The Benefits of Outsourcing Freight Payment and Audit Services
Any corporation that ships must pay the carriers that transport their goods. Companies that ship many things need to develop a complete, comprehensive system for assuring appropriate payments for all of the items they ship.
Shipping and logistics expenditures can account for up to 10% of a company’s total expenses. Due to the logistics industry’s freight rates and freight, prices are growing increasingly complicated. Therefore, carriers make plenty of freight invoice errors and inaccuracies. To combat this, shippers utilize freight bill auditing to guarantee that the carrier only gets compensated after verifying that the freight invoice is accurate and taken into account.
Shipping Invoices can Contain Errors
Generally, businesses want the shipment’s details to match the written BOL (bill-of-lading). However, there are specific circumstances in which they are subject to changes and additional fees. Reviewing bills against facts supplied on the BOL is a prime area to look for overcharges as an estimate of 5-6 percent of all carrier bills get calculated inaccurately.
Incorrect Carrier Name and Number
The carrier name and number should be one of the first things a shipper checks on their invoice, especially given the ease of passing a shipment onto the wrong truck when freight is offered and tendered to a carrier. Unfortunately, this happens far more frequently than one might expect, especially if the warehouse has a busy dock and several trucks are moving in and out for pick-ups across the day.
While picking up a shipment by the wrong carrier may not delay delivery, it may result in an overcharge. If a consumer has negotiated pricing with a specific carrier but did not pick up their load, they will likely receive a greater cost than planned.
Incorrect Contact Information
Incorrect contact information is another common invoicing error. This issue could indicate that the address for pick-up or delivery is faulty or that the invoice’s “bill-to” section is erroneous.
Incorrect addresses will almost always result in a delivery delay, but they can also result in additional fines. Many freight companies will bill clients if a carrier arrives at a delivery location and the shipment gets denied for address inaccuracies. Moreover, if delivery to the actual site necessitates an appointment, there will be an extra charge.
Incorrect Discount Rates
As previously stated, several shippers negotiate customized prices with either a 3PL or a carrier directly. This error can involve a percentage reduction, reduced or waived accessorial fees, or pre-arranged FAK agreements.
It is critical to have any agreements with a carrier on file and audit invoices to ensure that those rates get accurately reflected and represented in the charges. Check each line for fuel surcharges, mileage, and other considerations, as the savings may not be on the total cost.
Furthermore, when working with a 3PL, the billing party, either shipper or receiver, must ensure the correct “bill-to” gets used on the BOL. It may come out as unfortunate when discounts go unreported, and the client is invoiced directly from the carrier without the proper reductions listed.
Wrong Calculations of Weight, Dimensions, Pallet Count, and NMFC
The majority of shippers have faced obtaining a freight bill that was rife with unjustified charges due to incorrect item details. Furthermore, it is the most common cause for a freight invoice getting challenged, and it’s an understatement to suggest that changes to weight, freight class, dimensions, and other factors can significantly impact a shipment’s total cost.
Accessorial Requests and Fees
Accessorial expenses are incurred for additional services specified by the shipper or receiver but might inadvertently appear on a freight invoice. Accessorial fees can be scheduled and requested on the BOL, or they can emerge out of necessity during pick-up or delivery and get billed after that, including lift-gate, interior delivery, and driver assistance.
Effective communication between the shipper and receiver is the best method to avoid freight invoice problems. Learn about the sort of particular destination, whether a dock and delivery team are available, and what kind of truck will be required to make a delivery. Ultimately, it is up to the shipper and receiver to determine which services are fee-based and whether they can prevent the need for these extra services in the first place.
Outsourcing Freight Audit and Payment
As established, invoices are frequently modified and adjusted as mistakes happen more often than expected. As a result, Freight Audit and Payment becomes a considerable back-office expense for organizations whose key skill is not handling shipping expenses; thus, they must build an audit function to discover and remedy any problems.
Furthermore, Freight Audit is a time-consuming process of inspecting and confirming freight bills and cross-examining them with the shipments with which they relate and correspond. After the statements have gotten validated and, if necessary, corrected, they get delivered to accounting for accounts payable.
For these reasons, outsourcing these services might be the most cost-effective and time-saving option.
Freight Audit and Payment (FAP) outsourcing entails entrusting these two activities to a qualified third party. Essentially, all bills and shipping information gets sent to a third party who checks and confirms the statements before submitting them for payment using freight payment software.
When firms outsource FAP processes to a third party, they entrust the professionals to handle the time-consuming and costly issues that come with internal freight audits and payments, including:
- Dealing with a variety of carriers, each with its own set of procedures, fees, and details.
- Taking on an overwhelming quantity of FAP paperwork.
- Dedicating several precious internal resources to a work that will use a significant amount of their time.
- Timely resolution of errors, overcharges, and duplicate charges.
Instead of dealing with a slew of carriers or providers, a corporation can outsource FAP and have a single point of contact. Furthermore, when a business grows and freight auditing becomes more difficult, it would not have to spend money on new personnel, training, or even overtime.
Outsourcing ultimately streamlines processes while reducing internal paperwork and workload. Companies can then target their internal resources and, most crucially, enlist the help of seasoned specialists to maximize their FAP savings.
How Outsourcing Freight Audit and Payment Works
If a firm chooses to outsource Freight Audit and Payment to experts, they will gain access to a wide range of services, some of which are tough to conduct in-house with limited resources daily. Essentially, third-party FAP providers provide all-in-one FAP solutions.
The procedure for outsourcing FAP is as follows:
- The last six months’ worth of parcel and freight invoices gets sent to a third-party freight auditor.
- Bills are examined for mistakes and cross-checked with price contracts/agreements.
- If an overcharge or disparity gets discovered, the auditor either files a claim or works to fix the situation. Potential anomalies in pre-audited invoices get corrected before payment. If there are any inconsistencies after the audit, the third-party supplier must claim reimbursement.
- Billing to shippers is consolidated, providing a clear picture of freight expenditures, while cost allocation to individual cost areas is determined.
- When the payment is received, the company gets a check.
- Freight audit and payment providers transform carrier contracts into a price matrix that includes rates, surcharges, and alternative fees using a model-specific set of rating standards. This process enables them to audit any freight bills competently while also providing a company with a better understanding of their entire transportation expenditure.
Additionally, FAP providers validate claims while actively identifying potential duplication, ensuring cost correctness, and avoiding rebilling expenses or validation errors. Third-party FAP experts identify and correct faults, lowering the chance of costly mistakes or oversights during the payment process.
Third-party Freight Audit and Payment experts also monitor changing compliance needs worldwide to guarantee shippers follow international rules. This option further establishes a higher level of validation and verification that they are operating according to local, national, and international standards, meaning lesser shipment risks of being held up with unnecessary complexities.
The Advantages of Outsourcing Freight Audit and Payments
Outsourcing Freight Audit and Payment tasks opens a wealth of advantages, including the following:
Among the most direct benefits of Outsourcing FAP is increased efficiency. Efficiency soars thanks to the streamlining of touchpoints, the use of experienced professionals’ skills, and the freeing up of valuable internal resources for other critical tasks.
Higher Level of Transparency
Internal FAP has several weak points, including a lack of transparency and a larger risk faced by stakeholders. On the other hand, shippers and freight forwarders can obtain full transparency into cost structures and verification procedures through a third party and vital transportation expense data to aid rational decision-making.
The combination of skills can accelerate a firm’s rapid growth with a specialized company. Outsourcing freight audit and payment provides a third party’s expertise and allows a company to focus its resources on market expansion.
Outsourcing FAP to a third party saves money in several key areas, including:
Outsourcing asserts that a corporation does not have to hire specialized personnel to complete FAP responsibilities. For FAP, cost savings on expert employees include pay and recruitment, health insurance, training, and other expenses. Moreover, companies do not have to worry about the impact of employee turnover on their in-house expertise when institutional knowledge is held and managed by a third-party source.
Whether it is a rate management system, an accounting system, or something else entirely, these expensive IT systems require a significant upfront investment, as well as continuous maintenance and update expenditures and subscriptions. A good FAP partner will already have the infrastructure and competence in place, eliminating the expenses of constructing, maintaining, and upgrading a cutting-edge FAP system.
There is a heightened likelihood of errors and burnout when accountants must manage FAP in addition to their typical business accounting needs. Contrarily, accountants can spend more time on other tasks that are key business operations by outsourcing FAP to a third party.
The recent surge of the COVID-19 pandemic has served as a stark reminder that future-proofing and contingency planning are critical to any company’s long-term survival. Outsourcing Freight Audit and Payment makes companies more robust and flexible to future disasters since their overhead gets reduced. They adjust swiftly to changing conditions by preparing ahead with their trusted partners.
Outsourcing Freight Audit and Payment responsibilities are increasingly becoming essential. When seeking an outsourcing partner, businesses must search for someone prepared to meet their current demands and long-term goals. Ultimately, companies will benefit from a partner who can assist them in comprehending, analyzing, and making more informed decisions about their spending and strategy.