What Is a Freight Invoice Audit and How Does It Reduce Total Transportation Costs?

What Is a Freight Invoice Audit and How Does It Reduce Total Transportation Costs?

Finding savings within transportation, especially in the complex world of omnichannel supply chains, is a top priority for shippers of all sizes. But how does a shipper go about keeping spending in check when carrier rates are continuously changing? The answer is simple: shippers need to find savings opportunities through a freight audit. But the value of freight bill auditing is often misunderstood. There are ample ways to apply the data from audits to optimize your freight network, but it all begins with understanding the basics of an audit. Let’s take a look at what a freight audit is, the challenges associated with manual auditing, how an audit benefits your business, and why a transportation management system (TMS) with embedded freight auditing is a great solution for shippers.

Defining a Freight Audit

Broad definitions of a freight audit focus on finding errors within freight invoices, and there are varying levels of invoice auditing to help shippers recapture costs. A freight audit is simply defined as a business process where the company’s freight bills are examined, adjusted, and verified for accuracy. The goal of a freight audit is to uncover savings by ensuring shippers only pay actual costs for transportation. While auditing sounds relatively simple, there are a few challenges within auditing that shippers need to consider.

The Challenges of Freight Invoice Auditing Without Technology

Take a moment to think about what goes into a typical freight invoice audit. A team member pulls the invoice, matches it to the quoted rate, reviews information within the invoice, including general ledger codes and delivery data, and determines whether the information matches. Depending on the shipment-specific data, this might only be a single invoice for a load that was consolidated, sent by truckload, scheduled for air transport at another stop, and then a separate charge for white-glove services. There’s also a chance that multiple carriers might each send invoices for this one move, and that’s a very real concern as volumes surge in tandem with e-commerce logistics expansion.

That’s where the complexity begins to increase. Each added touchpoint and action increases the risk for a duplicate or erroneous invoice from another logistics service provider (LSP).

Assuming that it takes 20 minutes to fully audit an invoice, that amounts to conducting 120 audits per FTE per week. Even at a doubled speed, 240 invoices taking 10 minutes each per week, that’s still a $800 weekly expense. Yes, invoice errors that result in overcharges happen, in double-digit rates depending on mode, such as 25% among ocean carriers, according to David Biederman of JOC.com. Here’s the kicker: that statistic comes from a 2013 report, and as volumes have increased, the chances of errors has further increased.

This is a simple principle and applies to any carrier. More activity means a greater chance for errors, and even the most well-trained team members might misread the data. And, if the employee doesn’t catch enough errors that add up to more than their wages, freight audit savings from manual audits cannot hold water. It’s that simple. But, technology and automation can achieve all the benefits of auditing without the added overhead. Let’s dig a bit deeper.

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The Benefits of Freight Invoice Auditing Within a TMS

The standards for efficiency have increased dramatically in the supply chain, and with advancements in software-as-a-service (SaaS) platforms, including the MercuryGate TMS, freight audits are easier and more automated. Embedding invoice auditing within the TMS, leveraging the collective resources of MercuryGate freight auditing partners, puts the technologies that power automated auditing at your fingertips.

Combined with advanced analytics, our TMS reconciles, audits, and settles payment across all invoices systematically and automatically. The data reviewed in the process is also useful for gaining insights into total transportation spend and granular insights, allowing your team to continuously optimize supply chain management. Remember that there is also a “is-it-worth-it” factor to consider. It might not be worth filing a claim for an error if the error is only a few cents, but that should never negate an overall plan for auditing.
That’s where creating thresholds for triggering a claim within the TMS can add value by initiating chargebacks or filing claims for high-variance invoice errors, reducing waste and recapturing the most value. Furthermore, the ability to collect and analyze data from across all modes allows the MercuryGate TMS to track the full shipment lifecycle, its anticipated costs, and invoiced charges from origin through last-mile delivery to the end user.

Tracking the costs for each movement, even when consolidated into other larger shipments, helps to bring total transportation costs under control. Additionally, the insights gained lead to improved decision-making when choosing a carrier for a given shipment. It also provides a treasure trove of information that’s useful when executing shipments, such as whether a carrier was able to deliver on time and in full, whether service guarantees were applicable, and the next steps TMS users need to take. Unless user-defined rulesets in the TMS require manual intervention, it can all happen autonomously within the MercuryGate TMS. This is a marked advantage that helps shippers focus on top-priority needs and manage by exception, which boosts throughput and lowers barriers to efficiency.

Expand Your Freight Audit Efficiency and Recapture More Savings With MercuryGate

Conducting a freight audit might be relatively simple, but it is a time-consuming, taxing process when done manually. That’s why more companies have turned to expert auditing services to handle it. But imagine a world where the auditing occurs seamlessly and happens without needing to log in to yet another system. Unifying auditing and settlement processes within the MercuryGate TMS makes that a reality.

See how to derive freight audit savings

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