Checklist Outsourcing freight audit & payment: 10 checkpoints

Pieter Kinds

October 8, 2015 - 09:27

_{Update 14-3-2019}

In the ever evolving world of logistics and transportation it is imperative for shippers to keep track of business developments that can influence your day-to-day operations. When it comes to freight audit services & payment, the practice tells us that logistics and operations managers are wisely curious about the abilities, techniques and tools of competitors to solve their data and audit challenges.

Therefore, we decided to make a list with 10 important checkpoints to consider when looking at your current or future outsourced freight audit & payment partner.

Today, well-developed Freight Audit & Payment providers have technologies and capabilities far beyond their original function of verifying, correcting, and the payment freight bills. The reason for this? The demand for all-around logistics data is increasingly becoming important to logistics operations and financial departments. The in-house capabilities often turn out to be limited don't match the strong demand, so many shippers turn to outsourced freight audit & payment providers for the ultimate data solution.

Besides the initial savings on freight spend by ruling out overbilling (3-7%), companies are looking to become lean and low-touch when it comes to freight payment and demand strong analytical capabilities from providers that meet the challenging and ever cost-cutting supply chain environment. With strong data in their back pockets, coming from the clinical freight audit process, shippers gain a stronger position in carrier negotiations, benchmarking processes and gain cost-to-serve visibility.

Traditionally, carriers have more data on transportation which gives them a strategic benefit, however, with the help of the data coming from the freight audit process, shipper are leveling the advantage point.

Checklist top 10: What to look for in a Freight Audit Company

• The tools. Besides the quality and level of development of the freight audit services, many freight audit providers (FAP) deliver additional tools. Don't just look at analytics and BI reporting tools. Ask references on others (Tender & Shipment booking for example) how well the tools meet the needs of transparent transportation management.

• Invoice consolidation. Are your carriers forced to invoice 1 shipment per invoice because your Freight Audit provider cannot consolidate shipments? Non-consolidation means that you are losing money or you need to create workarounds to calculate it correctly. Achieving cost savings by verifying if your carrier does the correct shipment consolidation of your LTL, parcel and Air shipments is a crucial part of freight audit.

• Technology. Look for a freight audit provider that has cutting edge cloud based technology with highly automated processes, to make freight invoice auditing as low touch as possible for your logistics and finance department. You want your people just to be involved in exception handling, saving as much FTE-time as possible on invoice checking.

• Financial Stability of FAP.

• Be Strategic with your pricing. Look for a high-end solution to ensure the freight audit & payment process becomes low-touch. Industry leaders have a vision for Freight Audit and use the data it generates to enhance Finance, Logistics, Operations and Sales. Too many companies are lured in by low prices finding out only later that they are sold a very basic service that has very limited value.

• International expertise and global capabilities. Ask about the provider's experience in the countries where you do business, and how it handles language differences. Don't forget to check if the providers on your shortlist have the ISAE 3402 Type I - certificate for EU and ISAE 3402 Type II - certificate for The United States.

• Consult your carriers. Ask your long-sitting carriers to provide advice and insights in the latest things happening in this specific market, trends, best practices, news and where the market is heading and what others are doing. Free intel is just a phone call away.

• Start with a pilot. Companies are feared to go all in because there are traditionally several question marks about ROI, process pressure or value. Therefore, never be overambitious or believe in fairy-tale implementation times. Take the implementation step-by-step and discover the benefits from a limited roll-out, before implementing complete scopes. On the shippers side the startup also requires effort and dedication.

• Dig deep in the ROI analysis. See the paragraph below.

• Don't be tricked by TMS. Many companies are trying or actually have set up self-billing in their TMS systems. So how are your systems and rates maintained and how do you make sure your data is always up to date and correct? Are your contracts properly analyzed and waterproof? Are your accessorials under control? How do you manage extra and unforeseen costs? When performing self-billing make sure that your company has 100% correct data.

The truth: Outsourcing and ROI

We highlighted this part because it forms often a stumbling block for decision makers when they approach outsourced freight audit & payment. With outsourced Freight Audit everyone is a winner, but it depends on your company size how much you gain. Smaller companies with a spend of less than 2 million typically gain around 2X the cost, most companies with a freight spend above that up until let's say 30 million easily get a return of easily 5x the cost and the large companies with large regional or global freight budgets will see returns of no less than 20x of what implementing and running a freight audit program will cost them. This is actually seldom realized as Freight Audit typically has a low priority within many organizations as it is perceived as commodity.

Freight Audit & Payment: Added values of outsourcing freight audit & payment

1) Savings from 3 to 7% of freight spend
2) 100% invoice control
3) Invoice processing for all transportation modes
4) Full account coding
5) FTE (full-time employee) savings
6) Centralization of contracts and rates
7) Full transparency in processes
8) Valuable management information for better decision making, benchmarking and tender processes
9) Efficiency in freight audit processes
10) Certified services:
ISAE 3402 Type I - certificate for EU
ISAE 3402 Type II - certificate for States

Check also out our recent blogpost about out Top 20 tips about choosing a freight Audit company

About ControlPay - The leading Freight Audit Company since 2002

ControlPay is, with a growing staff of over 250, the leading freight audit services provider in the world. The history of our business goes back to the year 1969, with the start of a logistics consulting company resulting in different ventures in logistics and transportation until we decided to redefine Freight Audit & Payment at the start of the century. Nowadays, ControlPay supports many large multinationals with complex logistics structures in their needs for control of freight costs and freight bills. Want to know more about our services? Just contact us!