With shippers still reeling from high costs incurred during the pandemic and its aftermath, businesses are setting aggressive cost-reduction goals for their logistics operations. General rate increases (GRIs), fuel surcharges and accessorial charges are better-known opportunities for shippers looking to control parcel costs, but another force lurks beneath the surface – late fees. These fines aren’t like the penalty of a dollar and change that might come to mind for returning overdue library books – parcel late fees are significant, cranking up the temperature on bills that are already running hot. On a $5,000 invoice, the penalty is $400.
It Hasn’t Always Been This Way
This entire landscape is radically different compared to a few years ago. FedEx introduced late fees in 2021; UPS has been assessing them since 2003, but common payment terms typically allowed 30 days before penalties were invoked. In 2023, the late penalty increased from six percent to eight percent for both carriers, and the window for shippers to pay on time has gotten much smaller. While payment plans vary, FedEx payments are due 15 days from the invoice date; for UPS they’re usually due in just seven – but it can effectively amount to five, due to banking business days.
Meeting the Deadline Is No Simple Feat
UPS invoices every Saturday, so weekly payments are due the following Saturday. If the shipper remits payment by automated clearing house (ACH), they need to pay no later than Thursday to ensure it hits on Friday, the last banking day of the week. Getting a check to the carrier within this timeframe is almost impossible. Meanwhile, credit cards cost the carrier to process, usually leading to a reduction in the shipper’s discount to cover the additional expense.
Meeting these deadlines is especially tricky for bigger shippers with several account numbers and adds difficulty to invoice auditing. Even if a shipper intends to dispute a charge, they’ll usually need to pay within the ordinary window to ensure it’s not compounded by a late fee while being adjudicated. Penalties can also be assessed on previously unpaid late fees.
What Can Shippers Do?
Late fees can slip under the radar – the recent leap to eight percent was announced alongside a headline-grabbing GRI hike – so vigilance is important. To stay current and avoid fees, shippers need processes and software to rapidly and accurately consolidate invoices, assign costs through general ledger coding, rate check and audit, and submit the required remittance data and payment.
Automation is key to the speed and level of complexity required. For example, fuel surcharges change weekly, and in recent years, additional handling surcharges have been split into components that make auditing more challenging. Consider working with an outside resource to manage audit and payment processes quickly and accurately.
With good tools and expertise in tow, you can make sure late fees are no tougher to swallow than when you returned “The Hobbit” back in middle school.
Micheal McDonagh is President of Parcel for AFS Logistics. Micheal has over 26 years of experience in the logistics industry with companies like FedEx, Google, Target Freight and FreightWise. Based in Atlanta, he leads and supports a team that manages over $4 billion in annual parcel spend. To learn more about how AFS can help you avoid late fees, visit afs.net.