settlement efficiency and effectiveness are not a top priority. And for many, there’s no need to imagine — that nightmare is the reality they face every month. 

From unhappy carriers to accounting errors, the consequences of a poorly managed settlement process can be disastrous, not to mention costly. In fact, depending on your starting point improvements can bring savings of anywhere between 1% - 4% of your total freight spend. 

Depending on your starting point, improvements can bring savings of anywhere between 1% - 4% of your total freight spend.

By establishing an efficient and effective logistics settlement operation, shippers can ensure that they don’t overpay on shipments, maintain better relationships with carriers, keep employees happy and focused on higher value items, and deliver better insight and expectations on cash flow to your business.

Of course, as with any operational change, obtaining maximum logistics operational efficiency and effectiveness means implementing and strictly adhering to a set of best practices. And so, in this article, we lay out 10 such best practices that maximize settlement efficiency and effectiveness in your logistics operations.

1. Define your Settlement goals:

Successful Settlement starts with having clearly defined goals. These goals should be established in conjunction with at least the transportation and finance areas of the organization but there are often other areas that are impacted that should be involved. Whenever establishing your goals, clearly define which goal(s) are the primary drivers of what processes and metrics that you will use to establish and measure the goals sought. Some common but important Settlement goals include:

• Cost savings: Identify billing errors, overcharges, and opportunities for negotiated rates to reduce overall transportation expenses.
• Improved accuracy: Enhance the accuracy of freight billing, payments, and record-keeping, minimizing discrepancies and disputes.
• Time efficiency: Automate manual processes, saving time and resources for other critical business tasks.
• Enhanced visibility: Gain better insight into transportation costs, patterns, and trends to make more informed decisions.
• Streamlined dispute resolution: Quickly identify and resolve billing disputes or issues with carriers.
• Compliance: Ensure adherence to contractual agreements, regulatory requirements, and internal policies.
• Scalability: Utilize a software solution capable of adapting to changing business needs and growth.

2. Establish your metrics

For the top three goals, establish 1 to 3 metrics to measure goal attainment. Then, establish the targets for each of these goals. Lastly, go back to your metrics and make sure they are achievable given your process and update if needed. Key metrics that you may leverage include:

• Straight Through Processing % by Mode: Percentage of loads where the total freight charges in the Shipwell load matches the carrier’s invoice by mode. Full Truck Load target of 95%. 
• Invoice Exception Resolution Time: Time between when an invoice comes in with an exception and it is reviewed and resolved.
• % of Loads with Invoices: Percentage of loads marked delivered where a carrier posted an invoice. Suggested Target of 95%
• Invoice Posting Cycle Time: Cycle time between the load being marked delivered and an invoice being posted. Suggested Target of 3-5 business days.

3. Define your process

While there is not a single Settlement process that works for everyone, there are some fundamental guidelines that you should use to determine the best process for your organization. The process should be mapped together internally with different stakeholder teams including at least transportation and finance areas. Your process should be crafted with the identified goals and metrics identified previously. In defining your process, establish who does what, when it happens, and how it happens. This includes your people in your organization but also your carriers and partners, if applicable. 

4. Properly onboard carriers

Onboarding carriers with clear understanding of your settlement process and expectations is an important aspect of success. Communicate the What, When, and How with each carrier, namely:

• What: The ‘What’ represents what financial adjustment and settlement documentation is needed as part of Settlement. 
• When: The ‘When’ represents when invoices and supporting documents are due. This will vary based on the type of mode.
• How: The ‘How’ represents how carriers must make or communicate financial adjustments, how carriers must invoice you, and how invoice disputes will be handled.

5. Centralize tracking and invoice management

One of the most effective ways to ensure accurate and efficient freight settlement is to use a centralized system for tracking and managing freight invoices and bills. Shipwell offers such a system to its clients. The system should allow you to track the status of each shipment, from pickup to delivery, and to verify that each invoice matches the agreed-upon rates and charges. By using a centralized system, you can eliminate the need for manual data entry and reduce the risk of errors or discrepancies. 

6. Verify rates and charges before payment

Before paying a freight invoice, it is important to verify that the rates and charges are accurate and in line with the agreed-upon terms. This can be done by comparing the invoice against the original rate agreement, as well as any relevant shipping documents such as bills of lading or delivery receipts. If there are any discrepancies, these should be addressed and resolved before payment is made. First Pass Match can be efficiently handled in systems like Shipwell to make this part of the process seamless.

7. Monitor carrier performance and address issues promptly

Regularly monitor carrier settlement performance. This will not only ensure a more efficient settlement process for your organization but also provide another input into which carriers you select to do business. Address issues promptly when you see them. By addressing these issues promptly and effectively, you can help to maintain strong relationships with carriers and ensure that your logistics operations continue to run smoothly.

8. Conduct regular audits and reconciliations

Regular audits and reconciliations of freight settlement process and data can help to identify and correct errors or discrepancies, address settlement compliance with personnel, as well as make process corrections if needed. This involves spot checking supporting shipment documentation, back and forth communication between your personnel and carriers around disputes, and resolution notes. Even when using technology like Shipwell Settlement, it is still recommended to conduct regular audits and reconciliations to make sure your process is indeed being followed and issues that might be identified are resolved promptly. 

9. Establish clear communication channels

Establishing clear communication channels with carriers and partners is critical to ensuring accurate and efficient freight settlement. This involves establishing regular communication protocols for updates on shipment status, changes to rates or charges, and any other relevant information. By establishing clear communication channels, you can help to prevent misunderstandings or disputes, and ensure that all parties are informed and aligned throughout the freight settlement process.

10. Invest in automation and digital technologies

Investing in automation and digital technologies can help to streamline freight settlement processes and reduce the risk of errors or delays. This can include using electronic data interchange (EDI) or other digital technologies to automate data exchange with carriers, as well as leveraging machine learning or artificial intelligence (AI) to improve data validation and reconciliation. By investing in automation and digital technologies, you can improve overall efficiency and accuracy in freight settlement, while also freeing up internal resources for higher-value tasks. Shipwell provides this automation and digital technologies to our customers.

An effective and efficient freight settlement system and process is critical to the success of any logistics operation. By establishing and adhering to the 10 best practices above, you will be setting yourself up for success. Implementing and following these best practices will help maximize your Settlement operational effectiveness and efficiency settlement process, leading to saving time and money while simultaneously helping you develop stronger carrier and customer relationships. 

Shipwell customers are able to enjoy all the benefit of best-in-class Settlement technology that will help them towards this path of obtaining maximum logistics settlement operational efficiency and effectiveness. If you are a Shipwell customer, reach out to your Customer Success Manager to learn more about how Shipwell can help you maximize your Settlement process. If you are not a Shipwell customer, but are looking to enhance your Settlement process and curious about how Shipwell might be able to help you maximize your operational efficiency and effectiveness, email us at sales@shipwell.com, or speak with one of our platform experts today.