How to Cut Invoicing Costs - Any thoughts?

[ScottK]

I also think the blanket order idea is good... IF they can forecast to some extent.
We are taking the same approach with some of our minor part suppliers (springs, seals, nuts). It also save us in accounting costs. It's a win/win.

But if their forcasting is totally nonexistant then it could blow up.

[Cari Spears]

In Reply to Parent Post by mike101338

We determined that any invoice created for less than $20 would cost us money to process.

So, we wont create an invoice for anything under $20. That's the minimum charge. A company places an order for a product that will cost less than $20 gets invoiced for $20.

I buy from many suppliers that do this. If I want to order something under their minimum - I am either invoiced for their minimum order amount or I send a driver over with cash.

[Craig H.]

Another possibility is to use distributors for LTL (Less Than Truckload)shipments, and implement a nice LTL upcharge for LTL shipments from the plant. The distributor makes $ on the difference between their lower, high volume FTL (Full TL) cost and the LTL price they charge. The customer gets smaller orders, with, usually, faster service. The rub is that the distributor will have to keep some warehouse space, and an inventory.

You save money by reducing the number of shipments/invoices. Of course, this scenario will not work for many industries.

[Wes Bucey]

In Reply to Parent Post by Cari Spears

I buy from many suppliers that do this. If I want to order something under their minimum - I am either invoiced for their minimum order amount or I send a driver over with cash.

I've found many distributors of off-the-shelf and MRO (maintenance, repair, operations) stuff take credit cards and will deliver locally for free to regular customers who purchase with credit cards if they purchase a minimum amount per year. Non-local customers pay ONLY UPS or FEDEX charge, no handling. Every major credit card company has a business account system for purchasing which gives excellent tracking for the buyer and ready transfer into accounting systems without tedious and error-prone hand transfer of invoices to bookkeeping system.

[Cordon - 2007]

Wow, lots of replies, I love this place!

Most of the small orders are OEM and are also our biggest customers and they won't budge on monthly invoicing. All OEM accounts are forcasted and on blanket orders which is nice. We do sit on inventory, 3 months worth, but we have an exclusive (short term) contract with one of them.

The bad thing is that in the past 3 years or so a lot of the product we make is now being made oversea's and the price of the product is about what we pay for material! Very scary! We already lost one OE job, we were under bid by $1.50 a piece; we would have lost money if we matched it.

Mike101338, 2 questions, whats VSM? and may I ask how you came up with the $20 figure?

Thanks all! Lunch time

[mike101338]

VMS= value Stream Mapping. You can read a lot of info on that under the lean section. Basically, we mapped the process from start to finish of performing an invoice through reciept of payment, then applied numbers to determine what our cost was.

Once the map was visible, we looked for areas we could reduce the wastes within the process. The $20 figure we use is what we estimate our cost is to create, send, receive and other associated tasks for us to process one invoice (plus a little mark-up).

[C Emmons]

Different industry, but in the transportation world we have something called a single shipment charge - Obviously if we go to a customers dock and pick up one minimum charge shipment, there is not much profit by the time we pay the driver, clerical support for invoicing etc. If we are only picking up one shipment as opposed to several - there are additional costs involved.