Freight Invoice Processing and Auditing; Outsourcing Vs. In-house

Freight invoice processing involves the creation of detailed shipping documents which are mission-critical for carriers and transport companies. But processing freight invoices — also known as freight bills —  and performing freight invoice auditing can be time-consuming and resource-intensive, placing a tremendous strain on back office resources.

Errors and delays in freight invoice processing and auditing can result in cash flow challenges and operational disruptions. As such, it is common for the business leaders of transport and shipping companies to consider the merits of the continued in-house management of their freight invoice processing tasks versus outsourcing this critical invoicing to a third-party service provider.

The Challenges of Freight Invoice Processing

As a company up-scales and grows, its shipping activities increase accordingly, with more and more products being sent out and received. Over time, retailers, wholesalers, suppliers, distributors, and e-commerce companies have increasingly relied upon carriers to maintain on-time deliveries that align with customers’ expectations.

Shipping companies and carriers play a critical role in the successful rollout and fulfillment of customer satisfaction initiatives. You need an efficient shipping process to keep customers happy and convert a one-time customer into a “regular.” But many companies find their in-house resources strained as their customer base and operations scale in size.

A company’s back-of-house resources can be stretched thin as the business works to fulfill customer demands and pay carrier invoices. Growth-related challenges may be regarded as a “good” problem to have, but it’s a challenge nevertheless, and it’s something that must be addressed. Many businesses pursue alternative solutions, such as outsourcing for freight invoice processing and auditing needs.

Success demands efficiency in the realm of freight invoice auditing and processing tasks. Freight invoices contain a wealth of essential information, including:

• Shipping company information;
• Point of origin;
• Destination location;
• Weight and size of freight load;
• Detailed description of freight contents;
• Charges incurred immediately before, during, and after transport;
• Delivery-related charges or fees;
• Miscellaneous fees or charges; and
• Total carrier costs due.

Notably, a freight invoice differs from a similar document known as a bill of lading or BOL. The latter contains much of the same information as a freight bill, but it is more formal in nature, and as such, it is the type of formal document that can be presented in court.

How to Solve the Problem of In-House Operations vs. Outsourcing Freight Invoice Processing and Audits

A company confronting in-house freight bill auditing and processing challenges can address this problem in several ways.

Invest in more in-house resources – A company may invest in additional in-house resources by acquiring new technology, infrastructure, and staff to meet demand. For businesses that are up-scaling and expect additional future growth, this investment may be a prudent one that brings about a reasonable ROI. This option has an element of risk, mainly if business growth is not sustained or the company finds itself down-scaling in the future.

Outsource a portion of fulfillment operations to a 3PL service provider. If a company’s in-house resources are stretched too thin, it may outsource a segment of its fulfillment operations, such as freight invoice audits and freight bill processing. Third-party logistics (3P) service providers can be valuable outsourcing partners for a company’s fulfillment tasks.

Outsource all fulfillment operations to a 3PL service provider – A business may outsource all of its fulfillment operations — including freight invoice processing and freight bill auditing tasks — to a 3PL service provider. Outsourcing these tasks allows the company’s in-house staff to focus on alternative and potentially higher-value projects, creating the potential for greater profitability.

A hybrid solution can also be advantageous. Business leaders may invest in technology, infrastructure, and in-house resources to efficiently handle freight processing and auditing tasks in the case of a hybrid approach. They may also outsource some freight bill processing operations to a third-party logistics service provider, eliminating some of the burdens on their in-house staff and resources.

The Dynamics of In-House Freight Bill Processing and Auditing

Continued investment into in-house may appear beneficial at a cursory glance. But a closer examination often reveals a few problems and challenges that can compromise profitability and business operations.

• Investing large sums into in-house freight invoice processing can represent a departure from a core business model – one that is centered around production and sales. The business may invest in infrastructure, software, and resources typical of a business focusing exclusively on shipping and transport. This can seriously detract from the company’s primary mission and focus.
• Scalability issues may arise due to increases and decreases in demand, and these fluctuations can limit ROI, even leading to a loss in some cases. Conversely, an outsourcing partner can accommodate changes in demand cost-effectively.
• Employee training and turnover costs are high. This can make it financially and operationally impractical to upscale in-house freight invoice processing resources.
• Human error is commonplace when performing freight invoice processing, which may result in incorrect payment amounts and delays in payment.
• Turnaround times for carrier payments can be demanding, so delays in processing and auditing can create significant cash flow issues. As a result, a company may need to stretch its in-house resources extremely thin to finish the job on time.

The Dynamics of Outsourcing Freight Bill Processing and Auditing

Outsourcing freight bill auditing and processing operations can yield several operational, financial, and strategic benefits. Third-party logistics providers specialize in several logistics- and fulfillment-related services such as the clerical tasks related to:

• Sales order processing;
• Coordination of shipments and deliveries;
• Freight invoice processing; and
• Freight invoice auditing.

These processes can be outsourced individually on an “a la carte” basis, or the 3PL outsourcing partner can serve as a one-stop shop that tends to all of a client’s fulfillment needs. The advantages of outsourcing 3PL services are many and varied.

• They are experts in logistics services. As such, these outsourcing partners can deliver scalable, cost-effective services with a low rate of human error and rapid turnaround times.
• They use well-refined, highly-efficient, and technology-specific processes to ensure invoices are processed accurately and quickly. Since 3PL companies specialize in a minimal range of services, they have the opportunity to develop and refine their workflows and processes.
• They invest in machine learning (ML) technology, process automation, and enterprise software platforms. This technology is leveraged to ensure that freight invoices are processed correctly. Audits are performed to ensure accuracy.

On the whole, freight invoice processors and 3PL companies specializing in outsourcing solutions can deliver an outsourcing solution that is more efficient, faster and more accurate than another company could achieve in-house.

At iTech, we specialize in helping businesses achieve their freight invoice processing and auditing goals by leveraging the most innovative technologies, such as machine learning and business process automation. We work to understand the client’s unique challenges and then architect a solution around those pain points in a way that delivers maximum ROI. We invite you to connect with the iTech team today to learn more about what the latest freight invoice processing technology can do for your company.

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IDS Commander iTech2021

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