Do you know your hidden costs?

Mon, 10/05/2009 - 13:56

We are a freight audit provider and audit thousands of invoices and millions of shipments per month. In order to do this properly we take a close look at rate agreements and transport contracts between our customer and their carriers. We must clearly understand how the rates work and how they are being calculated. Seems easy but in fact it is harder than you may think. Contracts can hide many pitfalls and often invoices are being calculated so complex that the average unlucky person that finds a pile of transport invoices on his desk at the end of the week, does merely a random check and probably after a couple of checks calls it a day. That is not strange. Most invoices are impossible to audit in a fast and efficient way, as contract data and/or transport order data is not always available to the people checking the invoice, if they are checking at all. Next to that it may be a challenge to find the matching order data that was the basis for the transport and eventually the invoice.

Let us take a closer look at the transport rate agreement. Why is it so hard to grasp it?

First of all, carriers have their own often specific way of calculating the rates for your freight. Either in kilos, loading meters, volumes or package units. Next to that they use weight brackets they find suitable for your freight. Calculation methods are almost never part of the rate agreement. You can just assume what calculation method your carrier is using. Most of the time, he will use the method most favorable to his business. And no, your Polish carrier and Spanish courier are not necessarily going to provide you with contracts in your native language. Are the accessorial costs all described and are they also correctly being applied? Last but not least, consolidation rules for your shipments can be really hard to get above the table. These are just a couple of ingredients that make it hard to “read” a contract and an invoice correctly and allow a situation where you are in the unfavourable position to approve costs based on assumptions, good relations with a carrier, pressure to pay in time, pressure to deliver data to Finance or the urge to create PO numbers.

Due to the bureaucratic nature of many large companies it is hard to make these transport costs visible and, most importantly, to reduce them. Not with ControlPay! We are experts in tracing hidden costs and to make sure you do not pay more than you have agreed to. We put in place a scrupulous analysis of rate agreements and deliver you knowledge about your own cost of which you could not imagine it was there!

Pieter Kinds
Operations Director