Freight bill audit processing can be a complex and troublesome ordeal for many businesses. With issues like incomplete information, data overload, inefficient systems, and intricate rate contracts, it’s no wonder the process can be daunting. To make matters worse, freight bill processing often places heavy demands on shipping operations. This not only hampers innovation but also restricts operational flexibility and hinders the ability to incorporate new carriers into the mix.
And let’s not forget about the insightful invoice data locked away in financial system data silos. This leaves many shipping operations unable to access this valuable shipping data resource. So, how can we tackle these challenges? Keep reading for my 8 beneficial tips to make your freight bill audit process a win-win for both your shipping and financial departments!
1. Keep Shipping Contracts Simple To Streamline Freight Bill Audit.
One way to make your freight audit process benefit your entire shipping operations is to keep your shipping contracts simple. This can help streamline billing and audit processes by reducing the number of disputes that may arise from complex contracts. For instance, keep the carrier contract down to a couple of pages. Focus on getting discounts on shipping charges that bring the greatest value.
As for a specific example, let’s look at residential delivery charges. If residential deliveries are your biggest shipping activity, work with your carrier on the overall costs of your residential deliveries, not just a specific charge type. Also, avoid adding custom contract terms as it just complicates the audit process. Remember, the most important thing is to get the best overall price from the carrier on your key shipping activities. Getting a $50 credit on your invoice each week is not the best measure to a successful audit. A better measure is saving hundreds of thousands of dollars by getting a key discount for every package.
2. Favor Carriers And 3rd Party Partners That Provide Simple, Quality Freight Bill Data.
As more shippers use carrier invoice data for analytics, they have two major challenges:
- Painful Process To Access Freight Bill Data. First, it can be a very painful process to just get access to raw, detailed electronic billing data from their carrier.
- Poor Quality Freight Bill Data. Second, the data is of such poor quality that it is a struggle to even audit the electronic invoice. At the same time, poor quality invoice data is useless for post-diagnostics analytics to optimize shipping operations.
In most cases, this is not so much an internal IT deficiency, but a problem brought on by carriers and 3rd party partners. So besides technology, there are quite a lot of things a shipper can do working with the right supply chain partners to get easy access to quality invoice data. When I say supply chain partner, this can include the transportation carrier, a 3rd party logistics (3PL) provider, an auditor, or any other 3rd party partner that may work with the shipper’s raw freight bill data from the carrier. Below are 3 tips that will go a long way toward helping a shipper get easy access to quality freight bill data from their supply chain network.
3 Tips To Get Simple Data Access To Quality Electronic Freight Bills
- Quality Data. First, Favor Carriers That Provide Uncomplicated, High-Quality Invoice Data
- Easy Data Access Policies. Second, Favor Partners That Have Streamlined Authorization Policies To Access Billing Data
- Easy To Use Technology Interfaces. Third, Favor Carriers That Have Frictionless Technology Access To Invoice Data
For more details on how to work with carriers and 3rd party partners to get easy access to quality freight bill data, 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.
Nowadays a shipper needs to be data savvy. More importantly, shippers need to leverage their data to streamline operations and improve their service offerings. Many shippers are getting to know that freight bill data is a key data source not just for paying carriers, but for optimizing shipping operations. Click here for more details on 3 tips to work with carriers and 3rd party partners to get easy data access to quality electronic freight bills.
3. Be A Data Centric Business: Stop Locking Your Data In Systems That Are Or Will Soon Be Obsolete.
Avoid putting your data in systems that are or will soon be obsolete. Instead, invest in modern technologies that can help you collect, store, and analyze data more effectively.
For example, you can use cloud-based business intelligence (BI) solutions that allow you and your software to access your data from anywhere at any time. See my article, A Data Centric Business: The Best Way To Agility, One Truth, Simplicity, Technology Innovation, to explore how to avoid getting your data trapped in legacy applications.
Undeniably, software will come and go, but your data is a valuable asset to keep and leverage now and in the future.
4. Leverage Data Analytics Where All Decision-Makers Have Access To All Freight Bill Data.
Data analytics can help you identify trends and patterns in your shipment data that may not be immediately apparent. For example, you can use data analytics tools to track carrier performance, identify cost-saving opportunities, and optimize your shipping routes. All with the same shipping data. For more ideas on data analytics, see my article, Data Analysis Examples To Best Overcome The Challenge Of Supply Chains.
5. Focus Your Freight Bill Audit On Enabling Operations To Provide Cost-Effective, Competitive Shipping Services.
Freight auditing should focus on areas where you can reduce costs and improve efficiency. Many times a freight audit is solely focused on billing errors that yield little value. Instead, the audit should also focus on identifying non-value charges and actions that operations can take to reduce cost and improve service.
For example, let’s look at multiple address correction charges for parcel shipping. A freight audit should be highlighting multiple address correction charges to the same delivery location over time. Here the shipper needs to take corrective action to update the shipping address in their shipping software. Worse, the shipper is probably paying more for the address correction charge than the package itself. Moreover, the customer is not happy with their packages getting delayed on a regular basis. For more ideas on improving your analysis of freight charges, see my article, Package Delivery – See How To Stop Surging Costs And Make Your Customers Happy
6. Focus Shipping Operations On Closing the Gap Between What Was Manifested Versus What Was Actually Shipped (And Subsequently Billed).
This is another way that your freight audit process can help save you money and improve your shipping operation. For example, your shipping department is not putting the correct dimensions on a package manifest with a billed weight of 10 lbs. In this case, they just enter the actual weight of 2 lbs. So preliminarily, the shipping operation is projecting lower shipping costs to finance. Then when the invoice gets processed, both finance and the shipping managers are surprised. This is a common mistake that can contribute to cash flow and budgeting challenges. Additionally, this type of shipment manifest mistake can result in invoice adjustments contributing to more freight audit labor costs and even penalties from carriers.
7. Automate / Optimize: Use KPIs To Continuously Find Ways To Minimize Labor Costs And Human Error.
Key performance indicators (KPIs) help shipping operations to continuously monitor and improve their shipping operations as well as their freight audit process. For example, you can track metrics such as invoice accuracy, dispute resolution time, and cost per shipment to identify areas where you can make improvements.
You can also use software solutions that automate the freight audit process, such as invoice matching and payment processing. This can help reduce the time and effort required for manual tasks, such as data entry or invoice reconciliation. For more ideas on automating your operations in the age of AI, see my article, What Is Automation? High Tech Ways To Better Replicate, Apply AI To Business Processes.
8. Partner With Carriers And 3PLs To Have A Fault-Free Audit & Pay Cycle.
Shippers can delay carrier payments for numerous reasons. This includes not having enough information to approve a freight bill, or the shipper is disputing the bill, shipper carelessness, or even because of shipper cash flow challenges. Also, carrier payment delays can result in late fees.
An irregular audit & pay cycle is a sign that you do not have a healthy relationship with your carrier. By adhering to a set schedule for audits and payments, you can ensure that all parties are on the same page and that there are no surprises when it comes to billing. Additionally by adhering to a schedule, this will help you identify root causes of delays, and then you can take action to correct. Lastly, by partnering with carriers and 3PLs to have a consistent audit and pay cycle, you can improve and streamline your relationship with your shipping partners. This will reduce the time and effort required for manual tasks associated with the freight audit process.
For more ideas on how to improve your procurement process, see WhatFix’s The Procure-to-Pay Process, Explained (+P2P Challenges) and ProcurePort’s 6 Basic Procure-to-Pay Problems.
Greetings! As an independent supply chain tech expert with 30+ years of hands-on experience, I take great pleasure in providing actionable insights to logistics leaders. My background includes implementing 100s of innovative solutions using emerging technologies and a data-centric development approach. I have also provided business intelligence (BI) solutions for 1,000s of shippers. For more about me, click here.