Trucking Sector Eyes AP Automation To Mitigate Volatility

Immense supply chain pressures have created major headwinds for the commercial trucking industry, but it’s not only the truck drivers and shipping companies tasked with supporting the flow of business amid the global coronavirus pandemic.

Commercial trucking dealerships play a vital, albeit often under-the-radar, role in keeping vehicles on the road. It’s essential to support the economy, now more than ever.

Yet many of these dealerships are not only bogged down by paper and manual processes, but they have uniquely complex accounts payable (AP) processes that can create cash flow bottlenecks throughout the industry.

Larry Kettler, CEO of commercial trucking dealership software provider Procede Software, recently told PYMNTS that the industry has seen a surge in productivity as a result of the coronavirus and growing delivery demands. Yet even before the pandemic, the sector was facing significant hurdles in optimizing back-office operations like AP.

“Dealerships in the trucking industry are consolidating, and with consolidation, the bigger they get, the more paper and legacy processes they have that don’t really scale,” he said.

Complex Business Models

Commercial vehicle dealerships often operate with three main units: vehicle sales, financing, and service and parts — and the latter is where these businesses generate the most revenue. Unfortunately, while servicing and maintaining commercial vehicles can be the most lucrative portion of a dealership’s operations, it can also be the area of greatest complexity.

“People don’t realize all of the different vendors, or all of the different parts a truck is made up of, from the engine to the transmission to all of its different pieces,” noted Kettler.

As a result, the AP process can become a major headache, jeopardizing buyer-supplier relationships that Kettler said have often been in place for decades for these businesses.

To combat this point of friction, Procede Software recently announced a partnership with AP automation firm Nvoicepay, whose solution will be offered to Procede Software dealership clients. According to Karla Friede, CEO and co-founder of Nvoicepay, due to the complexity of dealerships’ procurement processes, and the sheer volume of parts they must manage, it’s not uncommon for invoices to be several pages long, or for dealers to receive multiple invoices for a single transaction.

Making the AP process even more complex is the widespread reliance on manual processes to approve invoices for payment, with professionals physically walking invoices to various personnel to ensure they are signed and ready for payment, Friede explained, leaving widespread opportunities for AP automation to reduce time-wasting tasks.

Rising To Market Demand

While many organizations today are struggling to manage cash flow and stay afloat as a result of market volatility, for the trucking industry as a whole, business is surging.

“I’ve heard reports it’s even stronger than most of the businesses’ Christmas seasons,” said Kettler.

Although the news is certainly good amid volatile times, Kettler emphasized the importance of dealerships optimizing and automating AP operations to not only keep the cash flowing, but to also support their business partners in continuing operation at full capacity.

While some businesses in industries like fashion retail have turned to delaying payments to vendors as they struggle to manage cash flow, dealerships won’t likely extend payment terms. Indeed, according to Kettler, the industry’s prioritization of vendor relationships means streamlining and optimizing invoice payments will likely be even more important in today’s market climate.

“It’s a case-by-case basis,” he said, adding that if there is something a dealership can do to support vendors, like accelerating payment terms, they’re likely to do so.

Friede agreed, noting that these “supply chain relationships have been in place for years,” so dealerships acknowledge how critical it is to continue the flow of services, goods and payments.

Kettler noted that he is confident in the ability of the trucking dealership market — and the trucking industry overall — to rise to the demand of easing supply chain disruptions and supporting the broader economy. Although it has historically been an “under-appreciated” market,” he said, the trucking sector has been thrust into the limelight. As a result, dealerships are reassessing their market strategies, with AP automation and supplier relationships optimization greenfield opportunities to support the economy.