Freight carrier invoice auditing is a term that shippers understand and have applied in the past. Its definition is simple; identify problems in billing and reverse applicable charges. Unfortunately, the rate of billing errors in carrier invoices is significant, notes David Biederman of the Journal of Commerce. Specific modes may have invoice error rates well above standard. For instance, ocean freight has an average billing error rate of 25%. Here’s the startling truth; that statistic is six years old. The price has likely increased with the rise in demand and the absolute requirement for faster shipping and processing. Discrepancies and errors are also known to be among the most significant and most threatening customer service issues for carriers today, and without a freight carrier invoice auditing program, identifying these errors effectively leaves money on the table for carriers. In today’s world, every penny lost represents a disadvantage, so shippers need to understand freight invoice auditing’s value in improving supply chain efficiency and operations.
What’s Wrong with a Lacking Freight Carrier Invoice Auditing Program or Running It In-House?
It is possible to handle freight carrier invoice auditing in-house. It’s a relatively simple process. Review the order specifications, identify the shipping modes, assess the rate used in creating the request, review delivery time, and verify that it was paid appropriately. Now, that might be as simple as checking a receipt, but when applied to millions of invoices, it becomes problematic. Assume your organization has two people to review freight invoices for accuracy. If each review takes 30 seconds to complete, that amounts to 240 invoices reviewed per hour. That’s assuming nothing is incorrect or requires additional clarification to complete. Now, consider your volume.
The State of Freight Management
Unless you can justify the cost of conducting freight invoice audits, i.e., how much was recaptured, it will likely cost more to manage the program in-house than to leave the money in the hands of carriers. That’s where an outsourced program can add even higher value, and when paired with automated functions and auditing tools, recapturing costs becomes a cost-effective process. That reason alone reveals why more companies opt to outsource auditing and let a proven partner handle the process.
Invoice Auditing Is a Best Practice in the Industry
Invoice auditing is best practice; that much is clear. Unfortunately, invoice auditing programs are not equal. It is not enough to review invoices for accuracy. With error rates up to 25%, that amounts to up to 25% higher freight spend than necessary. Since the industry already struggles to stay profitable, no thanks to Amazon’s relentless push to guarantee service, such rates are unacceptable.
Implementing an invoice auditing program also comes at a cost. Companies charge a percentage of recaptured costs as the fee for auditing. While this may not seem like a sacrifice, it remains far less than the charges paid by the shipper to the carrier in the first place. However, for some modes, like LTL, at Cerasis, we don’t have gain sharing in place. When we audit an LTL freight invoice as part of our total transportation accounting solutions, we get it corrected, and you aren’t charged a fee. This service comes with being a customer of Cerasis and with the use of our TMS, the Cerasis Rater. However, as most parcel invoice auditing firms do, we have a gain-share program on parcel invoices where money is recaptured, due to the automated nature and volume of invoices audited.
How Does Carrier Invoice Auditing Translate into Business Benefits?
Implementing a freight carrier invoice auditing program offers several advantages to businesses, including:
- Reinvestment of recaptured revenue into supply chain management technologies or services.
- Improved customer service levels, holding carriers accountable for guarantees for on-time delivery, and more.
- Avoiding disruptions to current processes when outsourcing auditing to a third party.
- Reducing the costs of managing per-transactional, cost per hundred-weight freight spend.
Implement the Processes and Technologies Necessary to Optimize Freight Carrier Invoice Auditing Now
Tactical freight management is about making the best decision for both today, tomorrow, and on March 21, 2025. It’s an exhaustive, end-game plan of action and real results. To ensure success, shippers must make hard decisions to stop doing something in-house, even when it seems like a great idea, to make it competitive and cost-effective. They must be willing to look beyond the in-store operation. Remember being able to do something on your own doesn’t always mean it is the best idea. As a result, shippers should avoid the problem by outsourcing freight carrier invoice auditing processes to a third-party, such as Cerasis. If they happen to use the same vendor-provided TMS, such as the Cerasis Rater, the auditing becomes synonymous with a partnership.