Eliminate cost leakages and drive efficiency with the best practices in freight bill audit and payment.
In logistics, cost control isn't just a goal—it's a necessity. After all, transportation, procurement, and other logistics elements converge at invoice processing.
If you're wondering what freight audit and payment is all about, it's a function that focuses on ensuring accuracy and efficiency in this critical process. Errors and misses at this stage directly erode profitability. Eventually, these auditing and payment gaps lead to hidden leakages that are hard to detect but expensive to overlook. The solution is to establish a set of practices that are designed to ensure every dollar spent delivers maximum value.
If you're unsure about where to start this blog covers ten freight audit and payment best practices that drive logistics cost control excellence.
Freight audits and payment processes all aim to optimize logistics costs. If you're looking for maximum savings and intelligent expenses, consider these top ten practices.
Automated rate management solutions focus on managing digital contracts and real-time rate validation. This solution results in 85% fewer billing errors and recovers 2-5% of total freight spent annually.
To effectively implement this, make sure to:
If a logistics provider automated their rate validation, they would immediately catch billing discrepancies. It will also ensure their invoices match their contracts at all times. According to a 2023 Gartner study, automated rate management achieves 99.2% billing accuracy as opposed to 92% accuracy from manual processes.
Consistent freight documentation across all shipments keeps the clearance process and error identification straightforward. A standardized BOL program is the perfect practice to minimize errors. Plus, it reduces billing disputes by 60% and shortens payment cycles by 8-12 days.
When setting up a BOL program, here are a few things you should not miss out on:
A shipping company using a digital BOL system instantly simplifies customs clearance, avoiding delays and disputes in cross-border deliveries. In fact, Walmart's standardized BOL program reduced freight payment disputes by 67%. Plus, it saved $2.3M annually in processing costs.
Advanced freight audit software, like Pando's, streamlines freight cost verification. It uses machine learning, real-time dashboards, and EDI integration. By detecting duplicate payments and incorrect charges, it can recover 3-8% in costs.
Here are the essential features you will need when adopting freight pay and audit software:
For reference, let's say an online retailer adopted freight audit software that flagged duplicate charges. It would be long till the retailer recovers costs during processing effortlessly and has better cash flow for operations. This solution has an average payback period of just 4-6 months, delivering 300-400% ROI over three years.
A multi-point audit protocol involves verifying invoices across numerous checkpoints for billing accuracy and compliance. It detects 98% of billing errors, outperforming single-point audits that catch only 85%.
Here's what you must verify with this practice:
Assume that a manufacturing company introduced multiple checkpoints for invoice validation. The process will help uncover unauthorized charges and streamline payment processes. Studies show this practice may uncover an average of $180,000 overcharges for every $10M freight spent.
Transparency drives excellence, and carrier scorecards are the secret sauce. Sharing performance scorecards keeps carriers laser-focused on improvements. This practice can create a 12% dip in rate variations and a 25% surge in compliance.
Here are a few metrics that facilitate performance and cost control:
Let's say a global distributor shared carrier performance scorecards, which would help motivate their partners to improve billing accuracy and service quality. It's best to hold monthly carrier reviews with performance-based penalties and incentives as it plays a big role in driving accountability and continuous improvement.
Accessorial management policies govern the additional charges applied during shipping and freight management. Without clarity, they result in overcharging and even fraud. With robust policies, you reduce unauthorized accessorial charges by 40-60%.
Here's a framework to follow in accessorial management policies and clauses:
Let's say a transportation company implemented pre-approved policies for extra charges. This could significantly reduce disputes and ensure smoother invoice approvals in as little as one review cycle. Top performers keep accessorial charges between 4% and 6% of total freight spend, far better than the industry average of 10% to 15%.
Seamless data flow and planning translate to smooth accounting and auditing. Integrating EDI into your freight bill audit and pay can slash processing costs by 60-80%. Plus, it boosts data accuracy by 95% and streamlines logistics operations.
Here are the essential EDI types you must integrate into your planning systems:
Picture a food supplier and shipper integrating their EDI systems. It would result in seamless communication with carriers and no manual errors in freight documentation. In fact, EDI systems help organizations process invoices 5x faster with just one-third of the staff.
BI and analytics are all about operational patterns and trends, giving you immense foresight into logistics expenses. They can even uncover 2-4% additional savings opportunities.
To focus on the right insights, keep these four key analytics in mind:
When a retail chain uses analytics to identify inefficiencies in high-cost shipping lanes, it is better equipped to optimize routes and improve overall profitability. Recently, a Fortune 500 manufacturer achieved $3.2M in annual savings with analytics-driven optimization.
Exception management processes create a clear data flow for financial escalations and exceptions. They minimize disruptions, reduce resolution time by 65%, and free up cash flow by cutting payment holds.
Here are four elements to incorporate for comprehensive exception management:
Imagine a tech company automating its exception management process. The consistent practice helps quickly resolve invoice issues and maintains strong supplier relationships. If you're wondering how effective this could be, organizations resolve 90% of exceptions within 48 hours. This impact plays a vital role in high satisfaction rates and minimal conflicts.
Systematic GL integration ensures accurate financial tracking. In fact, it reduces accounting errors by 75% and speeds up month-end closings by 2-3 days.
Every freight audit and payment solution must have these GL integration components:
When a firm, like a construction business, streamlines its freight expenses into its general ledger, it simplifies all its month-end processes. Moreover, the practice improves the accuracy of its financial records. According to the Aberdeen Group, automated GL integration cuts freight payment reconciliation time by 45%, giving you more time to focus on growth.
Best practices align businesses with industry benchmarks and drive measurable, innovative cost-control improvements. A well-implemented freight bill audit and payment solution builds on these practices, ensuring long-term operational efficiency.
That's why a phased implementation is essential. It enables businesses to assess the impact and customize solutions in real-time. Deploying solutions in phases also maintains seamless operations throughout the upgrade.
Here are a few recommendations to keep in mind for a strategic and phase-wise implementation:
Timeline: 0-6 months
During the early stage, your business deploys elements focusing on quick wins, like billing errors and recoverable costs. Here's what to focus on:
Timeline: 6-12 months
Phase two is all about mid-stage improvements—reducing inefficiencies and increasing savings. Here's what to focus on:
Timeline: 12-18 months
The final implementation phase should aim to refine processes and uncover deeper cost-saving opportunities. Here's what to focus on:
If you're keen to learn about how phased implementation also segments expenses, here's a breakdown of the average estimates of ROI based on the timeline:
For proof, Accuride, a U.S. auto parts supplier, saved over $1.5 million annually by implementing the Pando system in a phased approach. They even recovered startup costs in just 4 months, followed by exponential savings.
Minimizing cost leakages in logistics isn't just about saving money—it's about building smarter, sustainable operations. Achieving this requires the right practices, protocols, and tools working seamlessly together.
With the ten freight audit and payment practices we've covered, you're setting the stage for financial transparency, logistics efficiency, and long-term profitability. All that's left is one comprehensive solution to help integrate these practices.
That's where supply chain AI expert Pando comes in.
It's a great partner for freight procurement, auditing, and even automated payment. Pando's unified platform also helps automate processes, uncover hidden savings, and simplify logistics management.
If you're looking to fine-tune how you handle logistics costs, it's time to try Pando.
Book a demo today!