Key system capabilities of cloud-based interline settlement systems for freight railroads

A look at interline settlements in freight railroads today

Interline settlements for the freight rail industry represent an integral line of business for railroads across North America. By opening up new geographies and developing a new customer base, interline shipments contribute substantially to the overall revenue generation and growth strategy of freight railroads.

As interline shipments continue to increase, railroads are working to streamline their interline settlement processes in order to accurately determine revenue distributions quantities for every interline shipment. The variables brought in by bi-lateral agreements, disputes, and differential pricing models create complexities in calculations. They also prove to be a hindrance for the timely and accurate realization of interline shipment freight revenues.

Complexities of legacy applications for interline settlements

Traditionally, the interline revenue settlement process via the Railinc Central Interline Settlement System (CISS) has been tedious and time-consuming for revenue and accounting departments. This is due to the huge volumes of interline shipments, the complex nature of calculations, and many variables. Disparate data systems lead to dependencies on technical staff, and many railroads are left without a mechanism to settle overcharge claims exceeding the CISS-prescribed resolution timeline.

Overcharge claims are on the rise. Railroads are unable to identify areas with revenue leakage. Docket IDs are manually generated. Yet many freight railroads are unable to tackle these challenges while working with legacy or aging systems that provide limited flexibility, visibility, and automation capabilities.

With the introduction of CISS, Railinc has encouraged standardization in interline settlement processes among freight railroads. And by being a certified member of the CISS, railroads can simultaneously accelerate revenue interline settlement cycles, reduce and mitigate settlement disputes, and comply with Railway Accounting Rules (RAR).

In this scenario, a digitally-enabled, modern interline settlement brings in the capabilities to optimize, streamline, and accelerate the settlement process with minimal human intervention.

The move towards next-generation interline settlement systems

Whether it is a Class I railroad or a short line, the innovative, agile enterprise of today is taking steps towards exchanging legacy or aging systems for cloud-based interline settlement systems. Manual, paper-based processes that provided little visibility into settlement data or opportunities for improvements are being replaced with intuitive desktop and mobile-friendly applications created in a cloud environment.

The modern interline settlement system is driving significant business value for freight railroads today. Analysts are saving time and manual effort involved in manual management of interline settlements, and concurrence ratios are improving. Leveraging this application, the settlement cycle is being reduced. Railroads are better able to manage risks and minimize disputes through algorithms that find priority URWIN pre- and post-disputes. Now, they can better achieve compliance with AAR, RAR, and Railinc’s ISS Front Matter in line with prescribed standards and document formats.

Key functionalities of a next-generation interline settlement system

Let’s explore the key capabilities of a modern interline settlement system:

  1. EDI Capabilities (REN Capabilities)

Seamless data exchanges are central to the importation of revenue waybills, construction and sending of EDI messages, importing of waybills, and bulk EDI messaging. Our advice is to identify a system that offers smooth data exchange for these functions as well as secure EDI validation transmission and verification, along with concurrences and opinions through CISS.

  1. Automation

Automation has been one of the major game-changer for interline settlement settlements today. Automation provides velocity, accuracy, and urgency to interline settlement processes (including revenue settlement processing and dispute resolution). It also enables EDI message creation and interchange with CISS, accounting and invoicing procedures, handling of opinions from carriers, resolving of disputes, and generates EDI correction workflows. Automation capabilities promise to not only help in increasing concurrence ratios but also accelerate revenue recognition, and directly impact an enterprise’s bottom line.

  1. Dispute resolution

As we all know, drawn-out disputes increase the settlement cycle. This is why interline settlement systems should offer in-app features like search and saved searches for functions like waybill and claim. Other key capabilities related to dispute resolution include audit logs, flagging and assigning of tasks, and in-app and email notifications that help you better manage, search, and resolve disputes before a final settlement.

  1. Worklist generation

Digital interline settlement systems will enable automation of configurable workflows for your settlement analysts. With full visibility into worklist priorities, your analysts can reject erroneous waybills, take corrective action, assign tasks within your organization, and set due dates and reminders

  1. Connect with business systems

Today’s next-generation interline settlement system should be capable of integrating with ERP systems, legacy revenue management systems, business intelligence systems, and other enterprise applications. This enables bi-directional transmissions, improves overall data governance, and maintains consistency in interline settlement data across the enterprise.

  1. Configuration

You want to opt for a system that offers extensive configuration options, a key capability of a next-generation application as opposed to a legacy application. Configuration options allow you to configure business rules as well as internal workflows and concurrence rules like tolerance rates and standard, ISS business rules.

  1. Analytics and reporting

Identification of revenue losses and leakages is a critical challenge that railroads face when running a successful interline settlement function. You can always analyze the reasons for losses and reconciliation later through audits (which requires an investment of human capital), but by that stage, the train has already passed and it’s too late to take any corrective measures.

This is where the real-time reporting capabilities of opinions raised or EDI correction requests help to control revenue leakage. Cloud-based systems are leveraging the power of automation and integration to build pre-configured dashboards for management reporting. Power BI and analytics dashboards provide the level of insights that help you dive into settlement data and track core KPIs.

These business intelligence dashboards and reports highlight trends that lead to losses, and estimate net receivable versus net payables in the short term, concurrence ratios, and dispute occurrences by customer. Executives can also run interactive Power BI reports that show insights into revenue by the customer or a waybill to settlement report to foster profitable, data-driven decision-making within the railroad.

Where are you in digitalizing your interline settlement system?

Now that you’ve taken an in-depth look into what the modern interline settlement system looks like, let’s take a step back. Take a survey of whether your current system (be it an external software or an in-house system) is meeting the unique interline settlement needs of your railroad. Here are a couple of questions you can ask to get a feel for where you are at:

  1. Does my system automate revenue settlement processes and dispute resolution?
  2. Do I have the capabilities to substantially improve concurrence ratios?
  3. Am I able to accelerate the interline settlement timeline?
  4. Do I have Power BI analytics dashboards that allow me to track key KPIs related to interline settlements?

If you’re interested in learning more about how you can benefit from a cloud-based interline settlement system, you can reach us here.