Over the years, I have been involved in many accounting based mostly automation initiatives. There’s one venture in the retail petroleum house that seems to give distributors and suppliers the most important headaches, that is Consignment Billing. Consignment Billing is when a distributor or supplier manages the gasoline inventory facets for the dealer after which payments them for the hundreds serviced. Nonetheless, this course of has a great amount of risk for the distributor or provider as they’re susceptible to shedding or delaying cost of 1000’s of dollars if the seller decides to delay payment or not pay altogether. Also, there are fraud dangers associated with this method if you haven’t any approach to examine the inventory of the load on the time of delivery. However, putting in an efficient and environment friendly system has huge benefits for the distributor as well because the dealer. Not only can you create a extra correct and efficient billing system, you may as well add options resembling automated gas order and environmental control monitoring for the supplier as a service. Sadly, many distributors as well as suppliers don’t absolutely understand the assorted elements involved to make this course of work efficiently and end up abandoning the implementation or placing in a partial resolution that’s ineffective. This article attempts to cowl the principle elements of consignment billing automation and the numerous pitfalls that may be averted to achieve a successful implementation.

<b>The Parts of Consignment Automation>/b>

With a purpose to architect an effective Consignment Automation program, it’s vital to grasp all the mandatory components that go into this system. There are three key elements to the program, on the whole: Accounting, Delivery Distribution (Enterprise Process) and Technology. Not understanding the how each of those areas play on the earth of consignment automation will trigger a failure in the implementation of the program. The following are the key parts defined:

Vendor pricing (Accounting Element)

Every little thing starts with vendor pricing, how much a seller is predicted to pay for a load of gas. Having worked in the trade for a several years, the deals made between the distributor and the supplier are sometimes like an episode from “Let’s Make A Deal”. The pricing constructions offered from the distributor to the seller can fluctuate drastically and make it hard to place in a standardized pricing scheme. For example, some distributors could offer a dealer a RACK + $.01 worth, which is the value from the provision rack plus a $.01 mark up per gallon. Others might offer an analogous deal primarily based on an trade normal pricing model akin to OPIS. As well as, freight expenses can come into play where some firms supply a typical flat fee for delivery. Others may supply a freight price based mostly on miles from the rack (i.e. terminal). Whatever the deal, it is crucial that the accounting system is ready to take the input and apply to the Accounts Receivable primarily based on the data acquired and not by way of any guide manipulation. This will usually be carried out by a pricing table within the accounting system. However, the perfect rule of thumb is to attempt to arrange a standardized pricing mannequin. This has the benefit of eliminating confusion between distributor representatives and the dealer or customer and makes your billing and supply extra efficient. Your seller will recognize that reduction in complexity of their billing statement.

Provider Settlement Process (Business Process/Accounting Part)

This course of is vital to know as even though it impacts the distributor’s Account Payable course of from the Provider, it also translates to the Account Receivables to the supplier. In addition, area advantages from a standardized pricing scheme to scale back the complexity of the AP process. Supplier prices can change on the rack by day and even by hour throughout a natural disaster or different. As such, a consignment automation system should have the ability to drag in costs from the suppliers for all racks robotically and at a frequency that matches the price adjustments. This is completed for 2 reasons, 1) pricing supplied to the vendor and 2) pricing used to pay the provider per load.

Some suppliers will batch costs and distribute them at the top of every day. Others may change prices in real-time. In both case, the accounting system needs to help the ability to import the accurate price for the interval the worth can be honored throughout the system. Again, a pricing desk is an effective mechanism to meet this need. The desk should be able to import all prices and the duration the worth is valid. When Bill Of Lading information is entered (which is discussed later) the pricing desk is referred to based on the date and time the value was legitimate and that’s the value that shall be applied for each the AP and AR values for fee and billing. The explanation this is important is that between the order coming in and deliver, there is a 24 -forty eight hour lag time, finest case, before all essential billing parts can be found for correct billing. There for, a price historical past have to be maintained on the provider/distributor aspect of the accounting equation. This turns into er when discussing the supplier business process beneath.

Invoice Of Lading (BOL) Process (Accounting Element)

The Holy Grail of consignment automation is the flexibility to automate the Bill Of Lading course of. That is principally the process that happens when a supply tanker goes to the Rack (terminal) and fills up a load of gasoline. At that time, the supply person receives their Invoice of Lading from the supplier rack aka terminal for that load of fuel. The opposite aspect of the Bill of Lading course of is when the gasoline is dropped in the bottom tanks on the dealer’s site. The driver checks the present inventory in the ground, adds the brand new ship, checks the fuel again for what’s delivered. What will get over appeared in this part of the process are the 2 variations within the accounting of the gas between what was picked up within the rack and what is actually delivered. For instance, what happens if the driver has 4000 gallons of gas to ship and when he checks the tank at the positioning, 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 further gas is called a Retain and now needs to be delivered to another site because it cannot be returned to the terminal. With out the compensating management of balancing the load at the rack with the load(s) delivered, that 2000 gallons can easily go lacking. Another downside could be a short load, where a load of 4000 gallons to a site is predicted but solely 2000 is delivered and dropped. Again, what happened to the opposite 2000 gallons? As such, capturing each BOL amounts is essential.

Unfortunately, many provider terminals will not be automated sufficient to supply a vendor with the required BOL info electronically. Also, many carriers still use manual strategies to trace BOL information. Carriers typically have the drivers drop their BOL varieties back at a central workplace the place data entry clerks enter it into their accounting systems and invoice their distributors for the masses. This, again, results in a paper process if this isn’t automated. There are, however, programs that can take the ordering course of by means of the BOL and “automate” it in order that the BOL can be balanced and entered into the distributor accounting system electronically. Firms comparable to Gas Quest, Telapoint, NPN and others assist to supply automation between the order, the provider and the distributor. Some also can use historical data to do development evaluation and look at seasonal demands to insure fuel managers are ready to keep their sites equipped successfully during peak occasions. The programs use a variety of methods to acquire data, both by means of electronic meters or personnel knowledge entry via the different connection points (rack, truck, carrier and distributor). The important thing for Consignment Automation is that ultimately, the BOL, Delivery and retailer stock and gross sales readings are all in an electronic format to enter within the distributor’s accounting system.

Seller Billing Course of (Accounting Component)

The Supplier Billing Process is where all parts for the accounts receivable come collectively to implement billing. A great consignment automation program ought to have this process fully automated. There ought to solely be exception reporting validation on this space as all inputs and outputs are electronically utilized from the varied sources into every dealers account.

First, for the billing course of to accurately occur there must be a settlement of all transactions that make up the statement for the specified account. Meter Gross sales, Meter Inventory and Gross sales worth are the key components from the site that are required to provide the precise sales side of the settlement equation. The following parts that should be settled and then utilized to the vendor accounts are the delivery info. As mentioned above, the final actual delivery, service BOL, that was dropped in the tanks at the location and the supplier BOL info is reconciled in the distributors accounting system. If they’re in agreement, then the vendor is billed the actual based mostly on the negotiated dealer worth 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 prior to billing and the proper accounting group works to determine the issue and correct it. Once more, the exception is where the human issue comes into play. This is also the realm where both the AP and AR knowledge interchange as you want the settlement data from the provider and distributor (AP) to reconcile with the Supplier and the delivery (AR).

One vital factor that’s common in implementing automation on this level is the worth at time of sale. Most EPOS systems in the petroleum business Don’t provide value historical past for gallons bought between worth modifications. Sadly, a site may change their prices multiple a day depending on the market, particularly if a price warfare with a competitor is underway or there are provide points. It is not unusual for a site to have 2 – 4 price adjustments in a single day. Combine that with a mid-day fuel supply and now you will have an accounting nightmare that is extraordinarily tough to stability with supply precise. Due to this problem, most automated processes find yourself utilizing average each day pricing verses actual price per value change. This idea usually results in differences of opinion between the sales department and accounting division of a distributorship due to the notion of lost profit.

Consider the following state of affairs, assume a site experiences three value changes throughout the day: $Three.569, $three.609, $three.669. The common value per gallon is $three.629. Assuming 10000 gallons sold during that period, average sales can be $36,290 in sales. Now assume worth by time period utilizing the same knowledge, for 7 hours, gasoline bought at $2.569 and 2800 gallons were offered, for 5 hours it sold for $three.609 and 2800 gallons offered and for the remaining 12 hours of the day, 4400 gallons bought for $3.669. The precise sales can be $33,442. Using this same methodology for a decline in value during identical day interval, reversing the order of the price change using identical gallons for the durations outlined above, the common price stays the same $36,290 however the actual gross sales now present $36,082, which is near the typical sales value. When this swing is stretched out over a protracted time period taking a look at both the price increase and lower, the adverse impression is on the value enhance, the constructive is throughout a value lower, but the web impact is zero, which means over time between the swings, the general value stays close to the common.

Another massive a part of the Billing course of is the use of Digital Funds Switch (EFT) for cost of the masses from the dealer back to the Distributor. Distributor agreements last for 10 – 15 years typically. Once more, to lower knowledge entry errors and to hurry cost processing between the distributor and supplier, it is highly really helpful that the seller 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 cost of the load. Though this seems to be highly in favor of the distributor, the supplier has a bonus as effectively if he can have his complete gas supply process automated and managed outdoors of his everyday business issues. The seller is de facto left with reconciling his retailer sales and inventory to his EFT statement and insuring common deposits are made from his retailer sales. He does not should concern himself with calling in a fuel supply or constant monitoring of his tanks as that can be monitored and managed by the distributor. This is the key concept of consignment automation.

There’s one phrase of warning. Distributors should be very aware of their customer’s cash flow. Remember, it may possibly take 2 – 3 days for the BOL course of to complete and a distributor bill to be made. Although the EFT process could be independent of the billing process, a detailed match up is recommend due to the issue of Retains and brief hundreds. A distributor can, and infrequently does, draft a seller immediately after delivery solely to search out out some form of drawback with the load. In consequence, the distributor ends up implementing a credit again to the dealer’s account, normally on a next load. However, this kind of transaction has a huge effect on a dealer, which is why quite a lot of sellers try to avoid EFT. It is strongly recommended that EFTs be applied only to in stability bill transactions. Also, distributors should consider making use of a set day for the EFT draft. For example, a distributor can tell their dealers that by 4pm each Tuesday and Thursday, the corporate will difficulty an EFT for monies owed for hundreds that week. This a minimum of supplies the vendor notice of their draft days and can insure they’ve enough funds within the financial institution to keep away from NSF prices and points. Lastly, distributors ought to limit EFT drafts to not more than twice per week.

Technology

As has been mentioned in a few of the enterprise course of and accounting elements above, know-how is key. If you want to automate this course of, you want the fitting expertise to automate with. First, look closely on the stores gear. The store ought to have an excellent Electronic Point of Gross sales System (EPOS) and Computerized Tank Gauge (ATG). It is suggested that a industry customary unit be used that has its interfaces built on a NACSXML standard. The basic requirements for these gadgets are:

1) The EPOS can interface with the ATG for on demand reporting, particularly shift and day close reporting. This is normally done via a serial or community interface.

2) Each the ATG and EPOS have distant entry capabilities. The EPOS will be the dedicate machine to pull accounting information for the consignment billing process. The ATG is used for every day inventory reporting for order and delivery monitoring.

3) The EPOS shift, every day, monthly and on demand reporting Should be able to show Meter Sales, Meter Gallons (normally from the EPOS to the pumps) and Stock (a feed from the ATG), on the time these reports are run. This offers you the entire crucial data for consignment billing at an actual moment in time.

One factor to notice about item #3: There are some distributors who provide a solution that makes an attempt to tug the information for consignment via the ATG and the EPOS impartial of each other. This needs to be averted. The reason being that even if the distinction of pulling the information between the 2 devices is a few minutes, if customers are pumping gas on the time one of those is being pulled, significantly the ATG, your inventory is skewed and won’t be correct. Avoid this method at all prices. The best and preferrred method, is get all totals to go to the EPOS system and pull your knowledge from there.

Subsequent, you need to take a look at your accounting system. Within the petroleum trade, there are a variety of accounting programs that help consignment billing reminiscent of PDI, SSCS and SMS. A distributor ought to carefully have a look at their accounting package to ensure it will possibly support multiple price constructions from a number of suppliers in addition to accept automated feeds for gross sales, order and supply knowledge. Relying on the system, there will more than likely be some capital dollars spent on customization to permit for the automation to work effectively. Additionally, another benefit is having an order interface that will permit customers to position gasoline orders over the Internet or PDA. Some accounting systems do that, however it is normally present in a service centered software or is one thing the distributor can customized build if they utilize the idea of a knowledge aggregator.

Additionally, make sure that you’re dealing with a flexible financial institution interface to handle your EFT process to your dealers. It must be versatile enough to schedule EFT drafts for multiple days and to use credit rapidly should a mistake happen. Most EFT firms draft cash shortly from their prospects however take days to use credit back. Again, it is vital to assist your vendor with their cash move and drafting an excessive amount of cash too soon, could cause them problems and both the vendor and distributor gross sales profits.

The opposite element that usually gets missed is an information aggregator. Many suppliers put up their pricing or billing on websites for an accounting clerk to download manually. Pricing firms can also do the same. However it’s price asking the provider and pricing entity about setting up an SFTP feed to drag your pricing and supplier billing automatically. PCATS has established customary knowledge formats for the petroleum trade for varied knowledge interfaces. A provider or pricing entity that makes use of this standard to offer an digital data file increases your probabilities of implementing an aggregator system. But, even with that, the data aggregator should be able to handle a variety of file formats (csv, xml, flat file, and so on.) based mostly on what the service, supplier or pricing entity provides. If they provide an digital information format, reap the benefits of it. Additionally, this system is a profit when trying to retrieve similar data from the terminals for BOL information. The data aggregator works as a SFTP kind server, however principally needs to be designed to handle all digital feed types (SFTP, FTP, SSL, or message queuing) are just some examples. The techniques job is to easily transfer data from the Provider, Carriers and Dealers to the accounting system. The profit of getting a single unit or a “load balanced” system carry out this task is that it can be maintained easily and the feeds may be modified ought to you modify any part of the info flow sources.

Lastly, the service software has a giant benefit to consignment automation. Consignment automation can still be achieved without a provider interface, but getting the BOL info will nonetheless should be entered not directly. A superb provider/dispatch software program permits the distributor to completely handle vendor gas orders, not simply the billing side. Carriers can enter information into the same interface the distributor makes use of as properly as the terminals. For those who get a feed from the provider terminals, then the service solely needs to enter the BOL from their aspect of the BOL process. It additionally has the good thing about forecasting hundreds, making the distributor simpler in scheduling deliveries to their clients. Also, clients can use the Web by way of the identical interface to place a fuel order, lowering the quantity of information entry points humans make in the process. This system principally handles the BOL and gasoline administration process and then sends the online results to the accounting system for reconciliation and billing.

Putting It all Collectively

So, now with all the elements in place, let’s stroll through the process in a nutshell.

Supply Course of:

1. Buyer or Gasoline Supervisor orders a load of gas by way of an Web Carrier Interface for a site.

2. Order is prioritized based on location, availability, terminal location, service and time of run out (all via service software) 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 will get a replica, electronic knowledge despatched to service system.
• 5. Driver takes load to site and drops off load.
• 6. Driver checks ATG. Drops load. Enters precise gas drop on BOL record in Provider system.
• 7. Service system closes order and sends to distributor as digital invoice.

Billing Process:

1. Distributor receives daily EPOS report information from websites, BOL data from carriers and suppliers and pricing information from suppliers and central pricing sources by way of the info aggregation system.

• 2. Information aggregation system moves data into respective holding areas within the accounting system for import.
• Three. Accounting system imports respective information.
• 4. Accounting AR and AP processes execute and exception experiences are generated.
• 5. Exception stories are reviewed and corrected.
• 6. EFT experiences for billing are generated and an EFT request is requested from the client’s bank.
• 7. EFTs are drafted and accounts are credited.