The paperwork that accompanies shipping can be overwhelming and time-consuming, including the entire invoicing process. Freight audits can help to save time and money, as well as give insights on how to best streamline a business. It is estimated that anywhere from 10%-25% of all freight bills have errors, most often not in the shipper’s favor. However, a freight audit can help increase efficiency in managing this process.
What is a Freight Audit?
A freight audit encompasses a review of carrier invoices to a complete assessment of shipping operations. The carrier invoice reconciliation compares the invoice against the terms that were agreed upon and the services that were received. Cost elements such as freight rate, discounts, mileage, shipping weight, accessorial charges, and freight classification are all reviewed. Audits provide transparency and a better understanding of how carrier services match freight needs. It is important that each invoice is checked for accuracy, unnecessary costs, and optimal service choices. Businesses may uncover processes that need improvement such as packaging to match shipping requirements, or the consolidation of smaller shipments into LTL carriers.
A freight audit should find opportunities to save money or time such as:
- Inaccurate invoice charges
- Ideal shipment services
- Internal process streamlining
- Cost-effective ways to ship
Freight audits are a way to control costs and lower unnecessary spending not only by finding errors but by providing data that shippers can use to improve business processes. A freight audit then is a cost-savings method that provides business intelligence. On average, companies can expect to recoup an average of 2% to 5% of their freight costs through auditing.
Benefits of Freight Audits
Companies can expect the following benefits from conducting regular freight audits:
Finding the right product pricing can be difficult for shippers. Freight audits give a better idea of costs per carrier, costs of LTL vs TL shipping modes, and comparisons per shipping lane. Being able to break down shipping costs for individual customers based on delivery location and time frames as well as by volume can help find discounts or shipping opportunities. Prices can be determined to cover transportation costs without overcharging the customer.
Accurate Freight Invoices
Accurate freight invoices equate to a reduction in expenses, which benefits not only the bottom line, but also other areas of the business. Accurate invoices can cut down on unnecessary detention charges such as the delay in the return of a container. Correct invoices also give a business much more control over the billing process. The tools that give the ability to view freight costs can reveal ways to anticipate future costs or optimize trade routes.
Better Data and Analytics
A freight audit can supply improved data and analytics which affects how information is collected, structured, and maintained. Freight audit services like those offered by logistics platforms like Verizeal ensure that company information is integrated with the carrier data structures to give accurate, useful data. This can then be used to create reports and make decisions. When managed effectively, this data can be used to create KPI’s and other metrics and tools. This historical data can also help with negotiating future terms and rates with shippers.
Errors on paperwork are common, but a digital platform that eliminates inaccurate billing will help to save money. For example, digitized Bills of Lading (BOLs) come with a digital time stamp that will get rid of issues with detention charges. The savings can really add up. For example, for a business that spends $20,000 on shipping per month, and 5% of invoices have errors, that equates to about $1,000 a month on incorrect freight bills.
Freight invoices are complex because there are points of contention between the shipper and carrier. If the issues are not identified early. Freight audits help catch errors as soon as they occur, not months later. It is easier to address an error when it happens rather than down the road and can help decide how to move forward with a carrier. It can also reveal which routes might be better, more cost-effective options.
Automated Freight Audits
Freight audits that are automated bring even more benefits as auditing software provides more consistent results. Software systems can be integrated electronically with freight carriers which makes the auditing process more efficient and more accurate. About 60% of U.S. companies outsource their freight audit payment services because of the value it brings to a business.
Verizeal for Automated Freight Audits
Most companies do not have the ability to check freight bills for errors every month. And since every business is different, a good freight audit provider should be able to customize a system to meet the business’s needs. A customized and comprehensive freight audit system like the one Verizeal provides allows your company to dispute claims in a timely manner. Your business will benefit by saving time and money while still having complete visibility into the invoicing process.