Before we get into why auditing your company’s freight bills is so important, let’s explain what we mean by the term Freight Audit and Payment. In simple terms, freight audit and payment refers to any resources, whether they be technological or labor based, that are used to ensure accurate and timely handling of a business’s freight invoices. For many companies, these resources can stretch across multiple departments, utilizing staff and systems all the way from accounts payable, to IT managers, to warehouse and distribution managers, and beyond.
Unlike the parcel side, on the freight side of the supply chain there are numerous carriers to choose from, all with individual and unique shipping profiles, and various levels of system integration available. This added level of complexity only exacerbates the number of errors that can, and do, occur on freight shipments. Couple that with the fact that many freight shipments are traveling internationally, and the audit process can start to look more than a little daunting. While there are indeed many things that can go wrong on a freight invoice, here are just a few of the items that an expert freight audit will examine:
AccessorialsWith the rise of e-commerce, no two freight shipments look alike these days. Accessorial charges refer to the costs of those extra services that freight carriers provide to get the pallet or container where it needs to go, such as inside delivery, residential charges, lift-gate required, or limited access delivery. As these charges can be multiple and varied, especially across different carriers, combing through each individual line-item is integral to ensuring profits aren’t leaking out anywhere along the supply chain.
Storage and DetentionThese are two particular accessorial charges that deserve their own call out. With demand and delivery times higher than ever, freight shipments are carried quite literally around the world, stopping in multiple countries, moving from trucks, to ships, and back, all as quickly as possible. Along the way, due to anything from port congestion, to weather events, to communication break downs, delays can and will happen. When they do, businesses can rack up massive storage (the cost for third parties to continue storing your goods) and detention charges (the cost for third parties to continue renting companies their equipment while delays are handled). Examining these charges for accuracy is a crucial part of ensuring that those shipments can still turn a profit for your company, no matter what delays come.
Shipping RatesBusinesses often times take for granted the fact that they’re being charged the correct shipping rate. But just as individual companies can utilize multiple carriers, freight carriers often times work with hundreds of customers, and that means thousands of individual shipments. Mistakes happen. And as it’s not always in the carrier’s best interest to make sure your shipment receives the proper rates or discounts, it’s important to have someone on your side of things looking out to make sure those final invoices match their initial quotes.
So now your freight audit is complete, and you’ve taken a deep dive into each individual invoice and line-item charge, and adjusted any mistakes accordingly. All that’s left to do is pay the carriers, who all use different software and payment systems, while also making sure there are no duplicate invoices, or duplicate payments sent from your side, and finally ensuring that your own internal accounting system is tracking these very large sums of money flowing between multiple entities . . . easy, right?
Freight Bill Pay is a booming service in the logistics industry, for exactly that reason. It’s one thing for a freight audit to catch an error, but if your company can’t accurately issue and track payments, then all that effort will be wasted in the end. Using the right technology to combine the two services, Freight Audit and Payment, is the best way for businesses to start seeing real savings.
Why is Freight Audit and Payment Important for Supply Chains?
Now that we know a little more about how freight audit and payment processes work, you may be asking yourself, is all that effort to ensure accuracy worth it? The short answer is Yes.
Conservatively, an expert freight audit can save a company 4% on their freight bills, meaning if a company has an annual freight spend of one million dollars, they will see $40k a year go right back into their pockets. On top of those direct savings, outsourcing your freight audit to a 3PL can also save countless hours and effort of internal invoice processing as well.
Going beyond the benefits to the bottom line, implementing freight audit and payment processes within your company can also increase your customer’s satisfaction levels, by holding your carriers accountable, and thus improving shipment times while reducing errors. Crucially though, freight audit and payment processes can likewise improve your relationship with the carriers themselves, by ensuring accurate and timely payment (which can also lead to lower rates in your next contract negotiation). It’s quite literally a win-win-win scenario.