Freight Audit Essentials: What Every Business Should Know
No matter how big or small your business’s shipping needs are, it’s crucial to keep a close eye on your freight costs so that you can dispute any errors that may pop up and identify ways to make the most of your shipping budget.
You can do this by performing a freight audit—the process of analyzing and managing shipping invoices to ensure correctness, recover erroneous payments, and achieve maximum cost savings.
Lojistic's freight audit solutions empower businesses of all sizes to keep a vigilant eye on freight costs, dispute errors confidently, and uncover strategies to maximize shipping budgets.
Read on to learn more about how to implement this key strategy and optimize efficiency for your business.
The Evolution of Freight Auditing
Although freight audits are essential to businesses of the modern world, they aren’t a new strategy.
During the early 1900s, the transportation system was strictly regulated, meaning that payment terms between shippers and carriers were generally similar across the board.
However, a shift occurred in 1980 when the industry was deregulated. As with any change, there were upsides and downsides to this decision:
- The pros – Shippers and carriers gained the freedom and flexibility to negotiate their own terms.
- The cons – It became easier for invoice inconsistencies to fall through the cracks.
Put simply, without the once-present security blanket of terms being consistently regulated, the world of deals between shippers and carriers became increasingly laissez-faire, devolving into a Wild West of sorts.
However, with the right strategies, shippers can still benefit from this way of doing business.
If you negotiate and play your cards right, you can enjoy affordable rates and fast delivery speeds. But be aware that the onus now falls upon your business to keep track of invoices and make sure all your logistics fall in line.
Key Aspects of Freight Auditing
To get up to speed with what freight audits are and how they can help your business, we’ve broken down the key elements you need to know.
Types of Freight Audits
All freight audits involve the thorough examination and validation of expenses related to shipping. However, there are various methods for conducting a freight audit. These include:
- In-house auditing – If you prefer to do things the old-fashioned way, you can dedicate a portion of your in-house team to the task of freight auditing. This method can be quite time-consuming, costly, and prone to errors.
- Outsourced auditing – By offloading your freight auditing duties, you can free up your own team’s time for more strategic tasks while leveraging the expertise of professionals who specialize in freight auditing. These companies often have powerful technology to automate the audit process, which significantly reduces manual errors and saves time. This option results in more comprehensive and accurate audits, potentially leading to greater savings.
- Hybrid approach – Some companies choose a combination of in-house and outsourced freight auditing or integrate automated software with human oversight. This flexible method allows businesses to customize their approach based on current needs, budget, and resources available.
Each method has its advantages and challenges, and the best choice depends on the company's size, volume of shipments, and specific requirements.
Role of Technology in Freight Audits
Imagine trying to sift through every single shipping invoice your business has accumulated over the past quarter. Not only would it take you hours, but you’d likely miss some errors—and each error means money out of your pocket.
Luckily, advancements in technology have taken the busy work out of the freight audit equation, providing you with both accuracy and speed. By using the right system, you can completely automate the process of analyzing your invoices for errors or discrepancies.
In fact, digital tools can help you:
- Enjoy real-time, end-to-end supply chain visibility
- Gain access to data about consumption trends
- Streamline communication with your carriers
- Identify recurring issues and eliminate them
- Automatically restore your inventory as needed
Benefits of Freight Auditing
A freight audit empowers you to become aware of the efficiency (or lack thereof) of your business’s shipping operations.
When you get your auditing process down to a science, you’ll be able to ensure that both parties in your shipper-carrier partnerships are upholding their ends of the obligations laid out in your contract.
But these aren’t the only benefits. Let’s dive deeper into more of the advantages that freight auditing can afford you.
Cost Savings and Financial Accuracy
Freight audits are an incredibly easy way to cut costs while expending minimal effort and resources. This is because they allow your business to:
- Collect any refunds you’re owed because of accidental duplicate invoices
- Recover funds you’ve lost due to overcharging from carriers
- Receive compensation for missed or late deliveries
- Tweak your shipping system for optimal cost efficiency
Neglecting to perform regular freight audits is like throwing money away. Retain the funds you deserve by keeping a watchful eye on the accuracy of your invoices.
Enhanced Operational Efficiency
If you don’t perform regular freight audits, you won’t know where your shipping system is lacking. And, as weak points accumulate, they can drag down your overall productivity and profit.
By consistently tweaking your shipping system to perfection, you can:
- Streamline your workflow
- Optimize your operations
- Avoid wasting valuable time, money, and resources
For instance, did you know that ground delivery can sometimes be faster than air? Many business owners assume that air is always the best mode of transportation, and they end up losing money because of it.
By analyzing the data in your freight audits, you can ensure that you’re employing the most effective methods for success.
Strategic Data Insights and Decision Making
Freight audits allow you to access and analyze actionable shipping analytics insights, such as:
- Shipping patterns
- Performance metrics
- Carrier advantages
With this information in your back pocket, your business will be better equipped to make smart decisions about the transportation modes you utilize, the shipping routes you plan out, and the carrier partners you work with.
You can then make decisions that are backed by strategy and data rather than taking guesses at what might work best.
Implementing Freight Audits
A business that wants to maintain a healthy and lucrative shipping model can’t afford to overlook a process as simple—yet vital—as freight auditing. But if you’ve never performed a freight audit before, you might feel unsure about how to get started.
In this next section, we’ll explain the steps you need to take to conduct your first freight audit with confidence.
Freight Audit Payment Processes
To incorporate freight audits into your carrier payment process, adopt this strategy:
- Receive invoices from your carrier
- Send the invoices to your auditing team or use a freight audit software
- Perform a thorough audit to confirm the validity of the invoices
- Dispute overbilling and other errors if necessary
- Proceed with payment
Preparing for a Freight Audit
If you’re conducting your freight audits manually, it might make sense to check your invoices in pre-prepared batches rather than one at a time. However, handling your invoices and audits on a digital interface is a smarter choice in the long run.
With an automated system, you can stay up to date on your payments without having to process them by hand one at a time.
To prepare your digital freight audits:
- Find a software that offers robust invoice analysis and real-time data
- Set up an online system where your invoices will be uploaded
- Ensure the system you’re using organizes your documents for ease of viewing
Freight Audits and Carrier Relationships
The shipping industry is complex and ever-evolving. Staying on the same page as your carrier can do wonders for:
- A transparent working relationship
- Efficient communication
- Improved collaboration and negotiation
Without paying attention to the accuracy of your shipping invoices, it’s easy to fall out of touch with your carrier. Resolving any discrepancies or conflicts up front helps to facilitate a sustainably healthy relationship between shipper and carrier.
Choosing the Right Freight Audit Partner
Securing a trusted entity to help you conduct thorough and accurate freight audits is often far less burdensome on your business in the long run than manually performing audits yourself.
In fact, with the right partner, the only question you’ll have left about freight audits is, why didn’t I start doing this sooner?
Lojistic revolutionizes freight auditing with a suite of services tailored for efficiency and cost savings. Our easy-to-use platform ensures businesses of all sizes can optimize their shipping budget with minimal effort.
Self-Serve Freight Auditing Software
- Automated Invoice Auditing: Checks for overcharges and service failures automatically.
- Data Insights: Provides detailed analytics to make informed shipping decisions.
Managed Freight Auditing Services
- Expert Auditing Team: Manages the entire freight audit process for you.
- Cost Recovery and Optimization: Actively seeks out refund opportunities and contract improvements.
Freight Payment Services
- Carrier Payments: Seamlessly handles payments with precision post-audit.
- Payment Reconciliation: Ensures financial accuracy and maintains control over freight spend.
Next Steps with Lojistic
Start enjoying the many benefits of freight audits today by partnering with Lojistic. We offer sophisticated yet simple-to-understand freight auditing software that can identify and eliminate shipping invoice errors, automate cost coding, streamline your carrier payment process for effortless efficiency, and save you money in the long run.
The best part? Your free account only takes a minute to set up, so get started and experience the Lojistic difference for yourself. Partner with Lojistic today for a complete freight management solution that simplifies, saves, and scales.
Sources:
Cassidy C. Supply Chain – Your TMS Isn’t Enough: Why You Need a FAP Solution. GlobalTrade. December 5, 2022. Accessed January 25, 2024. https://www.globaltrademag.com/supply-chain-your-tms-isnt-enough-why-you-need-a-fap-solution/
Bouk J. Advantages of Freight Auditing Technology: Your Frequently Asked Questions Answered. GlobalTrade. May 4, 2023. Accessed January 25, 2024. https://www.globaltrademag.com/advantages-of-freight-auditing-technology-your-frequently-asked-questions-answered/
Author
Bryan Van Suchtelen
Bryan Van Suchtelen
Corporate Director of Parcel Rate Services
Prior to joining Lojistic in 2015, Bryan enjoyed a 26-year career with UPS where his roles included Pricing, Field Sales and Director-level Sales Management of some of UPS’s largest customers.
At Lojistic, Bryan leverages his wealth of experience/expertise to identify and execute supply chain cost management solutions for parcel shippers of all sizes. Bryan has helped his customers reduce their shipping spend by tens of millions of dollars.