In a commerce-driven world economy, freight charges can account for a massive portion of a company’s expenditures. But an estimated 20% to 25% of an organization’s shipping invoices contain errors that can potentially increase shipping costs. This can account for tens or even hundreds of thousands of dollars in unnecessary freight costs at scale.
A freight bill audit is perhaps the single most effective measure for verifying freight charges align with the actual size and weight of the items you’re shipping. But actually performing freight bill audits can be time-consuming unless the company has an effective freight audit software program designed to analyze and audit shipments.
The Most Common Shipment Cost Mistakes: How Do Freight Audit Errors Occur?
Calculating freight charges is complex and very involved. A single typo or misplaced comma or period can have a disastrous and very costly impact. But it doesn’t end there: cargo and shipment cost errors can arise due to many other issues. The following is an overview of the most common mistakes and errors that occur when calculating shipment costs and performing freight audits.
- Duplicate Invoices
- Incorrect Freight Rates
- Incorrect Shipping Classification
- Tax and Tariff Calculation Errors
- Incorrect Shipping Discounts
- Incorrect Mileage
- Incorrect Surcharges or Accessorial Fees
1. Duplicate Invoices:
Duplicate invoices can account for a major financial hit. Cargo invoices are commonly used to calculate the weight and dimensions of a shipment, so if you double those figures, the overage may be substantial. Fortunately, if an invoice is accidentally recorded twice, the right freight audit software can identify this with relative ease by detecting duplicate amounts or invoice numbers.
2. Incorrect Freight Rates:
Calculating the incorrect freight rate may result in excess freight costs. Errors can range from a typo or transposition of two digits to an incorrectly situated decimal point or comma. It’s also possible that a shipment is miscategorized — you may calculate freight charges for an entirely different shipment class or even the wrong shipping company.
3. Incorrect Shipping Classification:
Different cargo classes have different shipping rates. If you accidentally calculate freight costs using figures for the incorrect shipping classification, you can end up overpaying significantly. This is a common area for error, as there are 18 freight sub-classes, and each has unique specifications related to liability, density, stowage, and other variables.
4. Tax and Tariff Calculation Errors:
Shipments are subject to state, federal, and international taxes and tariffs. What’s more, these must be paid before the parcel will be delivered to its destination, so an error can result in delays. In addition to the variances by region, it’s also typical to see differences based upon the contents of a shipment. This leaves lots of room for error and overpayment.
5. Incorrect Shipping Discounts:
Cargo and shipping companies frequently offer discounts to regular customers and those with larger volumes of freight. These shipping discounts may vary over time, and there is commonly variance according to the cargo classification, shipping method, or other attributes. If you calculate for less of a discount than you’re eligible to receive, the overage can translate into thousands of dollars.
6. Incorrect Mileage:
Mileage calculations are a key determiner of freight shipping costs. In addition to cargo weight and dimensions, shipping freight rates are determined by mileage (which, notably, varies from distance calculated as the crow flies.) If the wrong mileage figures are inputted when trying to calculate freight charges, the overage can be significant.
7. Incorrect Surcharges or Accessorial Fees:
Errors calculating surcharges and accessorial charges can easily skew freight shipping costs. Accessorials include handling costs, last-mile delivery fees, or warehousing/storage costs, while surcharges may be applied for certain types of cargo and freight. Whether it’s a data entry error or accounting for an accessorial or surcharge that doesn’t apply, this is another area where it’s common to see miscalculations resulting in financial losses.
Avoiding Excess Freight Shipping Charges With Freight Invoice Audits
With as much as one-quarter of all shipping invoices containing potentially costly mistakes, today’s auditing software can go a long way toward reducing unnecessary expenditures by catching the errors that humans miss. The impact on a company’s bottom line can translate into savings of tens or hundreds of thousands of dollars—or more.
iTech specializes in processing and auditing freight invoices for accuracy. This provides our clients with significant savings since they’re no longer overpaying for shipments. Our technology features a level of automation and cutting-edge technology processes that are unmatched by other outsourcers in the industry. Contact iTech today to discuss your freight auditing needs.