Understanding the Freight Audit Process
As a carrier in the trucking industry, it’s important to understand the freight audit process because it can impact your company getting future jobs from certain shippers depending on their findings in the audit. The freight audit process is where the shippers examine logistics costs in their freight spend and verify your freight rates and surcharges are not above the going rates in the industry. Shippers will check on this from time to time with a shippers freight audit & payment verification program.
What is a Freight Audit?
A freight audit is the process of the shipper managing transportation costs by verifying freight bills accumulated from shipments. A freight bill is the freight invoice provided to a shipper from the carrier which lists the total charges being billed for the shipment of the load. However, while the shipper does want to ensure they are paying in the appropriate range for shipments, the financial aspect is not the only focus of this shipper’s audit. They will also be examining things like if the loads make it to the correct locations, if they were delivered on time and undamaged, and if there were detention fees and other additional costs attached.
A shipper’s audit double checks that these bills are accurate and reflect actual freight costs, as well as making sure the shipping is not paying more than the going rate for their shipments. So if you charge substantially more than other companies this is where you may lose them as a future customer. The shipper will also cross compare the data to the BOL (freight bill of lading) to make sure there are no discrepancies there either. It is good to always keep this process in mind and continually check as you go with something like pre-audit by the shipper. This largely limits the possibility of finding a great deal of mistakes during a global freight audit.
Freight Audit Process Options
Within the shippers freight audit process you will commonly find three options practiced by the shipper. These options are manual freight auditing, automated freight auditing, and combination freight auditing.
Manual Freight Audit Process
This option means that the process will be conducted through manual labor. Manual audits are time consuming for shippers and it becomes easier to overlook errors with the human eye. This is tedious work that requires an expensive amount of comparison from memory. Simply put, you can expect this process to take more time for the shipper to complete.
Automated Freight Audit Process
Adding automation in this process is a huge accomplishment for many companies and allows them to better set business rules for the future. While the investment in this level of business intelligence software is higher, this process can begin to pay for itself in future invoice auditing. Electronically reviewing the payment process of carrier invoices is not only a major time saver but yields a cost savings as well. The automated freight audit approach enables the shipper to utilize specialized software. Whether custom in-house software is used or the task is outsourced to an auditing firm, this route will yield more consistent results. One nice ability here is that these software systems can be integrated electronically to work with the freight carriers system, making the entire process more streamlined and efficient all around.
Combination Freight Audit Process
The combination audit approach can also prove efficient and beneficial; allowing a human eye to check the questionable parts and make appropriate business decisions while allowing the optimization of the automated approach. Here all of the auditing process that can be completed by the shipper without question will be done automatically by the system similar to the automated process. The difference is that any data flagged by the system will go to a queue for human review instead of the system making a guess on how to handle it.
Freight Audit Checklist
- Detailed invoices are gathered from the carriers
- The scope of how big the shipper’s audit will be is determined and a timeline for completion is set
- Invoices are organized appropriately for the scope set
- All of the rate cards/rate confirmations are compiled for validation
- Zones and postcode files are matched to the rate cards/sheets
- A manifest is created of all field data
- Data is cross verified between the invoices, rate cards, and your manifest
- A consignment verification is completed
- A credit request is compiled
- Credits are negotiated with the carriers account manager for a payment solution
Should You Outsource Your Freight Audit?
Outsourcing the shipper’s freight audit process to a third party freight auditor can have its benefits, largely depending on the specifics of your company. There are naturally some pros and cons to outsourcing audits to professional freight audit services. One major factor is the pricing of dedicating an in-house position to this task. It may be a better idea for some shippers to not involve an external freight audit company and complete this process internally. By doing the job internally the shipper’s auditor can be trained specifically to meet the level of standard for that company. However, if a dedicated role is too financially prohibitive to justify the cost allocation, you may want to consider routing these duties to a dedicated professional transportation management company.
Our dedicated team of trucking experts are here to help. Give us a call today if you have more questions on the shipper freight invoice audit. 913-393-6110