Freight Audit: Getting Control of Your Shipping Costs
Freight auditing is one of those often overlooked aspects of logistics management, but it can be a game-changer for companies wanting to control costs and improve efficiency. By carefully reviewing freight bills, businesses can catch mistakes, avoid overpayments, and uncover hidden savings. It’s not just about making sure payments are accurate; it’s also about bringing more control and transparency to your supply chain.
Here’s a closer look at what freight auditing involves, the benefits, common challenges, and some best practices to help you manage your logistics expenses more effectively.
What is a Freight Audit?
Freight audits involve a thorough check of shipping invoices against what’s outlined in your carrier agreements. The main goal is to catch discrepancies, ensure compliance, and confirm that you’re only paying for the services you actually received. It’s a practical and often eye-opening way to keep your logistics costs in line.
We’ve worked with businesses that initially thought they had a good handle on their shipping costs, only to find out that freight auditing revealed numerous overcharges and billing errors. For many of them, it wasn’t just about the immediate savings; it also helped them renegotiate contracts and improve their overall logistics strategy.
How Freight Auditing Works: Step-by-Step
- Invoice Verification: The process starts with reviewing each invoice to ensure the charges align with the agreed rates and services. This initial check helps catch overcharges and errors right away.
- Spotting Discrepancies: During the audit, we often uncover issues like duplicate charges, incorrect service fees, or other billing mistakes. These discrepancies can add up over time, making it crucial to identify and address them early.
- Resolving Issues: Once errors are identified, the next step is to resolve them with the carriers. This involves communication and sometimes negotiation to ensure the correct amounts are billed. Addressing these issues promptly helps avoid paying unnecessary costs.
- Final Payment Processing: After all discrepancies are resolved, the final step is processing the payments. With a proper audit in place, companies can be confident that they are paying only what is due, which maintains financial accuracy and control.
Leveraging Technology for Smarter Audits
Freight auditing has evolved significantly with the advent of technology. Automated freight audit software can handle much of the process, making it faster and less prone to errors. These tools can verify invoices, identify discrepancies, and generate detailed reports that support better decision-making.
We often see companies struggling with manual audits, which can be time-consuming and prone to human error. By leveraging automation, businesses can streamline their processes, reduce administrative burdens, and focus on more strategic tasks.
Advanced analytics and AI have also revolutionized the way freight audits are conducted. These technologies can detect patterns and discrepancies that might be missed by a manual review, offering deeper insights into shipping costs and revealing new opportunities for savings.
Why Outsourcing Freight Audits Can Be Beneficial
For many companies, outsourcing freight auditing to specialized providers is a strategic move. It brings access to expertise and advanced tools that might not be available internally. This approach not only reduces the administrative burden but also ensures that audits are thorough, accurate, and efficient.
Outsourced freight auditing services can scale effortlessly during peak periods, offering the flexibility to manage fluctuating workloads without sacrificing accuracy. This is particularly advantageous for businesses with complex logistics operations or those experiencing rapid growth.
Motul, for example, leveraged GoComet’s GoInvoice platform to streamline their freight auditing process. By automating the reconciliation of overcharges and flagging duplicate invoices, Motul not only saved on manual verification efforts but also reduced their overall freight spend by 3.5%. This strategic shift allowed Motul to reallocate resources more effectively, leading to better control over their logistics costs and a more optimized shipping strategy.
Real Value: Cutting Costs and Mitigating Risks
A well-executed freight audit does more than just cut costs. It also helps ensure compliance with carrier contracts and industry regulations, reducing the risk of penalties and legal issues. With accurate, transparent data, businesses are better positioned to make informed decisions and fine-tune their logistics strategy.
From our experience, companies that regularly audit their freight bills are often surprised at the cumulative impact of small billing errors. Over time, even minor discrepancies can add up to significant amounts. By keeping a close eye on invoices and addressing issues promptly, businesses can avoid these hidden costs and maintain better control over their shipping expenses.
Common Challenges in Freight Auditing and How to Overcome Them
Freight auditing isn’t without its challenges. The complexity of freight invoices, frequent rate changes, and the need for data integration from various systems can make the process daunting. For many companies, these hurdles can slow down the audit process and increase the likelihood of errors slipping through.
One common issue we see is the challenge of maintaining accuracy across different data sources. Manual audits, in particular, are prone to errors, which is why many companies turn to automated solutions to maintain consistency and accuracy in their audits.
Another challenge is integrating data from various systems like transportation management systems (TMS), enterprise resource planning (ERP) systems, and carrier systems. Discrepancies in data formats and a lack of standardization across platforms can lead to errors and inefficiencies in the auditing process.
Frequent changes in shipping rates and contracts can also complicate audits. Companies need to continuously monitor and update their rate agreements and contracts to ensure that their freight audits reflect the most current information. This requires significant administrative effort and can lead to delays in the audit process if not managed effectively.
Best Practices for Effective Freight Auditing
- Standardize Your Processes: By creating uniform procedures, companies can streamline their audits and reduce the likelihood of errors. Standardization also makes it easier to train new staff and maintain consistency across different audits.
- Work Closely with Carriers: Maintaining strong relationships with carriers is essential for successful freight auditing. Effective communication and collaboration ensure that all parties are on the same page, making the audit process smoother and more efficient.
- Embrace Continuous Improvement: Freight auditing is not a one-time task but an ongoing process. Regularly reviewing and improving audit procedures helps businesses adapt to changes in the logistics landscape and continue to optimize their operations.
- Leverage Technology: Using advanced tools and software can greatly enhance the efficiency and accuracy of your audits. For example, GoComet’s GoInvoice software can automate much of the auditing process, reduce errors, and provide valuable insights into your shipping costs. By integrating technology into your audit process, you can save time and resources while gaining a clearer picture of your logistics spending.
Key Takeaways
- Regular Invoice Checks: Regular reviews of invoices against contracts help catch errors early, saving money and preventing overpayments.
- Use Technology Wisely: Automation and AI can make audits faster, more accurate, and provide deeper insights into your logistics costs.
- Consider Outsourcing: Bringing in external experts can enhance your auditing process, offering both scalability and specialized knowledge.
- Stay Proactive: Keep communication open with carriers and continuously refine your processes to adapt to changes in the logistics environment.
Conclusion
Freight auditing might not always be the first thing on your radar, but it’s a critical aspect of managing logistics costs effectively. By implementing a solid audit process, whether handled internally or outsourced, businesses can uncover hidden savings, reduce errors, and ensure that every dollar spent on shipping is justified. Beyond just saving money, it’s about having the peace of mind that comes from knowing your shipping expenses are under control and aligned with your business goals. A well-executed freight audit doesn’t just help with the here and now—it sets your company up for smarter, more strategic decision-making in the long run.
If you’re ready to see how automated freight auditing can transform your logistics operations, schedule a demo with us today to explore GoInvoice, our powerful freight auditing software designed to streamline your process and maximize your savings.