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 can be both a non-value activity and place undue restrictions 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 untapped operational insights available in invoice data that is locked away in financial system data silos. As a result, shipping operations are not able to take corrective actions to reduce costs and improve service levels. 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 and keep administrative costs low. Indeed, 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.

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

2. Favor Carriers And 3rd Party Partners That Provide Simple, Quality Freight Bill Data.

As more shippers use carrier invoice data for analytics, there are 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 your 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.

3. Be A Data Centric Business: Stop Locking Your Data In Systems That Are Or Will Soon Be Obsolete. 

A Data Centric Business: The Best Way To Agility, One Truth, Simplicity, Technology Innovation

Avoid locking 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. Indeed, this is possible using both carrier invoice and shipment status data. For more ideas on data analytics, see my article, Data Analysis Examples To Best Overcome The Challenge Of Supply Chains.

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. 

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

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 in this example, 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 initially, the shipping operation is projecting lower shipping costs to finance. Then when the invoice gets processed, both finance and the shipping managers are surprised.

Indeed, this gap between what was manifested versus what was actually shipped is a common mistake that can contribute to cash flow and budgeting challenges. Additionally, this type of shipment manifest mistake can result in more invoice adjustments. Thus, this contributes 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. 

What Is Automation? High Tech Ways To Better Replicate, Apply AI To Business Processes

Key performance indicators (KPIs) help shipping operations to continuously monitor and improve their shipping operations. Not only that, KPIs can help improve and streamline the 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. 

Freight Payment Terms: A Painful Money Game, Its Purpose, Is There A Better Way?

For many shippers, self-auditing may not be the best option for their freight bill processing. For one, shippers can strain relations with their carriers by irregular audits and delayed payments. This can be because a shipper’s audit department may not have the expertise or information to approve a freight bill in a timely manner. Also, internal staff can be inefficient with disputing a carrier invoice charge. Worse, they are carelessness and miss major billing errors. Or it can be a case where the shipper has cash flow challenges. As a result, carrier payment delays result in late fees. 

So, 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 the root causes of delays. As a result, 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. Also, see my article, Spotlight On Freight Bill Payment: 10 Pitfalls To Best Overcome.

Freight Bill Processing: The Preposterous Challenge And The Insidious Ways It Can Make Your Shipping Operations Go Blind

For more from SC Tech Insights, see articles of shipping and finance.