Over the years, I have been involved in many accounting based mostly automation projects. There’s one venture in the retail petroleum space that appears to provide distributors and suppliers the most important headaches, that’s Consignment Billing. Consignment Billing is when a distributor or supplier manages the gas stock points for the supplier and then payments them for the hundreds serviced. However, this process has a great amount of risk for the distributor or supplier as they are liable to shedding or delaying fee of 1000’s of dollars if the seller decides to delay fee or not pay altogether. Also, there are fraud dangers related to this methodology if you haven’t any option to test the inventory of the load on the time of delivery. However, putting in an efficient and efficient system has large advantages for the distributor as effectively as the dealer. Not only can you create a extra correct and efficient billing system, you too can add options corresponding to automated gas order and environmental control monitoring for the supplier as a service. Unfortunately, many distributors in addition to suppliers do not totally perceive the various components concerned to make this course of work efficiently and find yourself abandoning the implementation or putting in a partial resolution that is ineffective. This text makes an attempt to cowl the main components of consignment billing automation and the numerous pitfalls that can be prevented to achieve a profitable implementation.
<b>The Elements of Consignment Automation>/b>
With the intention to architect an effective Consignment Automation program, it’s critical to understand all the mandatory elements that go into this system. There are three key elements to this system, generally: Accounting, Supply Distribution (Enterprise Course of) and Know-how. Not understanding the how every of those areas play on the planet of consignment automation will cause a failure in the implementation of this system. The following are the foremost parts defined:
Seller pricing (Accounting Element)
All the pieces begins with supplier pricing, how a lot a supplier is predicted to pay for a load of fuel. Having labored in the trade for a a number of years, the deals made between the distributor and the dealer are often like an episode from “Let’s Make A Deal”. The pricing structures supplied from the distributor to the seller can fluctuate significantly and make it onerous to place in a standardized pricing scheme. For instance, some distributors could provide a dealer a RACK + $.01 value, which is the worth from the provision rack plus a $.01 mark up per gallon. Others may offer an identical deal based mostly on an industry commonplace pricing model resembling OPIS. In addition, freight fees can come into play the place some corporations supply a typical flat charge for supply. Others could offer a freight value based mostly on miles from the rack (i.e. terminal). Regardless of the deal, it will be important that the accounting system is ready to take the enter and apply to the Accounts Receivable based mostly on the data obtained and not by any handbook manipulation. This will often be executed by way of a pricing desk inside the accounting system. Nevertheless, the perfect rule of thumb is to try to arrange a standardized pricing model. This has the good thing about eliminating confusion between distributor representatives and the dealer or customer and makes your billing and supply more efficient. Your supplier will recognize that discount in complexity of their billing statement.
Provider Settlement Process (Enterprise Course of/Accounting Element)
This course of is vital to know as despite the fact that it impacts the distributor’s Account Payable course of from the Provider, it also translates to the Account Receivables to the supplier. In addition, space advantages from a standardized pricing scheme to cut back the complexity of the AP process. Provider prices can change on the rack by day or even by hour during a natural catastrophe or different. As such, a consignment automation system ought to have the flexibility to tug in costs from the suppliers for all racks mechanically and at a frequency that matches the worth modifications. This is finished for 2 reasons, 1) pricing provided to the vendor and a couple of) pricing used to pay the supplier per load.
Some suppliers will batch prices and distribute them at the tip of every day. Others could change prices in real-time. In both case, the accounting system must assist the power to import the correct price for the interval the price might be honored within the system. Again, a pricing desk is an efficient mechanism to fulfill this want. The desk should be able to import all costs and the duration the price is valid. When Bill Of Lading information is entered (which is discussed later) the pricing desk is referred to based mostly on the date and time the worth was legitimate and that is the value that shall be utilized for both the AP and AR values for cost and billing. The reason this is important is that between the order coming in and ship, there is a 24 -48 hour lag time, greatest case, earlier than all essential billing parts can be found for correct billing. There for, a price historical past have to be maintained on the supplier/distributor aspect of the accounting equation. This turns into clearer when discussing the supplier enterprise process under.
Bill Of Lading (BOL) Course of (Accounting Part)
The Holy Grail of consignment automation is the power to automate the Invoice Of Lading course of. That is mainly the method that happens when a supply tanker goes to the Rack (terminal) and fills up a load of fuel. At that time, the supply individual receives their Bill of Lading from the supplier rack aka terminal for that load of gasoline. The opposite facet of the Invoice of Lading process is when the gasoline is dropped in the bottom tanks on the vendor’s site. The driver checks the current stock in the ground, provides the new ship, checks the fuel once more for what is delivered. What gets over appeared in this part of the method are the two variations within the accounting of the fuel between what was picked up in the rack and what is definitely delivered. For instance, what happens if the driver has 4000 gallons of fuel to deliver and when he checks the tank at the site, the positioning nonetheless has 6000 gallons in its 8000 gallon tank? The driver now has 2000 gallons left in his truck that he as to do away with. This extra gasoline is called a Retain and now must be delivered to a different site because it cannot be returned to the terminal. Without the compensating management of balancing the load at the rack with the load(s) delivered, that 2000 gallons can easily go missing. Another problem could be a short load, the place a load of 4000 gallons to a site is predicted however solely 2000 is delivered and dropped. Again, what happened to the opposite 2000 gallons? As such, capturing both BOL amounts is essential.
Unfortunately, many provider terminals should not automated enough to supply a dealer with the mandatory BOL data electronically. Additionally, many carriers nonetheless use guide methods to trace BOL information. Carriers sometimes have the drivers drop their BOL kinds back at a central office the place information entry clerks enter it into their accounting systems and invoice their distributors for the masses. This, again, ends in a paper course of if this is not automated. There are, however, techniques that can take the ordering course of through the BOL and “automate” it so that the BOL may be balanced and entered into the distributor accounting system electronically. Firms resembling Gasoline Quest, Telapoint, NPN and others help to offer automation between the order, the carrier and the distributor. Some can even use historical data to do development analysis and look at seasonal calls for to insure fuel managers are in a position to maintain their sites provided effectively during peak instances. The methods use quite a lot of strategies to obtain data, either via electronic meters or personnel data entry by way of the totally different connection factors (rack, truck, service and distributor). The key for Consignment Automation is that ultimately, the BOL, Delivery and retailer inventory and gross sales readings are all in an digital format to enter within the distributor’s accounting system.
Supplier Billing Course of (Accounting Component)
The Dealer Billing Process is the place all components for the accounts receivable come together to implement billing. A good consignment automation program ought to have this process fully automated. There ought to solely be exception reporting validation on this area as all inputs and outputs are electronically applied from the assorted sources into each dealers account.
First, for the billing process to accurately happen there must be a settlement of all transactions that make up the statement for the specified account. Meter Sales, Meter Inventory and Sales value are the important thing factors from the site which might be required to supply the precise sales side of the settlement equation. The subsequent elements that must be settled and then utilized to the vendor accounts are the delivery data. As mentioned above, the final actual delivery, service BOL, that was dropped within the tanks at the location and the supplier BOL information is reconciled in the distributors accounting system. If they are in agreement, then the supplier is billed the precise primarily based on the negotiated seller price for the load. That is cross-referenced with the pricing chart for that seller. If there is a discrepancy, then an exception report is generated previous to billing and the proper accounting group works to determine the issue and correct it. Once more, the exception is the place the human issue comes into play. This can be the world where both the AP and AR data interchange as you need the settlement knowledge from the supplier and distributor (AP) to reconcile with the Vendor and the supply (AR).
One important issue that is common in implementing automation on this level is the worth at time of sale. Most EPOS techniques in the petroleum business Do not provide worth historical past for gallons sold between value changes. Sadly, a site may change their prices more than one a day depending on the market, especially if a price war with a competitor is underway or there are supply issues. It’s not unusual for a site to have 2 – four worth adjustments in a single day. Mix that with a mid-day gasoline delivery and now you have an accounting nightmare that is extremely difficult to steadiness with supply precise. Because of this problem, most automated processes find yourself utilizing average every day pricing verses actual price per worth change. This concept often leads to variations of opinion between the sales division and accounting department of a distributorship because of the notion of lost revenue.
Consider the following state of affairs, assume a site experiences 3 price modifications through the day: $Three.569, $three.609, $3.669. The typical worth per gallon is $3.629. Assuming 10000 gallons bought throughout that interval, average gross sales can be $36,290 in sales. Now assume worth by time interval using the same information, for 7 hours, gas sold at $2.569 and 2800 gallons were offered, for five hours it bought for $3.609 and 2800 gallons sold and for the remaining 12 hours of the day, 4400 gallons sold for $3.669. The precise gross sales would be $33,442. Using this same method for a decline in price during same day interval, reversing the order of the value change using identical gallons for the durations defined above, the typical value stays the identical $36,290 however the actual gross sales now show $36,082, which is near the average sales worth. When this swing is stretched out over a protracted time period looking at each the worth enhance and lower, the destructive impression is on the value enhance, the optimistic is during a worth lower, however the online effect is zero, that means over time between the swings, the general value stays close to the common.
One other huge part of the Billing process is using Electronic Funds Switch (EFT) for fee of the loads from the vendor back to the Distributor. Distributor agreements final for 10 – 15 years generally. Once more, to decrease data entry errors and to hurry cost processing between the distributor and vendor, it is highly beneficial that the vendor be put on an EFT program. This manner, as soon as the load is delivered, the distributor can submit a request to draft the dealers account for the fee of the load. Though this appears to be highly in favor of the distributor, the vendor has a bonus as well if he can have his total fuel supply process automated and managed exterior of his everyday business considerations. The vendor is really left with reconciling his store gross sales and inventory to his EFT assertion and insuring common deposits are made from his retailer sales. He does not have to concern himself with calling in a fuel supply or fixed monitoring of his tanks as that can be monitored and managed by the distributor. That is the important thing idea of consignment automation.
There’s one word of caution. Distributors should be very conscious of their buyer’s cash circulate. Remember, it could take 2 – three days for the BOL course of to finish and a distributor bill to be made. Though the EFT course of could be impartial of the billing course of, an in depth match up is advocate due to the issue of Retains and quick hundreds. A distributor can, and often does, draft a vendor immediately after delivery solely to find out some type of downside with the load. Consequently, the distributor finally ends up implementing a credit back to the seller’s account, usually on a subsequent load. Nevertheless, the sort of transaction has a big impact on a supplier, which is why quite a lot of sellers try to stay away from EFT. It’s endorsed that EFTs be utilized only to in balance bill transactions. Additionally, distributors should consider making use of a hard and fast day for the EFT draft. For example, a distributor can tell their sellers that by 4pm every Tuesday and Thursday, the corporate will problem an EFT for monies owed for loads that week. This no less than gives the supplier notice of their draft days and might insure they have enough funds within the financial institution to keep away from NSF expenses and points. Lastly, distributors ought to limit EFT drafts to not more than twice per week.
As has been mentioned in a couple of of the enterprise process and accounting parts above, technology is vital. If you wish to automate this course of, you want the appropriate know-how to automate with. First, look carefully at the stores tools. The shop ought to have a good Digital Level of Gross sales System (EPOS) and Automatic Tank Gauge (ATG). It is strongly recommended that a trade standard unit be used that has its interfaces constructed on a NACSXML standard. The essential necessities for these devices are:
1) The EPOS can interface with the ATG for on demand reporting, especially shift and day close reporting. This is usually done by way of a serial or community interface.
2) Each the ATG and EPOS have distant entry capabilities. The EPOS would be the dedicate system to tug accounting data for the consignment billing process. The ATG is used for every day inventory reporting for order and delivery monitoring.
3) The EPOS shift, daily, month-to-month and on demand reporting Have to be ready to point out Meter Sales, Meter Gallons (usually from the EPOS to the pumps) and Inventory (a feed from the ATG), on the time these experiences are run. This gives you the entire vital knowledge for consignment billing at an actual moment in time.
One factor to notice about merchandise #three: There are some distributors who supply an answer that makes an attempt to tug the data for consignment through the ATG and the EPOS impartial of one another. This must be prevented. The reason is that even when the difference of pulling the knowledge between the two units is a couple of minutes, if prospects are pumping gas on the time one of these is being pulled, significantly the ATG, your stock is skewed and is not going to be accurate. Avoid this technique in any respect prices. The most effective and superb methodology, is get all totals to go to the EPOS system and pull your data from there.
Subsequent, you need to take a look at your accounting system. Within the petroleum industry, there are a variety of accounting programs that support consignment billing such as PDI, SSCS and SMS. A distributor should rigorously look at their accounting package deal to ensure it could actually support multiple price constructions from multiple suppliers in addition to settle for automated feeds for sales, order and delivery information. Depending on the system, there’ll almost certainly be some capital dollars spent on customization to permit for the automation to work effectively. Also, one other benefit is having an order interface that may enable customers to position gas orders over the Web or PDA. Some accounting methods do this, but it’s usually found in a carrier centered software or is something the distributor can customized build in the event that they make the most of the idea of a data aggregator.
Also, be sure you are dealing with a versatile financial institution interface to handle your EFT process to your dealers. It must be versatile sufficient to schedule EFT drafts for multiple days and to apply credit quickly ought to a mistake happen. Most EFT corporations draft cash rapidly from their clients but take days to apply credit again. Again, it is important to help your dealer with their money move and drafting a lot money too soon, can cause them issues and both the vendor and distributor sales income.
The other element that always will get missed is a knowledge aggregator. Many suppliers submit their pricing or billing on web sites for an accounting clerk to download manually. Pricing companies may also do the same. But it is worth asking the supplier and pricing entity about setting up an SFTP feed to tug your pricing and supplier billing automatically. PCATS has established commonplace knowledge codecs for the petroleum industry for numerous information interfaces. A provider or pricing entity that makes use of this normal to supply an electronic knowledge file increases your possibilities of implementing an aggregator system. But, even with that, the information aggregator should be capable to handle a variety of file codecs (csv, xml, flat file, etc.) based on what the service, provider or pricing entity gives. If they provide an digital files format, reap the benefits of it. Additionally, this system is a benefit when making an attempt to retrieve related data from the terminals for BOL data. The info aggregator works as a SFTP kind server, but basically needs to be designed to handle all electronic feed types (SFTP, FTP, SSL, or message queuing) are just a few examples. The techniques job is to simply move data from the Supplier, Carriers and Dealers to the accounting system. The benefit of having a single unit or a “load balanced” system perform this activity is that it can be maintained easily and the feeds may be modified ought to you alter any part of the info circulate sources.
Lastly, the carrier software program has a big benefit to consignment automation. Consignment automation can nonetheless be completed with no provider interface, but getting the BOL data will still must be entered in a roundabout way. A superb provider/dispatch software permits the distributor to totally manage supplier gas orders, not simply the billing side. Carriers can enter knowledge into the identical interface the distributor makes use of as well because the terminals. In the event you get a feed from the provider terminals, then the provider only must enter the BOL from their side of the BOL course of. It additionally has the benefit of forecasting hundreds, making the distributor more effective in scheduling deliveries to their prospects. Also, customers can use the Internet through the same interface to place a gas order, decreasing the number of information entry points humans make in the process. This system mainly handles the BOL and gas management process and then sends the web outcomes to the accounting system for reconciliation and billing.
Placing All of it Together
So, now with all of the components in place, let’s walk by means of the method in a nutshell.
1. Buyer or Fuel Supervisor orders a load of gas through an Internet Provider Interface for a site.
2. Order is prioritized based mostly on location, availability, terminal location, service and time of run out (all via service software program) and an order request is transmitted to the driver’s electronic queue.
- 3. Driver receives order and goes to terminal and picks up load.
- Four. Terminal BOL is generated. Driver gets a duplicate, digital information despatched to provider system.
- 5. Driver takes load to site and drops off load.
- 6. Driver checks ATG. Drops load. Enters precise gasoline drop on BOL file in Provider system.
- 7. Service system closes order and sends to distributor as digital bill.
1. Distributor receives daily EPOS report information from websites, BOL information from carriers and suppliers and pricing data from suppliers and central pricing sources through the information aggregation system.
- 2. Data aggregation system moves knowledge into respective holding areas within the accounting system for import.
- 3. Accounting system imports respective knowledge.
- Four. Accounting AR and AP processes execute and exception studies are generated.
- 5. Exception studies are reviewed and corrected.
- 6. EFT stories for billing are generated and an EFT request is requested from the client’s financial institution.
- 7. EFTs are drafted and accounts are credited.