3PL Best Practices: 3PL Billing

The 3PL billing process often follows the same key steps for all clients: 

1. Contract agreement: a contract between 3PL and client will be drawn up and signed by both parties, detailing the services to be provided, the rates to be paid, cadence of billing and terms of payment i.e. monthly and via which payment methods. 
2. Data consolidation: for each invoice, data relating to the services provided will be gathered, charges applied and totals calculated. This can include storage, handling, picking, courier costs and more. 
3. Create and issue invoice: once totals have been calculated, relevant data will be transferred and an invoice generated. Typically, these will include the calculations of the services provided, for example, X items picked at a cost of £Y per item = £Z. These are then issued to the client to process for payment. 

3PL billing can be complex with a wide range of chargeable activities, differing rates for each client, as well as supplier costs to factor in for things like transportation and packaging. 

Here’s a comprehensive list of all the types of charges 3PLs use:

• Receiving and handling: charges for receiving goods, inspecting them for damage and processing them for storage.
• Storage: charges for holding goods in location. These can be set by pallet size, square or cubic footage, inventory quantity and by the length of time goods are held.
• Order processing: charges for actions such as; relabelling, reworking, picking, packing, and packaging.
• Shipping and transportation: charges for the movement of products, whether via courier to the end consumer, or to another destination.
• Returns: charges for receiving, inspecting, restocking and disposing of returned goods. 
• Value-add services: charges for processes that are not already covered such as; custom packaging, product or bundle assembly, product personalisation and quality checks. 

3PLs choose to bill their clients in a variety of ways – usually to align with the services they offer – which can include activity-based pricing, fixed pricing models, varying price ranges or rates that are based on quantity, volume, weight or dimensions of products. It can further extend to the options of hourly rates, flat rates and even per-item rates. 

There is no single best way for a 3PL to choose to bill clients, and no matter how you charge, your billing activity is only as accurate as the data that is included in every invoice.

Running a 3PL is challenging enough, only made more stressful with the complexities of billing multiple clients, all with different rates and requirements. Some of the common challenges faced by 3PLs who are still relying on manual administration for invoicing are:

Activity Tracking / Consolidation 

Activity tracking and invoice consolidation is the root cause of almost all 3PL billing challenges. Manually logging and tracking all the costs and warehouse activity for all of your clients is time consuming, prone to human error and virtually impossible to do. Your warehouse is simply too busy for manual tracking to lead to accurate, fully detailed and indisputable billing. 

Consolidation is the same – even with spreadsheets and formulas to calculate invoiceable totals, the likelihood of all line items being accounted for, all charges being correct and everything being transferred to your accounting software without mis-keying data is low.

Under and Over Charging

Undercharging is easily done when you’re unable to truly account for every action taken by your team, on behalf of your clients. Without accurate record keeping, missing line items on invoices is a common error and leads to you losing valuable revenue without even realising.

Overcharging is just as common an issue, for similar reasons. If your records aren’t 100% accurate and reliable, assumptions may need to be made and therefore extra charges can easily be added. This can quickly lead to queries and your clients challenging invoices, or even refusing to pay.

Invoice Queries

Invoice queries are an inevitable result of the above mentioned challenges. Not only are they frustrating for you and your clients, they’re a drain of your time and resource. The time it takes to prove your invoices are accurate or finding the error, communicating back and forth with your clients and chasing payment, is time you could spend  building better client and supplier relationships, optimising warehouse performance or growing your client base. 

Client Confidence

Incorrect, inaccurate and unreliable invoices all lead to your clients losing faith in you and your business. The brands you work for are relying on you to represent them and losing that trust via overcharging, or constant queries is a sure way to end otherwise successful client relationships. 

Automating your 3PL billing processes can save you a significant amount of time. With 3PL software with billing capabilities, the tool should help you to speed up the entire process and ensure every cost is accounted for, ensuring you’re charging for all the work you’ve done. 

A good 3PL billing software should offer you the following: 

• Set client rates: store the rates you’ve set per client, including costs for; storage, handling, picking, rework, shipping and returns, so manual adjustments are not needed
• Track stock movements and fulfilment activities: keep detailed records of all work performed on behalf of clients, to ensure no item is missed off your invoices
• Itemised billing: give your clients complete transparency in your billing, so they can see the breakdown of charges and reduce the potential for queries
• Accounting software integration: sync your 3PL software to your accounting software, so invoice details are automatically transferred, without manual data rekeying

Don’t underestimate the power of transparency for your 3PL client relationships. Billing is core part of any partnership and can be a bone of contention if not done correctly. Under or over charging can cause a rift between you and your clients, and invoice queries are incredibly time-consuming to investigate and resolve. Nobody wants to be chasing invoices and having those awkward conversations about whether a line item is correct!

Additionally, using a trusted 3PL software can give you, your existing clients, and the clients you’re trying to secure, the confidence that the relationship you hold will be built on strong foundations, and that you can be relied upon to charge based on what’s been agreed, without any hidden surprises.

Billing your 3PL clients has never been so easy. With Mintsoft’s 3PL billing capabilities your invoices will be completed quickly and accurately. 

As the system keeps a record of all stock movements and fulfilment activities, as well as each clients’ chargeable rates, consolidation is super simple and requires little to no human intervention. You can even set invoicing to automatically run at set intervals, and link it to your accounting software. 

Here’s what some of our users have to say about the 3PL billing functionality: 

“With Mintsoft’s 3PL invoicing functionality, all of a sudden, as the owners of the business, we got 20-25 hours a week back and get our evenings back.”

Hamilton Butcher, Co-Founder, Haul + Store Ltd

“One of the features I really like with Mintsoft is its 3PL accounting and billing module. I think the fact that they can capture each individual transaction and movement through the system and, monitor all of the billing and, consolidate that onto a month end invoice for the customers with no manual intervention is perfect.” 

Dale Sharpe, General Manager, Bray Solutions

“One of the great things about the billing module is that it's reduced our invoicing queries from on average around 5 a month, down to 0 now.” 

Senior Commercial Manager, Steve Mills, Bray Solutions

Read more about Mintsoft’s capabilities and tailored 3PL features and if you’d like to see the software for yourself, book a personalised tour with one of our experts.