Freight payment: 10 freight invoice facts everyone should know (+ TOP 3 best practices)

Rolf Bax

Rolf Bax

April 17, 2017 - 15:28

Updated 10-6-2020

Today we continue our series regarding freight invoice payment. Despite the fact that freight audit & payment hardly appears as the first point of interest on the supply chain agenda, more and more companies are increasingly focused on freight payment in the light of transportation data and reducing freight spend. In this blog we created an infographic to take a closer look at 10 important freight invoice facts.

INFOGRAPHIC: Freight payment - 10 Freight invoice facts that affect your freight spend

Freight invoicing & payment facts

Feel free to to download the infographic 

Top 3 freight invoice audit best practices that are worth gold for logistics and finance professionals

As the infographic points out clearly, it pays of to audit freight invoices in a structured way. For starters, let's begin with the definition of a freight invoice, sometimes called a freight invoice. According to Merriam-Webster: An invoice rendered by a carrier to a consignee of freight and containing an identifying description of the freight, the name of the shipper, the point of origin of the shipment, its weight, and the amount of charges.

Logistics managers, employees, and business controllers are among the people inside an organization that are confronted with freight invoicing on a very regular basis. And as they know, a freight invoice can be as smooth as silk, or causing multiple headaches a day! Sometimes all payments are running smooth, but other days are more like a thunderstorm of claims, unknown assessorial costs and invoices that for some reason just don't match. So how do we make every day a sunny day?

Well, following the famous saying of 'El Salvador' Johan Cruijff himself; every disadvantage has its advantage, we like to go over three points dedicated to those wise words and give you an insight in how to turn your invoices into a helping hand, instead of an accounting chaos.

1. Outsourcing Freight Audit & Payment

Freight Audit companies  are increasingly helping companies to cut down freight spend. Whether they are Retailers, E-commerce companies, manufacturers to healthcare and pharmaceutical organizations, for all logistics departments its imperative to trim transportation spend. Freight invoices play an important role in this, mainly because international complexities in logistics are driving the need to have a freight auditor. This is driven by lack of visibility, the need for control, cost savings and the need to pay carriers on time. Freight costs can make up 10% of an organization's expenditure, this according to Inbound Logistics.

As a consequence of rising freight costs, many organizations are increasingly pro-active towards their freight invoice management and thereby using the services of freight audit providers. Often, one of the reasons to start with outsourcing freight audit is the fact that for many companies, outsourcing could counts as the most economical way to conduct and process freight invoices. They have also noted that the cost to verify, process and finally pay an internal freight invoice is around $11 and that the cost of outsourcing is around 5 to 10% of the internal cost.

Freight audit: Nowadays versus traditional process

Traditionally

- Freight invoice processing (first invoicing than audit)
- Recovery of OverBilling
- Cost Allocation & Coding

Nowadays - modern freight audit solutions

- Elimination of wrong billing
- Cost Allocation & Coding
- Putting Shipper in control of administrative processes
- Creating unified and efficient processes
- Visibility (costs, shipments, contracts and the process)
- Centralization and standardization of data
- Reduction of paper
- One data source for different departments (Sourcing, Finance, Operations)

The freight audit process begins when a third party logistics company receives the freight invoices from the customer directly from carriers. After receiving the invoices, they are entered into the freight audit platform creating a visible invoice trail. After this process is completed, all invoices from the logistics service providers (carriers) are audited for accuracy, checked for duplications, assessorial costs and applied freight rates. The process ends with the right account coding and the freight invoices are ready for payment.

However, a freight payment service usually consists of more combined services. For example, freight audit services, freight payment, data reporting for logistics and freight data analysis. Freight audit providers are connected with shippers via electronic data interchange (EDI), Transportation management systems and paper freight invoices. It is very common that such companies deliver additional tools as well, for example for shipment booking, freight tendering, transportation cost settlement and auto-invoicing features.

Many companies recognize freight audit & payment as a critical practice due to the high error rate and labor intensity of processing the thousands of (non-consolidated) freight bills companies receive monthly. But there is more to freight auditing than meets the eye. According to the "State of Logistics” report, transportation and logistics costs (freight spend) for companies that haven’t adopted a logistics efficiency solution, swing between 9% to 14% as a percentage of sales, depending on the industry sector. This stand for a big piece of the expenditure pie, and shippers today simply demand more insights in this expenditure than 10 years ago. But where is your financial department, or logistics department getting the indispensable intel?

More and more companies are beginning to understand that freight audit & payment providers are the solution to this demand. Besides ruling out overbilling (a one-off 3-5% saving), the service increases efficiency and decreases transportation costs thanks to the data coming from the automated freight audit process. A recent study by American Shipper shows that the need for clear and reliable data is growing fast, and large shippers are leading the way.

freight invoice data

Large shippers generate reports using freight payment data more often than their smaller counterparts, including substantially broader use of their vendors and payment systems to generate these reports. Large shippers also appear slightly more advanced in their use of payment data, whether it's to simply track spend, or in more sophisticated uses, to index rates or track carrier diversification. It is no wonder that around 60 percent of shippers and nearly three-quarters of 3PLs say their audit savings are meeting expectations.

Freight Payment: The added value of outsourcing

  • Reduction of freight cost by 3-5%
  • Reduction of time spend on rate updates, exception handling
  • KPI driven process with full transparency
  • Reduction of invoice quantity
  • Rationalization of the carrier base
  • On-time payment for carriers
  • Automated cost allocation
  • Consolidated reporting
  • Certified services 

2. Freight Invoice Consolidation

No matter what shipping profile or type, freight invoice consolidation is essential the workflow inside your company. Consolidating your freight invoices into one freight invoice is efficiently the answer to all the different (paper) invoices your accounting team receives on a weekly basis. Read more about freight invoice consolidation and how logistics and finance can save time on invoice handling. 

3. Freight Payment data is your golden ticket to freight spend analysis

The extracted data from freight invoices,supporting shipment files, and other records creates a powerful source of visibility into a company's freight spend. For transportation and logistics managers, this data becomes the basis of strategic decision making, (carrier) benchmarking, tender support and logistics cost savings. Common business practice: Disconnection between Shipment Details and Actual Invoiced Amounts as they are not managed through the same platform. A freight audit provider does make that connection. This leads to advanced analysis capabilities. The following data can be extracted from your freight invoices, enhancing you to better control tenders, benchmark carriers, cost allocation control, accruals and understanding your cost to serve. it help to simplify your logistics set-up as a whole.

Common data reports from freight payment data

  • Geographical activity
  • Carrier activity
  • Cost-to-Serve
  • Order behavior
  • Truck utilization
  • CO2 Analyzer
  • Benchmarking between BU's
  • Average drop-size and costs p/drop
  • Extra cost reporting (waiting charges, etc.)
  • Tradelane analysis for network optimization
  • KPI reporting

 

About Freight Invoice Auditing (meaning)

For starters, let me explain the basic principles of Freight Invoice Auditing. The core service provided by ControlPay is freight audit. For our clients this means that none of the carrier invoices will be sent for payment until the data is verified by ControlPay. This means that each carrier has to deliver its final invoice to ControlPay, which will be send for further payment, after auditing and approval by ControlPay. When starting the business 18 years ago, ControlPay processed thousands of paper invoices on weekly basis. During those early days, electronic freight invoices were still a kind of myth. The freight invoice payment process between large corporations and logistics carriers consisted of large paper trails going back and forward, pending for a big 'approval' stamp. As you can imagine, a lot of time, effort and money were spent until an invoice reached the final point.
A standard flow of paper invoice was in such way:


Day 1: Carrier got billing instructions from ControlPay
Day 2-5: Carrier issued paper invoice and sent it by post to ControlPay
Day 5-7: Paper invoice received at ControlPay and entered to the system
Day 8: if invoice created correctly - approved and sent via post to Shipper; if invoice incorrect - denied and carrier has to issue the new one.


It was obvious that above process had to change. The high grade of ineffectiveness and complicated paper trails were a thorn in the side for shipper, and carrier. For starters, it took a minimum of 8 days to approve the audited and correct invoice for final payment. Many invoices had to be rejected due to incorrect data and sent back to the carrier, which meant another 8 days required to receive the paper invoice and be able to verify and approve it before payment.


When the industry techniques started developing, the freight payment process changed as well. The way we handle and process freight invoices today, and moreover the way we deliver data value, has strongly improved over the years. One of those major developments took place some years ago, when ControlPay created a freight invoice tool which allowed logistics service providers to create their final freight invoice directly in the ControlPay system. This digital invoice can be created just in one click the same day when billing instructions are available in the system. This tool reduced significantly the time on final invoice audit and provides a 100% guarantee that the carrier invoice will be paid within agreed payment term.


We strive to optimize processes during, but also after the implementation process, for both clients and logistics service providers. The idea of the auto invoice was created during one of our team meetings. We had been able to ascertain that there should be an optional tool for carriers to create a solid freight invoice online, based on the given billing instruction provided by ControlPay. Nowadays, we see that many large and small carriers like to use this for the ease and speed of the freight payment process. The invoice is always in the same format and always correct.

Furthermore, with this freight payment solution, paper is eliminated where legally possible and the billing process is far more efficient because many manual handling points in the audit, coding and payment process are automated. This means that a great deal off effort is reduced for the finance department for both shipper and carrier, and the FTE involved in the process is almost negligible.

We created this tool because paper invoicing still raises many difficulties for businesses, including a lack of flexibility and a higher risk of human error or invoices getting lost. By moving the invoicing process online, technology is providing flexibility and visibility to both businesses and their suppliers, as well as reducing fraud and limiting the room for mistakes.Late payment of invoices causes risk

Additional ControlPay services connected to our Freight Invoice Auditing Platform

Business Intelligence
Whether you need corporate-wide information or detailed shipping line data with our business intelligence tools you can have it all. No need anymore take corporate decisions based on best guess information, with business intelligence you will get all your strategic logistics and financial data available instantly and secure.

Full visibility across multiple dimensions
Our Business Intelligence simplified and interactive approach empowers your business to access, discover and blend all types of transport and financial data. With a spectrum of increasingly advanced analytics, from basic reports to predictive modeling, you can analyze and visualize data across multiple dimensions, all while minimizing dependence on other information sources.

Ease of use
Within a single platform, our Logistics Visibility solution provides visual tools to extract and prepare your data plus the visualizations and analytics that will change the way you run your business. With ControlPay's 100% audited and approved freight data input, business intelligence allows you to turn big data into big insights.

Corporate-wide information on demand
Whether you need corporate-wide information or detailed shipping line data with our business intelligence tools you can have it all. No need anymore to take corporate decisions based on best guess information, with business intelligence you will get all your strategic data available, instantly and secure. And because business intelligence is directly linked to our centralized freight audit database you are guaranteed that all your business hubs have access to exactly the same set of 100% correct and audited data.

The philosophy behind the ControlPay processes is that everything in the system should be tracked and be traceable. We track performance of order and freight invoice data quality, the levels of automated precalculations, the number of issues,…Of course there is a lot of reporting available as well in formats like csv, excel and or pdf. Volume reports, accruals but also extensive reporting via our business intelligence platform like lane reports, average weight per shipment per country, average cost per carrier per lane. These reports come in dashboards with graphs, drill-downs, analyzer reports that can be created by the user. On request, specific reports can be added or created.

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