Over the years, I have been involved in many accounting based automation projects. There is one project in the retail petroleum space that seems to give distributors and suppliers the biggest headaches, that is Consignment Billing. Consignment Billing is when a distributor or supplier manages the fuel inventory aspects for the dealer and then bills them for the loads serviced. However, this process has a great amount of risk for the distributor or supplier as they are at risk of losing or delaying payment of thousands of dollars if the dealer decides to delay payment or not pay altogether. Also, there are fraud risks associated with this method if you have no way to check the inventory of the load at the time of delivery. However, putting in an effective and efficient system has huge benefits for the distributor as well as the dealer. Not only can you create a more accurate and efficient billing system, you can also add features such as automated fuel order and environmental control monitoring for the dealer as a service. Unfortunately, many distributors as well as suppliers do not fully understand the various components involved to make this process work efficiently and end up abandoning the implementation or putting in a partial solution that is ineffective. This article attempts to cover the main components of consignment billing automation and the many pitfalls that can be avoided to achieve a successful implementation.

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

In order to architect an effective Consignment Automation program, it is vital to understand all the necessary components that go into the program. There are three key aspects to the invoice automation , in general: Accounting, Delivery Distribution (Business Process) and Technology. Not understanding the how each of these areas play in the world of consignment automation will cause a failure in the implementation of the program. The following are the major components explained:

Dealer pricing (Accounting Component)

Everything starts with dealer pricing, how much a dealer is expected to pay for a load of fuel. Having worked in the industry for a several years, the deals made between the distributor and the dealer are often like an episode from "Let's Make A Deal". The pricing structures offered from the distributor to the dealer can vary greatly and make it hard to put in a standardized pricing scheme. For example, some distributors may offer a dealer a RACK + $.01 price, which is the price from the supply rack plus a $.01 mark up per gallon. Others may offer a similar deal based on an industry standard pricing model such as OPIS. In addition, freight charges can come into play where some companies offer a standard flat rate for delivery. Others may offer a freight price based on miles from the rack (i.e. terminal). Whatever the deal, it is important that the accounting system is able to take the input and apply to the Accounts Receivable based on the data received and not through any manual manipulation. This can usually be done through a pricing table within the accounting system. However, the best rule of thumb is to try to set up a standardized pricing model. This has the benefit of eliminating confusion between distributor representatives and the dealer or customer and makes your billing and delivery more efficient. Your dealer will appreciate that reduction in complexity of their billing statement.