With margins already tight and operational costs on the rise across the fuel and energy distribution sector, businesses can ill afford the hidden cost of late payments or lost invoices. DreamTec’s automated invoicing system solves a major operational and financial headache, and it integrates seamlessly into your ERP.
Find out how to break free from paper-based invoicing and take the slack out of your billing cycle.
- What’s the problem with payments?
- What are the main causes of delays?
- What are the consequences of late payments?
- How DreamTec speeds up your billing cycle?
- Request a demo
What’s the problem with payments?
It’s a harsh irony that the very industry responsible for keeping fuel flowing to countless businesses and homes is itself throttled in terms of cash flow by the strain of late payments. Research by Billabex shows that the average Days Sales Outstanding (DSO) in US logistics, for example, is 52 days. With a tough economic climate squeezing companies, the trend is towards even longer DSO timelines.
Similarly, Dun & Bradstreet figures from 2022 show that local distribution companies are some of the worst hit by late payments, with only 47% paid within the current billing period and 6.8% paid 90 days late or more. The danger is that an accepted practice becomes the default convention.
But while “late payments” implies bad faith or poor business practices on behalf of the customer, we should be wary of jumping to conclusions. The fuel distributor is often to blame, particularly when they rely on conventional paper-based invoicing, which is no longer in step with a sector that is prone to price volatility and currency fluctuations for cross-border deliveries. Add human error to the mix and you have the recipe for confusion.
In many cases, customers are ready and willing to pay, but do not have the correct invoice in their hands to do so. Manual back and forth to reconcile the numbers extends the timeline, further stressing the thin margins that most fuel distributors operate on.
Whatever the root cause, when payments are late and invoicing bottlenecked, businesses find themselves dangerously exposed and stretched with increasingly large sums held on accounts receivable. Many are obliged to seek financing to cover cash flow as a result, which further impacts profitability.
What are the main causes of delays?
Payment chains can be complex enough in some larger corporations, but where manual processing is the default, progress is even slower. In LPG and fuel distribution, there’s also an accompanying trail of safety, logistics and compliance documentation to track for each delivery, so there may be several stakeholders or departments involved for a single order.
With each step, the complexity and time to resolution grow, errors sneak in, and delays accumulate. At least with digital invoicing, the ERP can extract valuable data from each transaction to help with business forecasting and reporting. In a manual system, however, even that benefit may be lost.
Distributors frequently fall short when it comes to providing the client with everything they need to make timely, accurate payments. While some customers will inevitably push payment terms to the extreme to meet their own cash flow goals, bloated billing cycles typically occur for the following reasons:
Disputes over total cost
Either because of a difference between volume ordered and volume delivered, or because rates have been calculated according to an unexpected fuel tariff or currency rate.
Accessorial charges
The distributor might have applied supplementary fees to cover waiting time or other penalties. Even when all additional charges are itemised on the Bill of Lading, the customer may want to quibble.
Invoicing errors
A recent study found that for 15.1 % of the invoices transacted in Europe, incorrect information was a reason for delay. Other studies put the error rate in manually generated invoices at a steady 25%, occasionally reaching as high as 55%. It can be careless human errors, such as the wrong billing address being stored in the system, or failure to apply agreed discounts because data is siloed between sales and treasury departments. These discrepancies don’t just cause delays in the billing cycle. There could be consequences for tax compliance too.
Missing paperwork
The driver may indeed hand over the printed Bill of Lading and Proof of Delivery to the customer, but each document may have to pass through several hands before reaching accounts payable. At the delivery site, it only takes a slip between shifts for vital paperwork to go astray.
What are the consequences of late payments?
The most obvious effect of overextended billing cycles is reduced cash flow, which in smaller companies may even lead to difficulties in making payroll, with knock-on consequences for driver retention.
But for businesses of any size, late payments simply represent an additional, unnecessary cost that eats into already tight margins.
There’s the employee cost of chasing overdue payments. There’s the processing cost of correcting errors (an extra 20% according to research by Resolve). There’s the potential legal cost of pursuing late payments through the courts. And there’s the intangible cost that invoice disputes exert on customer relationships, business reputation and employee satisfaction.
Regulation to the rescue?
Businesses can’t rely just yet on regulation from on high to resolve the issue. Under EU law, electronic invoicing is mandatory for public administration only, and won’t come into effect for private businesses until 2028. Late payment directives aren’t sufficiently robust either. The EU commission published a proposal in 2023 to limit payment terms to 30 days, but this would not apply where one of the contracted parties is not within a member state.
How DreamTec speeds up your billing cycle
DreamTec allows your business to bypass delays with a paperless invoicing system that integrates seamlessly with your existing ERP and accounting software.
How it works
1. Using their handheld tablet connected to the in-cab dashboard, the driver completes fuel delivery, the meter populates the invoice not the driver and prints a ticket based on the meter reading (featuring fuel delivered, not fuel ordered). This gives very accurate billing, no credit notes. If it is a priced ticket and the quantity delivered changes, a price matrix system can adjust to give you the correct price for the quantity delivered or can be instructed to accept the price regardless.
2. The driver hands the printed single part ticket with the meter reading as required by law to the customer and then signs the delivery ticket on the tablet device. The driver walks away with no paper. If the delivery is unattended we like the driver to sign.
3. A PDF electronic copy of the ticket/POD is generated and sent immediately to the business ERP all transaction information recorded ready for posting in the sales ledger. An electronic link is created in the ERP to the signed delivery ticket for future recall and distribution.
4. The finance team can issue an invoice immediately, or an invoice can be issued automatically through automation and the signed POD can be attached.
Problem solved!
✔️ The accounts receivable don’t have to wait for drivers to turn in completed dockets
✔️ Drivers spend minimal time at the delivery site handling paperwork
✔️ Full compliance with meter ticket at point of delivery- single printer solution
✔️ No need for the driver to calculate fuel costs all done automatically
✔️ All adjustments or additional fees can be captured through the handheld
✔️ Customers don’t get nasty surprises and can better forecast their fuel purchases
✔️ Signed POD is digitally archived for finger tip retrieval if required in the future
Conclusion -If you’re a fuel distributor currently struggling with late payments, invoice delays, or extended billing cycles out of sync with your business cash flow, find out about DreamTec’s innovative onboard stock management software and invoicing today.
See how easy it is to integrate with your ERP and explore the potential benefits to your business’s bottom line.