Third-party logistics (3PL) companies are tasked with organizing dozens or even hundreds of freight shipments on any given day. It’s a complex process, with shippers coordinating travel routes, arranging for freight transfers from one vehicle to another, accounting for tolls and fees, and delivering freight at the exact time and place that it’s expected. This process generates lots of data that must be documented and accounted for in the 3PL company’s freight invoice.

Shipping and logistics companies rely upon accurate freight invoices to drive business forward. To ensure accuracy, 3PL businesses perform in-depth freight invoice audits regularly. This process is designed to verify that all information on the freight bill document is present — and accurate. But what happens if your freight invoice auditing system isn’t working? What are the consequences? And how can you remedy this problem?

The Importance of Freight Invoice Accuracy

Freight invoices are less formal documents containing much of the same data you’ll find on a bill of lading (BOL) form. This includes freight description, freight metrics such as weight and dimensions, shipment origin and destination, miscellaneous fees, expenses, and total amount due for the freight transport services.

Accurate data is essential for freight invoicing, or you risk a client being billed for an improper amount. If this happens, you must decide between issuing a supplemental invoice to the client or taking a financial loss. Neither option is an appealing one. This underscores the importance of getting it right the first time around by performing freight invoice auditing.

Signs Your Freight Invoice Auditing Process Isn’t Working

Freight invoice audits require time, resources, and a well-architected process. This process is where many 3PL service providers fall short. But how can you tell if your freight invoice auditing process isn’t working as it should? There are a few telltale signs that you can look for as you evaluate your freight invoice auditing process.

High Error Rates

If humans are involved in your freight invoice auditing, human error will occur. This is an inherent pitfall, and it’s one that you can never entirely avoid. That said, if well-trained employees perform your auditing, errors should be few and far between. If you regularly discover errors in your freight invoices, it’s time to re-evaluate your system. Identify how and why certain errors are occurring, then develop a plan to help you avoid these issues.

Missing Data Points

Freight invoices must contain as much relevant information as possible, and all applicable line items must be noted to facilitate accurate payments. For example, you may find that an invoice is missing fuel surcharges, accessorial fees, or other essential line items. This is another red flag that signals a problem. Once you’ve identified specific charges that have been omitted, you can work to determine how and why these omissions occurred.

Longer Audit Times

The time it takes to perform freight invoice audits can indicate inefficiencies within your process. If your invoice audit times are significantly longer than they used to be, this could be interpreted as a sign that your system isn’t working as it should. Make an effort to identify what is causing the extended audit times.

If you find more errors and issues, this signals a problem. On the other hand, you may be spending more time on audits because your freight invoices have become more data-heavy — a result of including all the information that ought to be present on a freight bill. This is a case where a longer invoice audit time is acceptable and non-problematic.

Poor Data Management

Poor data management processes can make achieving efficiency with any document or process that uses that data difficult. This is true of freight invoices too, which contain a diverse variety of data points. If you’re unable to easily access, store, or analyze your freight invoices, this can signal a problem. It may be time to revisit your data management processes, such as data collection methods and storage strategy.

Increased Disputes

Your client should review and pay a freight invoice without incident. Occasionally, a client may ask for clarification on a charge or line item, which is okay. This is to be expected even with the best, fully-accurate freight invoice. But you could have a problem if you routinely see disputes or cases where a client challenges the charges and line items on an invoice. This may indicate that your freight invoice auditing system needs to be fixed. In this situation, you’ll need to determine if there are any trends in terms of what charges or line items are being challenged. This will offer insight into what modifications will be beneficial.

As a shipping and transport company, a 3PL service provider has many responsibilities and priorities, with freight invoice accuracy topping the list. Accurate invoicing ensures that your customers are paying the right amount for the services they receive. Better accuracy also helps avoid awkward discussions associated with improper billing and supplemental invoices. When you’re aware of the red flags that signal a problem in your invoice auditing process, you’ll be well-positioned to take action before the company experiences negative consequences.

At iTech, our innovative team has been developing enterprise software and process automation solutions for third-party logistics companies and freight carriers since 2007. We work with each client to understand their unique processes and business needs. Then, we architect digital transformation solutions that improve freight invoice accuracy, operational efficiency, and the shipper’s bottom line. Contact iTech today to discuss your freight invoice auditing processes and how our technology can elevate accuracy and overall invoice quality.

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