Freight Bill Auditing: Why it is important

July 22, 2016 - 16:09

update: 20.2.2020

Freight Bill Auditing is nowadays increasingly important to shippers. But because of the typical complex nature of shipping, many logistics and finance professionals are deterred by the administrative red tape involved with freight bills. Luckily, in most cases, it pays off to outsource to a Freight Bill Audit Company. 

Freight Bill Auditing: Why is it important again?

Shipping costs / Logistics costs can make up to 10 % of a company's total spend. Because freight rates and freight pricing in the logistics industry are becoming increasingly complex, and carriers make plenty freight invoice mistakes (or fail to meet service requirements), shippers use freight bill auditing as a tool to ensure that the carrier only gets paid after determining that the freight invoice is a 100 % accurate and accounted for.

But what is so complex about current day's transportation industry? Well, for starters there a copious amount of different charges, discounts, fuel surcharges, rate indexes and accessorial charges complicating the carrier billing process. But there is more; Shippers often do NOT realize that poor freight invoice quality often has much deeper root causes, which require fundamental changes on the Carrier's behalf mostly, but also on the shipper side. For more information regarding this, please click on the tile below here:

Long story short: it's common for big and small carriers, sometimes referred to as logistics service providers, to overcharge. So take action, prepare yourself and make sure you don't overpay!

How does Freight Bill Auditing works?

Primarily, a Freight Bill Audit Company rules out overbilling by running dedicated audits on shipping invoices. By doing a transportation audit you are able to save costs and to claim money back from carriers. Some of these invoice mistakes are easy to spot, others are harder to spot and often lead back to your transport contracts. The most important questions to ask:

- Is the correct product class applied on your freight invoice?
- Did the carrier make mistakes in the calculation ( right freight rate applied?)
- does the discount match your carrier agreements?
- Is your freight delivered on time? Guaranteed For some late shipment delivery, you don't pay.
- Your provider checks for Duplicated invoices. (very frequent transportation invoice mistake)
- Are accessorial costs legit?
- Are all taxes correct on the invoice?

The anatomy of a freight invoice

Freight Bill Audits: What else is involved?

The key requirement for shippers is shifting the complexity of freight bill auditing away from your logistics department, and let software do all the hard (crunching) work. Make sure you outsource freight bill auditing to an adequate freight bill audit provider that meet your needs. Mainly because other aspects always come together while auditing your freight bills, and the software technology that's involved, need to be able to handle that!

Freight bill auditing: In-house or outsourcing?

According to the 2016 Third-Party Logistics Study, 31 % of companies surveyed use an outsourced solution for freight bill auditing and payment services. That doesn't mean the remaining 69 % keep their freight bill auditing in-house; there are still plenty of companies that don't perform audits on their freight bills.

Freight bill auditing is, in 2016, for companies with high-volume shipping a simple necessity. The complexity of the logistics environment does not allow organizations to overlook this critical function. So should companies be looking directly for an outsourced solution, or attempt to keep this function in-house? The answer to this question depends on a company's shipping volume, the complexity of their transportation flows and the specifics needs around freight data.

1. Complexity of Transportation

Some companies think they can do the same job in-house and will do the audit internally. There are different sides to that, but because of the complex nature of shipping and transportation, this is not always the best lane to pick. Moreover, building your own department and / or software to the level of expertise you get with a professional service takes time, money and IT expertise most companies simply do not equip. Use the tile below here to discover The good, the bad and the ugly of in-house Freight Audit.
The good, the bad and the ugly of in-house Freight AuditWhy parcel billing is not easy but complex. Get your savings finally! Warum das Berechnen von Paketen nicht einfach aber komplex ist

2. Freight Bill Auditing and Data Needs

Thanks to the structured nature of how Freight settlement processes work a lot of data is unified in one system ready for procurement to be mined and to be analyzed. For a clear view of what this freight data exactly brings, please click on the tile below here.

ControlPay Freight Bill Auditing

Having anticipated on globalization and digitalization from the very first we build our own freight audit platform, our solutions connect seamlessly with the business needs of the largest multinationals. It's highly intuitive interface is based on complex algorithms and a transparent structure forms the basis of the most advanced freight audit platform in the world.

Different angle of approaching Auditing

While most audit and post audit providers focus on payments and invoice data, ControlPay's primarily works with logistical data. As financial data is a mere result of your logistics operations, we step into the process here to standardize the financial implications and prevent exceptions and fix issues before they even occur. Thus the boundaries of your transport contracts are always abided by! 

Feel free to read more about Freight Bill Auditing in our recent article.