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What You Should Know About the Freight Audit Process

Logistics Tech Outlook | Thursday, May 05, 2022

It would be ideal if every freight invoice was precise, and the shipper could pay the bill without worrying about the accuracy of the amount presented and the details on the invoice.

FREMONT, CA: A freight audit evaluates a freight bill to confirm its accuracy and make any required revisions. This carrier invoice reconciliation checks the invoice to the agreed-upon terms and the services delivered and received, ensuring that the charges reflect the correct amounts and conditions.

The freight audit provider should also check that the bill is not a duplicate and has not been paid. Given the high percentage of organizational and logistics costs associated with freight transportation in the supply chain, freight audits are an excellent tool to manage logistics costs and eliminate wasteful expenditure.

The freight bill audit procedure accomplishes much more than simply identifying problems and negotiating a lower rate. Shippers can use the data from shipping invoices and payments for their gain, making it a value-added activity. Shippers can gain insights, which may result in additional business process adjustments. The audit is more than a checklist — it is a cost-cutting measure and a source of company intelligence.

An audit can be conducted manually, automatically, or in a hybrid fashion.

Manual Freight Audit Process

Manual audits are time demanding, and it's easy to overlook inaccuracies due to the monotonous nature of the labor and the difficulty of comparing and remembering. The more shipping invoices there are, the less sense a manual audit makes. With a manual approach, batches of invoices are more likely to be randomly examined, which enables the potential for errors to sneak through. Manual audits are only as good as the auditor who does them. Additionally, there is an opportunity cost, as the individual conducting the audit may be working on other objectives, mainly if the audit is performed in-house.

Automated Freight Audit Process

Software is used to conduct automated freight bill audits. Whether a company utilizes in-house software or an auditing firm uses its own, auditing software produces more consistent results, as long as the version is updated regularly. Electronic integration of software systems with the freight carrier simplifies and expedites the freight auditing and recovery procedure.

Combination Freight Audit Process

The combined method enables the software to perform most of the auditing work. Any exceptions or issues are routed to a human for evaluation. If any of these ways contains problems, the business or software will contact the freight carrier to obtain a rectified shipping invoice or collect the invoice discrepancy amount.

Choosing the Correct Approach

The strategy adopted may be determined by the shipping volume handled by a business. Shippers with a few invoices per month may get away with manual processing if they have someone qualified to review them thoroughly and adhere to company guidelines. If companies have a large number of invoices and shipments, or if companies deal with many carriers, it may be more cost-effective to outsource freight audit services. This can save businesses labor, time, and money, especially when the organizations providing these services have the skills to spot things that others may overlook. The objective is for the service to pay for itself and generate additional revenue.

A freight audit company that provides freight payment and auditing services is structured so that it operates efficiently. They have established processes and business standards, automated the majority of the audits, and trained people to manually review any highlighted bills. Given their volume of clients, they've seen it all and are familiar with the discrepancies between carrier invoices and the wording they employ, which may vary between organizations. They can directly receive invoices from carriers and enter them into their computer system. This enables visibility into the software's bills and the human auditors who examine them.

In an ideal world, a shipper or their freight invoice auditing provider would be able to integrate the auditing solution with their transportation management system. The transportation management system can provide pricing and quoting information corresponding to the invoices for shipment purchases, thus reconciling any discrepancies.

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