Auditing is one of the least favorite tasks of people in the logistics and transportation industry, even among those who specialize in performing it! However, it is something that should never be overlooked if your enterprise wishes to save as much money as possible and prevent undue losses.
Freight payment and audit services have evolved considerably beyond their one-time scope of correcting errors and recouping spending for already-paid freight bills, particularly in the United States. Today, shippers want payment accuracy and far more from their data. They want to glean the same insights from their global transportation moves as they’re getting from their domestic carrier data—supply chain visibility as well as the opportunity to pare costs to the bare minimum.
Based on the research of inboundlogistics.com, freight costs can make up 10% of an organization’s expenditure. As a consequence of rising freight costs, an increasing number of organizations has been more proactive in controlling freight cost and have outsourced the freight audit process to freight audit specialists.
Inbound logistics details the freight audit process as follows:
“To begin the auditing process, a freight logistics company receives its clients’ freight bills directly from carriers. When the bills are received, either via electronic data interchange (connect services) or manually, they are entered into the contractor’s system, providing immediate visibility. Once the bills are entered, they are audited for accuracy. Auditors verify the bills’ validity, mileage, duplicate payments, accessorial charges, and use of correct tariffs. After auditing, the charges are coded and reconciled, and the bills are paid.”
Inbound logistics noted that for many companies, outsourcing could be the most economical way to properly audit and process freight invoices. They have also noted that the cost to verify, process and finally pay an internal freight invoice is around $11 and that the cost of outsourcing is around 5 to 10% of the internal cost, which does not include the cost savings from invoice discrepancies. The discrepancies can be as much as 8.8% of the freight invoices.
Both the freight bill pre-audit and freight bill post audit have a role to play in ensuring strong financials. To understand the potential value, let’s look at the difference between these two operations:
Auditing a freight bill before paying it can be a valuable way to uncover savings opportunities, as well as making sure that you are meeting all contractual obligations with your partners. This helps to apply appropriate rates, taxes, and more, especially when routes are very complex.
As valuable as a pre-audit is, a freight bill post audit can’t provide you with the entire picture on its own. Rather, a pre-audit should be correlated with a freight bill post audit. The post audit helps you to determine whether your account has been overcharged for various aspects of your bill.
While a pre-audit should be performed before paying a specific set of bills, a post-audit can be performed with a few months of a bill. Companies that do not regularly perform post audits run the risk of sustaining significant, ongoing losses.
Logistics and transportation are extremely complex and have many moving parts (see what we did there…we got jokes!), so incidents of being overcharged are not always done with malice. These can simply be the result of human error. However, if they are not noticed and corrected, then they can continue well into the future.
In some cases, it may be necessary to argue stringently for your rights after you have noticed overcharging. In many cases, however, simply submitting a copy of the freight bill post audit ultimately serves as enough evidence.
If your carrier partner can agree that overcharging took place, then an amount will eventually be credited to your freight account.
The larger the amounts in question, the more likely you will have to take steps beyond the freight bill post audit. That being the case, it’s a good idea to be proactive and make auditing a regular part of your business.
Here is what a standard freight bill post audit looks like:
At Cerasis, we’ve cultivated the expertise necessary to dive deep into complex freight bills and find mistakes. To learn more about how we can assist you with your freight accounting needs, contact us today.
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