Parcel Auditing 101: Take Control of Your Invoices
Shipping invoices frequently contain errors, and if you’re not analyzing yours for accuracy, you could be overlooking some serious savings. Smart businesses conduct regular parcel audits to optimize their shipping operations and ensure they’re not paying carriers a dollar more than they’re due.
Whether you send out a couple of packages a week or a couple thousand, parcel auditing can positively impact your business in a big way. In this guide, we’ll explain the ins and outs of parcel auditing—a system that can save you money, increase your efficiency, and boost your business’s bottom line. By identifying billing inaccuracies and service failures, parcel auditing software services ensure you're not overpaying for shipping, thereby directly contributing to your cost savings and enhancing operational transparency.
What is a Parcel Audit?
What is parcel auditing, and why is it so important?
Parcel auditing is the process of thoroughly analyzing the invoices sent by the shipping carrier who transports your goods.
This process plays a significant role in logistics because:
- Businesses spend a lot of money on shipping
- Shipping invoices frequently contain errors
- Finding those mistakes allows you to reclaim money
While the refunds you can enjoy from parcel auditing are a main benefit, the process also affords you something else: a thorough understanding of the efficiency of your shipping operations.
Read on to learn more about how keeping a close eye on your shipping logistics can completely revolutionize the way you transport your product.
The Importance of Parcel Audits
If you run a small or medium-sized business, you may assume that parcel audits are an optional process that you can put off until you scale. But neglecting to establish a parcel auditing system will be far more burdensome in the long run—especially when you consider the small amount of effort and time it takes to get started.
Why is a Parcel Audit Important?
As a business owner, you already have a lot on your plate. Your top priorities are probably making sure your product, customer service, and marketing are top-notch.
But to nurture a truly successful business, holding your carrier accountable through parcel auditing is crucial.
Not only will parcel audits help you take advantage of cost savings and boost your profitability, but they’ll also empower you to:
- Accurately account for shipping expenses
- Streamline your operations
- Optimize your shipping strategies
The Impact of Parcel Audits on Business Efficiency
As an entrepreneur, you always want to be on the lookout for ways you can trim the fat and get your systems down to a science.
Parcel auditing instantly increases your business efficiency by:
- Bolstering financial health by keeping more money circulating in the bank account of your business instead of your carrier’s
- Informing you of the best ways to optimize your shipping routes and modes of transportation, leading to faster, more reliable deliveries and increased customer satisfaction
The Parcel Auditing Process
Parcel auditing might sound complex, but the process is quite simple once you understand the basics.
In the following section, we’ll detail a step-by-step guide for completing your first parcel audit with confidence.
How Do You Audit a Freight Bill?
Thoroughly comb over your carrier invoices with care and attention to detail. Make sure to:
- Peruse all charges and ensure accuracy
- Check for overcharges or opportunities for refunds
- Ensure that no duplicate charges were erroneously made
It’s important that you leave no stone unturned in this process—false charges can add up fast.
Identifying Overcharges and Service Failures
As you scrutinize your parcel bills, compare the payment terms you agreed upon in your carrier contract with the charges listed on each invoice. If the numbers don’t match up, there’s a chance you’re being overcharged.
Also, be sure to analyze your invoice data to check for missed or late deliveries.
If your goods arrived to the customer past the promised arrival time, you could be eligible for a full or partial refund since the service provided by your carrier was subpar.
Key Components of a Parcel Audit
Although different companies use varying methods to perform parcel audits, there are a few must-have factors for any successful invoice analysis:
- Rate verification – Ensure that the prices and discounts you negotiated have been properly applied to the invoice.
- Service level compliance – Make sure your carrier is consistently meeting the service level metrics laid out in your contract, and collect any money you’re owed as a refund if they fail to measure up.
- Accessorial charge validation – Sometimes, your shipping carrier might add extra fees to your bill if they had to perform services outside the scope of what you paid for, such as transporting hazardous materials or an oversized load. Check that any additional fees you were charged are valid.
Differentiating Between Small Parcel Audits and Freight Parcel Audits
Parcel audits and freight parcel audits are very similar. They both involve scrutinizing your carrier invoices to check for accuracy and dispute any discrepancies.
The main difference between these two systems comes down to the size of the businesses that most commonly use them.
- Small parcel audits – Best for smaller businesses that send out a relatively low number of packages.
- Freight parcel audits – The word “freight” refers to goods that are transported in bulk. Therefore, these scaled-up audits are typically most advantageous for medium- to large-sized companies.
Understand Parcel Costs and Benefits
When parcel auditing, you’ll need to part with a bit of your budget upfront to reap the benefits of your investment later on.
Below, we outline the traditional costs and returns associated with doing a parcel audit.
How Much Does a Parcel Audit Cost?
If you work with an outside auditing provider, they'll typically charge a portion of the refunds they recover for you as a result of the audit.
If you hire an in-house team, the salary you pay them to audit your invoices is, of course, a fixed cost.
Some providers, like Lojistic, offer the best of both worlds: a low monthly subscription so your cost is fixed, and an ongoing audit that helps you recover refunds for invalid charges.
ROI of Parcel Auditing
The return on investment you can enjoy from parcel auditing is significant.
The savings you can achieve from a sustainable parcel auditing system will accumulate in the long run. As they say, slow and steady wins the race.
With long-term parcel auditing, you can reduce costs in your shipping budget, ensure that your carrier is compliant with the terms of your contract, and optimize your shipping operations for maximum efficiency.
Leveraging Parcel Audit Data for Business Optimization
Trying to perfect your shipping process without performing audits is like playing a game of darts while blindfolded—you don’t have all the information you need to succeed.
Rather than taking guesses in the dark, you can utilize the actionable, real-time insights you gain from parcel auditing to:
- Rethink your routes – Sometimes, ground shipping can be faster than using air transportation. In fact, experts recommend that shippers consider converting shipments that will travel 750 miles or less from air to ground. With the insights you gain from parcel auditing, you can gain a clear overview of your numbers and determine which choice will optimize your operations.
- Negotiate your contract – When you’re fully informed about the service or invoice errors that your carrier is making, you gain leverage to negotiate better terms for your shipping contract. That means you can take advantage of possible refunds, discounts, and more.
- Reallocate resources – The money that shipping invoice errors drain from your business’s bank account can add up fast. Every dollar that you mistakenly pay to your carrier is a dollar you could otherwise be investing back into your business. Keep the money that’s yours and stimulate your growth.
Exploring the Types of Parcel Audits
So, you’re interested in using a parcel auditing process for your business. But how do you get started?
Parcel audits typically occur in one of three ways:
- They’re facilitated manually by members of your team.
- They’re outsourced to a third-party company that takes care of the audits for you.
- A software program takes your invoices and digitally analyzes them for errors.
With these common methods in mind, how can you choose the one that’s right for your business’s unique needs? Let’s take a closer look to find your answer.
Manual Versus Software-Assisted Parcel Auditing
While manual auditing can provide a sense of control and greater oversight, there’s great merit in entrusting your parcel auditing to a fully automated system.
In fact, technology may produce better results than manual auditing because it:
- Saves time – When done manually, parcel auditing can be incredibly time-consuming. You may want to leave the busy work to technology so your skilled team can have more time to focus on other priorities.
- Reduces errors – Basic human errors can easily occur when analyzing line after line of shipping invoices. Software, on the other hand, can quickly execute your audit with complete accuracy.
In-House vs. Outsourced Parcel Auditing
Now that we’ve analyzed the differences between manual and software-assisted auditing, let’s take a closer look at the pros and cons of keeping your audits internal vs. hiring an external team:
- In-house – Keeping your operations internal allows you to ensure that your invoice data stays private. However, you’ll either need to hire dedicated personnel to handle your auditing or hand off these responsibilities to existing team members. Either way, you’ll need to be ready to dedicate significant money and resources to this process.
- Outsourced – By entrusting your audits to an outside team, you can enjoy the benefit of working with experienced experts. Plus, you can completely offload the responsibilities of auditing.
Future Trends in Parcel Auditing
As AI and machine learning technologies continue to develop, companies will follow suit, cutting the busy work out of their employees' lives and entrusting parcel auditing to computer programs instead. And it makes sense why.
What used to take humans countless hours and constant headaches (with the risk of error) can now be executed almost instantly by savvy parcel auditing software solutions that can ensure greater accuracy.
So, whether you’re looking to perform your first parcel audit or streamline your current process, it’s worth your while to consider digital parcel auditing platforms.
Lojistic's Comprehensive Parcel Auditing Solutions
With Lojistic, parcel auditing is easier than ever.
In just one minute, you can set up a completely free account on our advanced platform. Then, you’ll connect your shipping carriers, enjoy our auditing features, and gain access to real-time shipping analytics concerning your data.
How Lojistic Can Transform Your Parcel Auditing Process
Instead of spending time on manual parcel auditing or spending money on outsourced services, you can use Lojistic to audit your invoices quickly, easily, and affordably.
Lojistic is an all-in-one, user-friendly parcel auditing platform that helps businesses lower and compare shipping costs, automate their auditing, review shipping reports and analytics, and more.
Set up your free account today to experience the Lojistic difference for yourself.
Sources:
Cordell W. Validation and Verification: Making the Most of Your Parcel Audit. Parcel Industry. April 18, 2018. Accessed January 25, 2024. https://parcelindustry.com/article-5104-Validation-and-Verification-Making-the-Most-of-Your-Parcel-Audit.html
Burg N. 5 Logistics And Shipping Mistakes Small Businesses Make. Forbes. December 10, 2012. Accessed January 25, 2024. https://www.forbes.com/sites/ups/2012/12/10/5-common-logistics-and-shipping-mistakes-small-businesses-make/?sh=552d7cf225ac
Author
Matt Bohn
Matt Bohn
Director of Parcel Rate Services
Prior to his role at Lojistic, Matt held significant positions in the industry, including his tenure as Senior Pricing Advisor at FedEx. Matt analyzed pricing programs and wrote pricing contracts for some of FedEx’s largest e-commerce and retail shippers. He also managed projects for the FedEx Global Pricing Approval Systems and Strategic Account Executive Inputs.
Matt earned a BS in Computer Engineering and an MBA in Finance from the Joseph M. Katz School of Business at the University of Pittsburgh.