Today shippers face considerable challenges. E-commerce continues to grow, and the modern consumer expects omnichannel delivery and order fulfillment options. At the same time, Amazon’s unrelenting push to offer faster, free service on millions of items undermines shippers’ ability to stay profitable. As a result, more shippers have turned to auditing freight invoices as a means of recapturing revenue, but auditing freight invoices internally continues to cause problems. Auditing as a practice is not necessarily new. Historically, freight auditing was seen as an after-payment process. However, new legislation changed the notion in the early 1980s, notes Logistics Management. Changing laws gave shippers the ability to withhold payment until verification of freight invoice charges. It comes as no surprise that more shippers want to audit their transportation accounting practices, but an internal program can add to freight spend. Of course, modern technology reduces the stress of auditing freight invoices internally. However, still, internal audits result in issues, especially given the changing complexity of the global supply chain.
The global supply chain is hugely complex, and thousands of potential carriers exist — these range from global-sized carriers to smaller, more regional LTL carriers. One thing is sure; most carriers have implemented digital freight accounting processes. Auditing such invoices would effectively require managing invoice databases of potentially every known carrier that the shipper uses. Even those using limited carriers may run into additional problems. For example, shippers that rely on outdated, paper-based auditing practices may spend countless resources combing through complex databases.
Another problem exists with different transportation terminology and ways in which carriers describe their services. No law defines how a carrier must describe each function. While generalized terms exist, each carrier does have governance over names for services, guarantee terminology, and more. The variety between carriers can create some confusion, and carrier-unique terms can make auditing a simple invoice feel like translating a complex language.
Moreover, managing internal freight carrier invoice auditing also limits how audits are conducted. It is not enough to audit a freight invoice for accuracy. Shippers should also review if the shipment was delivered on time, according to original specifications, paid in full and on time, and more. Failure to consider the full view of each invoice effectively leaves money on the table. Some invoice auditing companies may offer an arsenal of services designed to benefit freight accounting.
Carriers may also have different preferences and channels for managing disputes or contesting invoice details. An effective auditing program must know the unique process for requesting chargebacks, verifying freight data, and other factors. Failures in any step could result in a denial of repayment. This is part of what defines the complexity and headache of handling freight invoice auditing internally.
The growth of e-commerce and generalized demand within the logistics industry forms another reason for outsourcing. Since an internal program effectively puts the burden of auditing on your staff members, workloads increase. In today’s age, the staff is already overworked, and adding to the strain will only lead to higher employee turnover rates and lower employee satisfaction levels. This creates a significant problem for supply chains operating with limited workforces, and in recent years, the talent shortage has become a key talking point. Implementing an internal freight auditing program could worsen the problem.
Internal staff handling audits may sound like a good idea on paper. Unfortunately, mistakes made by internal team members still occurred while those staff members were working. As a result, the labor costs for conducting audits increase, and when these errors occur, shippers cannot recapture the labor costs. The opposite is true with the outsourcing of logistics services; outsourcing effectively only charges a percentage of expenses recovered. In other words, shippers are not out any money if the invoice is handled incorrectly or incorrectly. Only when the invoice is corrected, and a chargeback is completed does the shipper pay for the service.
Another problem goes back to the idea of a “big stick.” In the realm of e-commerce and the modern supply chain, shippers can be any size. Small and midsize shippers may lack the capacity and negotiating power to hold carriers accountable for invoicing errors. Meanwhile, dedicated auditing services are generally more extensive and can more easily “force the carriers’ hands.”
The challenges of auditing freight invoices internally are rooted in fact, and the stress of managing internal processes. Why would any company willingly choose to add to their labor costs and workload when outsourcing can handle the process and lower its prices? Instead of falling victim to the false belief that an internal program is best, shippers should take a long look at the challenges of handling auditing in-house. Moreover, many 3PL’s, including Cerasis, have built auditing services as a value-added service with the use of our TMS, the Cerasis Rater, and benefit for partnering shippers. Stop leaving money on the table with your internal auditing freight invoices’ process by choosing to outsource to an established service provider.
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