It would be nice if every freight invoice were accurate, because then you would feel comfortable paying the bill, without doubting that the details on the invoice are incorrect.
However, that is not what happens. Inaccurate freight bills are more common than business owners realize. Depending on who you ask, 10-25 percent of freight bills usually contain errors, and often these errors are in favor of the carrier.
Even if these errors are not deliberate, the mistakes increase your freight costs and affect your profitability as a business.
The good news is that you can find these errors in time and correct them to avoid paying extra costs through freight audits. This guide will take you through why you should use freight audit and payment in your business.
Let us get started.
What is a freight audit?
A freight audit is a process of verifying and examining freight bills to ensure they are accurate. A freight bill is an invoice from the carrier to the shipper showing the total cost of freight shipment.
The auditing process checks if these bills are accurate and ensures that the actual cost charged matches the quoted price.
For example, our founder, Eytan Sebag, owned several kiosks in a mall and would receive shipments from his suppliers via FedEx, so, the shipper is Eytan, and the carrier is FedEx.
A freight audit would ensure that the freight bills his carriers finally charge him match the quoted price at the time of shipment.
What is freight payment?
Freight payment refers to an accounts payable service for your transportation invoices. It involves relying on your logistics manager to collect all the carrier invoices, and have your accounting team handle the task of completing each separate payment through appropriate methods.
The benefits of freight audit and payment
By now, you know that a freight audit can help you catch data errors and save you money by preventing overbilling.
Here are the reasons why you should perform a freight audit:
#1 Better data and analytics
Freight bills provide valuable information about your company’s shipments and deliveries. Manually noting down these details can be complicated and messy. However, hiring a freight auditor that uses auditing software allows both you and the carrier to understand the process.
For example, nowadays, there are affordable technologies to track shipments 24/7. You will be able to integrate the freight expense data and logistics data to have a set of enriched data points for every delivery throughout their journey.
From there on, you analyze the data to get key insights. For example, you can check into deliveries in the past to identify inefficiencies in the process. You can also explore the freight expenses across various regions, carriers, and delivery modes to reveal cost-saving opportunities. You may realize that specific routes, carriers, and methods of delivery are cheaper compared to others.
Data from freight audit will help you predict future freight expenses and plan to get efficient services at affordable rates.
#2 Identify issues early
Freight bills are often a source of contention between the shipper and the carrier because of how complex they are. And if you do not identify these issues early, they can go unnoticed for months or years, resulting in loss to your company.
Let us say you had agreed with your carrier on the extra charges for late pickups. You notified your logistics team that the cost would be $60 per hour. After two years, you realize that the carrier had been paying $50 per hour the entire time.
If you have hundreds of freight bills coming in every day, this issue can quickly go unnoticed.
Here is where freight audits come in handy. They can catch these errors as soon as they occur. Then go ahead and clarify any miscommunications between the shipper and the carrier.
It is better to discuss any confusion in contract details at the beginning rather than let it culminate into a heated argument months or years later.
Even better, early identification of such discrepancies helps you determine whether you want to work with specific carriers in the future. For example, if freight audits reveal consistent errors and overbilling by one carrier. You may decide not to renew your contract and replace them with another carrier.
#3 Saving Time
Hiring a freight auditing company to handle your freight auditing processes frees up internal resources to focus on more critical business functions, such as serving the customers’ needs.
So, the time you would have spent on manual processes, and research becomes focused on developing management skills and making your company customer oriented.
#4 Reduced expenses
Despite your best efforts, errors can easily make you lose money. The carrier’s cost estimate may be wrong, or you negotiated a price of $50, but the carrier accidentally charged you $100. Sometimes the error may be difficult to notice. For example, a product may weigh 500 pounds, but the carrier charges your company 650 pounds.
These errors can add up, causing you to pay more than you should, resulting in unnecessary extra expenses.
For example, if you have 200 deliveries per day. This would translate into an average of 6000 deliveries per month. If only 3 percent of these deliveries have an error, it will translate into 180 deliveries.
If each error costs you $20, you will pay an extra $3600 due to faulty freight bills, but freight audits can help you avoid these unnecessary expenses.
#5 Increased visibility
Visibility refers to the process by which a company can estimate its future performance. When freight auditing is handled by a third-party company that uses top-notch freight audit software, you can get extensive reports to help increase the visibility of the top-level managers.
Having access to historical shipping information helps your company make better decisions about the carrier to work with and the modes of shipment to use. You can use the data acquired to negotiate better contract rates or choose new carriers that offer quality services.
How we can help you
Here at BetaChon, we provide our clients with increased saving opportunities by conducting high-quality freight audit services. Let us do a freight audit for your company to get numerous benefits such as increasing visibility, saving time, and identifying issues early.
We value teamwork, integrity, and are committed to ensuring our customers never pay more than they are supposed to. Are you interested in working with us?