Navigating the world of freight bill audits and payment processing can feel like a perplexing puzzle, causing headaches for both shippers and carriers. A frequent stumbling block is invoice discrepancies, where even tiny errors in billing information can lead to frustrating payment delays and disputes.

In this article, I’ll look into the top ten pitfalls to avoid when handling and paying freight bills. However, even with all these pitfalls, there is hope to streamline this costly, convoluted process! By the conclusion of this article, I’ll also share with you some effective solutions and tips to simplify and expedite this painful process of freight bill auditing and payments. So let’s get started with the pitfalls of freight bill audit and payment processing.

1. Surprise Freight Bill Fees and Surcharges.

First, freight bills often include hidden fees and surcharges that can significantly increase costs. For example, this can include such charges as additional handling or lift gate delivery. The reasons for these surprise fees and charges are usually the result of complex contracts or multifaceted shipping services such as International shipping or special services such as shipping hazardous material. For more details on how not to get surprised on package handling fees, see my article, Shipping Fee Surprise – Here Is How To Overcome Unexpected Package Surcharges.

2. Shipper’s Inaccuracies With Their Shipment’s Freight Classification Or Dimensions.

Package Delivery – See How To Stop Surging Costs And Make Your Customers Happy

More and more carriers are using dimensional pricing based on the size of the shipment. In these cases, it is key for smart shippers to accurately capture and record their shipment’s dimensions before shipping. Indeed, this is how to avoid many surprise shipping costs and even penalties. Also, especially in non-parcel shipping, shippers have the responsibility to properly identify the freight class of their shipment. 

So increasingly, it is incumbent upon the shipper to accurately specify their shipment’s actual weight and also, either the weight class or the dimensions. Otherwise, carriers will make an adjustment to the freight bill based on the freight’s actual weight, dimensions, or commodity class type. For more details on parcel pricing see my article, Package Delivery – See How To Stop Surging Costs And Make Your Customers Happy. Also, for information on emerging packing and dimensionalizing solutions see my article, The New World Of Package Dimensions: Need High Tech And Expertise To Stay Cost-Competitive.

3. An Over Complicated Freight Bill and Audit Process.

The complex nature of freight billing can result in errors and discrepancies, making it challenging to accurately audit invoices. For instance, a company may receive multiple invoices for the same shipment or incorrect charges due to manual data entry mistakes. For more on how to minimize billing issues, see my article, The Best Ways To Make Your Freight Bill Audit Process Better Benefit Your Shipping Operations.

The Best Ways To Make Your Freight Bill Audit Process Better Benefit Your Shipping Operations

4. Unnecessarily Tying Up Cash Flow and Working Capital In Freight Bill Processing.

Delays in freight bill payment can strain the cash flow and working capital of carriers and 3PLs. Consequently, this affects their ability to fund operations or invest in growth. Further, this can occur with slow payors or long payment terms like net 30 or 60 days. Worse, I’ve seen large publicly traded companies delay payments for 90 days just to improve their quarterly earnings reports. Also, shippers who frequently delay payments also risk damaging their relationships with carriers. What’s more, this results in unnecessary late fees, regardless of the reason for the delay.

5. Having Poor Visibility into Transportation Spend.

Without proper tracking and analysis of transportation spend, companies may struggle to identify cost-saving opportunities. Further because of this lack of analysis, shippers miss opportunities to negotiate better rates with carriers. Indeed, this lack of visibility can lead to overspending on freight services. For ideas to get better data visibility over your transportation spend, see my article, Simple Data Access To Quality Electronic Freight Bills: Here Is How To Make This Less Painful For Shippers.

Simple Data Access To Quality Electronic Freight Bills: Here Is How To Make This Less Painful For Shippers

6. High Labor Costs Handling Freight Bill Errors And Overcharges.

Resolving billing errors and overcharges requires time and resources for both the carrier and the payor. This results in increased labor costs. For example, a typical freight payment staff may spend countless hours investigating discrepancies, communicating with carriers, and processing adjustments. In fact, the shipping industry uses a very complicated methodology to process and pay invoices from carriers compared to other industries. For a comparison between procurement processing in other industries, see my article, Here Is Why Freight Audit & Payment Is More Painful And Volatile Than Simplistic Purchasing.

Here Is Why Freight Audit & Payment Is More Painful And Volatile Than Simplistic Purchasing

7. Incurring Late Freight Bill Payments and Penalties.

Shipping Fee Surprise – Here Is How To Overcome Unexpected Package Surcharges

Delayed freight bill payments can result in penalties imposed by carriers. Worse, on-going late fee penalties not only result in unnecessary costs to the payor, but also degrades the working relationship between the carrier and payor. In many cases, excessive late fees are driven by unrealistic contract terms. For example, a net 7 days to pay is not realistic. This is because most payors need more than seven days to do a detailed audit.

8. Regularly Having To Dispute Freight Bill Charges And Lengthy Resolution Processes.

Disputing incorrect charges on freight bills can be a lengthy and cumbersome process. In many instances, this requires extensive documentation review and communication with carriers. As a result, resolving disputes may take weeks or even months. Without a doubt, this causes frustration and potential financial losses. Worse, the labor costs can be more than the actual charge being disputed for both the shipper and the carrier.

9. Losing Trust In Carrier Due To Their Lack of Transparency in Their Billing Practices.

Many times, freight bills and payment processes lack transparency. As a result, this makes it very difficult for companies to understand the breakdown of charges or verify their accuracy. For example, a carrier may only provide a summary charge or does not provide detailed information in their invoice to justify the charge. As a result, this lack of transparency can lead to mistrust between shippers and carriers. Besides a carrier just having a sorry service performance record, I have seen many shippers lose trust in a carrier because of their billing practices. As a result, the shipper just stops shipping with the carrier.

10. Over Complicating Freight Bill invoicing With Different Discounts Depending Who Is Paying The Freight Bill.

Some of the most complicated freight bills to audit are the ones where carriers give different discounts to the payor based on whether they are the shipper, receiver, or third party. For instance, a 10 Lb ,zone 5 package with the same service commitment can have significantly different freight discounts based on who is paying for the shipping. Indeed, there may be some good reasons for the carriers to offer discounts based on whether the payor is the shipper, receiver, or a third party. However, it also further complicates the audit & payment process adding more labor and confusion to an already complicated process. 

For more information of the challenges with freight bill processing and payment terms, see Denim’s Understanding Freight Payment Process For Freight Brokers, Freightwaves’ What Are Net 7 Payment Terms, HaulPay’s What Is and What Are the Types of Freight Payment Services & Options, and Cass Information Services’ Extending payment terms with your carriers? Make sure you do this. 

Also, to explore eight possible technologies and methodologies that could ease the entire process, see my article, Freight Payment Terms: A Painful Money Game, Its Purpose, Is There A Better Way?

So, what is the root cause of this painful money game? The answer – complex freight payment terms in transportation contracts. Yes, if you have a complicated carrier contract, this leads the pack in the many pitfalls to freight bill processing. But why does it have to be this difficult? Could there be a simpler solution? In this article, Click here to explore the basics of freight bill payment terms. Also, I’ll detail 8 possible technologies and methodologies that could ease the entire process of freight bill audit & payment.

For more from SC Tech Insights, see the latest articles on Shipping and Finance.