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Why You Should be Doing Regular Freight Audits

by | IntelliTrans | Nov 5, 2020 | Blog News

Frequent freight audits ensure that you never pay carriers more than you have to.

If you’re not already auditing your company’s freight invoices, listen up. Not historically known for its attention to detail, the carrier industry sends out a lot of inaccurate invoices. In fact, roughly 25%-30% of those freight bills include errors, according to Supply Chain Dive.

These errors can add up and impact a shipper’s bottom line. And while reviewing bills, identifying errors, and addressing them with carriers is arduous work, it’s well worth the time and effort for shippers of any size.

“For businesses already overloaded with logistics tasks,” Supply Chain Dive adds, “poring over each carrier document in an attempt to glean data and determine their validity is neither reliable nor feasible.”

What is a Freight Audit?

The process of combing through carrier invoices to find billing errors, freight audits can turn up everything from incorrect tariff weight breaks to service level failures to unwarranted detention and demurrage charges. Similar to any other type of audit, the freight audit includes a thorough examination and verification of a specific account.

These audits can be handled manually, by a third-party (i.e., an accounting firm), or using an automated software platform. By automating freight audit process workflows, the latter provides accurate, in-depth data that can be used for more than just recouping money on your freight bills. A good freight audit process also helps companies:

  • Leverage accurate reporting and advanced analytics
  • Make the entire supply chain more transparent
  • Get higher levels of visibility into logistics operations
  • Spot market trends (i.e., rate increases, rate decreases, capacity issues, etc.)
  • Forecast future freight costs
  • Strategize more efficient shipping routes
  • Optimize those routes and your overall shipping process
  • Improve relationships with carriers (largely because disputed invoices are sitting around in “review” for months, waiting to be paid)

On a Mission

The freight audit’s core mission is to hunt down potentially recoverable charges. It does this by examining, adjusting, and then verifying bills for accuracy, with the ultimate goal of helping your company pay no more than what the original freight contract obligates.

For example, transportation providers may add fees for weather delays, detention, demurrage, terminal handling, or any other myriad number of “extras” that you probably didn’t factor into your cost of doing business. Multiplied over time, these fees can take a bite out of your bottom line and seriously impact the profitability of every order shipped.

Whether you’re shipping 100 packages a week or 10,000 per day, even a minimal number of freight bill errors multiplied over weeks (or months) can add up quickly. By ensuring that your freight invoices align with the quote you were provided at the time of shipment, and that no “hidden” fees or accessorials were tacked on after the fact, freight audits yield substantial savings across all modes—from truck to train to intermodal to ocean carrier.


2% Freight Cost Reduction

By auditing and paying freight invoices on behalf of shippers, IntelliTrans provides a valuable service that many companies ignore in favor of handling more pressing, core tasks. Rather than missing the opportunity to save money and leverage the benefits mentioned above, one shipper began using IntelliTrans to both audit and pay its freight invoices.

Reliant on a manual accounts payable (AP) process, the company was missing many payments to its carriers and also lengthening the time it took to pay those carriers. Additionally, inaccurate invoices were costing the shipper millions of dollars per year. The company wasn’t doing regular freight audits, which meant approximately 25%-30% of the invoices it was receiving included errors.

Wanting to get current with its carriers, reduce AP processing time, manage exceptions to the rule, and save money, the company automated its freight audit and payment services. It immediately began receiving accurate information that it could use to guarantee compliance and quickly resolve disputes and make payments.

The system also stores contract rates, tariff rates, accessorials, and fuel surcharges, all of which are cross-checked against freight bills. Finally, the company is using its transportation management system (TMS) to streamline the freight bill audit system and further improve accuracy, and automatically trigger freight bill remittances.

Moving to an automated freight audit system helped the company shave about 2% from its overall freight spend while also reducing to zero—from a previous $3 million—its past-due freight bills within just two months. This is just one real-life example of how regular freight audits can help shippers better manage their freight costs in any transportation environment.

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Tech-Enabled Freight Audits

IntelliTrans’ Global Control Tower provides high levels of supply chain transparency; aggregates, completes, and enhances data from a variety of sources; offers visibility into and execution of different aspects of the supply chain; and generates data-driven alerts and analytics that ask deeper questions and deliver meaningful insights.

By leveraging tracking information, the Global Control Tower provides analytics that measures key performance indicators (KPIs) like fleet cycle time, origin/destination dwell time, lane and hauler performance, back orders, freight spend, load optimization, and more. With their rate, equipment, lease, tracking, and invoice data in a central repository that’s accessible 24/7, companies can position themselves for success in any market conditions.