Auditing freight invoices is time-consuming. AI and ML-powered solutions can streamline the process, reduce gaps, and cut shipping costs.
Auditing freight invoices is time-consuming. AI and ML-powered solutions can streamline the process, reduce gaps, and cut shipping costs.
Following the several disruptions—political, economic, and natural disasters—it is high time that transportation and logistics teams adopt the philosophy of less is more. That is, they manage expenses anywhere they can, all the while improving the efficiency of their operations.
One significant opportunity for cost control and process improvement lies in the in-house optimization of auditing and payment of freight bills. When you have well-designed systems and processes in place, they do more than just ensure accurate audits and on-time payments—they give you the most accurate data, which facilitates detailed reporting and advanced analytics. A study by the Aberdeen Group suggests that companies that conduct freight audits can reduce their freight costs by up to 10% by identifying and correcting billing errors, negotiating better rates, and optimizing their shipping strategies.
Now, there are two ways to audit freight invoices: in-house and outsource.
- You can hire third-party logistics (3PL) auditors to handle invoice reviews, dispute resolution, and overpayment recovery. However, this reduces your control, introduces the risk of data breaches, and may lead to slower response times and less flexibility.
- The second and most effective method to optimize these processes is through in-house freight audits and payment software. Unlike outsourcing, which can introduce inefficiencies and reduce control, in-house software allows companies to manage their freight bills with precision and speed. This software provides real-time data, enhances accuracy, and helps maintain full visibility over financial operations, ensuring that your logistics processes are as efficient and cost-effective as possible.
Whether it is an in-house or outsource freight audit, freight bill verification is done to ensure you're billed correctly for the services provided. The invoices are cross-checked with the bill of lading and other shipment documents to confirm that the charges reflect the actual services rendered and that rates match your contract. It also helps catch any unauthorized or duplicate charges.
Best practices to make freight invoice audits hassle-free
Best practice 1: Implement automation and advanced technology
a. Benefits of automated auditing systems
If you are a large-scale manufacturer and retailer, manually auditing all your freight bills is inefficient and prone to errors, especially when you are managing thousands of shipments daily. Here is why you must automate your freight process:
- Reduce manual entry mistakes, speed up processing times, and improve cost accuracy.
- Automated systems can detect billing discrepancies like overcharges or duplicate invoices in real time.
- Expedite issue resolution to maintain your bottom line.
b. Key features to look for in auditing software:
- Seamless integration with your ERP and TMS for real-time data synchronization
- Scalability to handle large datasets efficiently in high-volume environments
- Automated discrepancy detection, detailed analytics dashboards, and robust reporting tools
- Customization options to match your business needs and freight terms
Best practice 2: Standardize your freight audit processes
a. Developing a consistent audit checklist
Create a standardized audit checklist to maintain consistency, especially when dealing with complex supply chains. Your checklist might include verifying contract terms, reviewing surcharges, and ensuring accurate weight and volume charges. You can reduce the chances of missed errors if you apply the same rigorous standards to every freight bill.
b. Creating clear workflows for exception handling
Like every industry, the supply chain has its own exceptions, such as billing discrepancies, incorrect weight charges, and damaged goods. If you have a clear and streamlined process for handling these exceptions, you can save time and minimize them. With a well-defined workflow and quick identification, you can resolve disputes much faster.
c. Establishing uniform data entry and practices
Home Depot, Procter & Gamble, Amazon, and many other large retailers apply strict coding protocols, which allow them to process freight data from multiple suppliers easily. You can also adopt a similar practice while working with large volumes of data. With such consistency in data entry and coding, you can reduce confusion and improve accuracy. This uniformity helps you generate clearer reports. identifying trends and conducting accurate audits.
Best practice 3: Prioritize data quality and management
a. Importance of clean, accurate data
Inaccurate or incomplete data can compromise your entire freight auditing process. Poor data management could lead to underpayment or overcharging your suppliers, which could affect your cash flow and relationship with them. Get a real-time data validation system that ensures every piece of freight data is accurate before auditing.
b. Strategies for maintaining data integrity
Maintaining data integrity involves regular checks and validations. You can implement automated data cleansing routines and set up real-time syncing between systems, ensuring accurate, up-to-date information is always available for audits.
c. Data analytics for insights and trend identification
A freight audit provides valuable insights, which, when analyzed, can help you spot recurring issues like carrier performance problems or inefficiencies in your shipping routes. Like Unilever, you can also use data analytics to track freight spend patterns and identify areas where they can renegotiate carrier contracts, leading to substantial cost savings.
Best Practice 4: Foster strong collaboration with carriers
a. Building stronger relationships with freight partners
Your relationship with your carrier vastly affects your operations. A strong partnership with your carriers ensures responsiveness when issues arise, such as billing discrepancies or delays. Regular communication and performance reviews help establish mutual trust and accountability.
b. Establishing clear communication channels
Miscommunication with carriers can lead to delays, disputes, and financial losses. Establishing clear communication channels—such as dedicated contact points or online platforms for freight bill queries—ensures smoother and faster resolutions. You can use a centralized communication platform for freight auditing, ensuring both internal teams and carriers can access relevant information, leading to quicker resolution times.
c. Developing mutually beneficial audit resolution processes
Discrepancies are inevitable in freight audits, but how you handle them can make a big difference in your relationships with carriers. Working together to establish fair, efficient dispute resolution processes benefits both parties. Close collaboration with your carriers to set up clear escalation procedures and timeframes for resolving billing discrepancies, ensuring issues are handled promptly while maintaining positive carrier relationships.
Best Practice 5: Invest in training and development for your audit team
a. Importance of knowledgeable staff
A well-trained audit team is better equipped to catch errors, navigate complex carrier contracts, and leverage technology for efficient audits. Their expertise enhances accuracy and speed, especially when working with automated systems.
b. Key areas for training focus
Focus on training in areas like contract analysis, exception management, and using data analytics for freight audits. This helps your team stay efficient and effective, even as operations scale.
c. Continuous education and staying updated on industry changes
Continuous education, whether through industry webinars, conferences, or certifications, keeps your team informed and agile. For instance, IBM encourages its audit staff to participate in industry-specific workshops, ensuring they remain at the forefront of new regulations, technologies, and practices.
Best Practice 6: Implement Performance Monitoring and Continuous Improvement
a. Setting KPIs for the audit process
Set up key metrics like audit accuracy, cost recovery, and dispute resolution time provide valuable insights into your audit performance. The KPIs can help you fine-tune your processes and achieve better results.
b. Conducting periodic reviews and assessments
Conduct quarterly or biannual assessments to measure performance against KPIs, spot trends, and implement changes where needed. Regularly assessing your audit processes gives you the data to make adjustments to stay efficient and ensure compliance with internal and external standards.
c. Implementing a continuous improvement cycle
Establish a continuous improvement cycle by incorporating feedback, adopting new technologies, and refining processes. Constant evaluation helps in improving your audit system; you ensure that your process remains efficient, cost-effective, and adaptable.
The importance of using freight audit software
Control freight spends
The biggest reason to opt for freight audit software is to get back control of the freight spends by catching billing errors and overcharges before they impact the bottom line. The software automates the auditing process, ensuring accuracy and efficiency, so you only pay for what you’ve shipped, ultimately leading to better cost control and financial transparency.
For example, let’s say you’ve agreed to a specific rate with a carrier, but the invoice comes back with an unexpected surcharge. Without auditing, this could easily slip through the cracks, costing you extra every time. According to a report from the American Trucking Association, billing errors can inflate freight costs by as much as 5-10% annually.
With freight audit software, you catch these mistakes early, ensuring your costs are accurate and under control. It’s a simple way to protect your cash flow and keep your logistics spend in check.
Moreover, auditing a huge volume of invoices manually is time-consuming and frankly quite tedious. Freight audit software like Pando helps streamline and optimize the invoice and audit process, significantly reducing the workload.
In-house or outsource: Risks and challenges
Why not completely outsource the process? It might seem like a hassle-free solution—someone else takes care of the paperwork, and you can focus on running your business. However outsourcing can lead to some significant risks and challenges. For instance, you might not have full visibility into how your data is being handled or where your money is going. There’s also the risk of vendor lock-in, where you’re stuck with a service that isn’t quite meeting your needs but is too difficult to switch out.
Then there's the issue of information security—handing over sensitive data to a third party can expose your business to risks like data breaches and cyberattacks. If their security isn't up to par, you could face financial losses, damaged reputations, and even regulatory penalties. And don’t forget about the lack of customization and adaptability. If your outsourcing partner can't flex with changing market conditions or regulatory requirements, you could end up with compliance issues and operational inefficiencies.
For example, a company that outsourced its FAP services and later discovered discrepancies in its billing that went unnoticed for months. They were overcharged by nearly 15% across several invoices—a mistake that cost them thousands before they caught it. If they had used in-house freight audit software, these errors would have been flagged immediately.
By taking control of the process in-house, you reduce these risks, gain full transparency, and can customize the audit process to fit your specific needs. Plus, it’s easier to scale as your business grows, which is a huge win for lean teams because it means they can handle more freight without needing to add a bunch of extra resources.
With freight audit software, companies can scale up their operations, manage more shipments, and process more invoices without compromising on accuracy or driving up labor costs.
AI and ML-backed predictive analysis
With AI and ML-backed freight audit software, you can predict errors in invoices or related processes. The software can analyze past data and spot patterns, forecasting potential billing mistakes or overcharges ahead of time, helping you avoid costly surprises. It can also, based on patterns from historical data, inform you about potential extra charges due to seasonal demands, changes in any law, or rises in fuel surcharges.
If you use multiple carriers, the software can check all past invoices and identify if any of them have been frequently charging higher rates than agreed upon. It can also predict that similar overcharges might happen in future invoices, allowing you to address the issue before it escalates.
Why the right tech vendor is pivotal for seamless freight invoice auditing?
Organizations must leverage a SaaS provider for seamless freight invoice auditing. However, choosing the right provider is key to success. Not falling for the marketing hype and evaluating a vendor based on domain expertise, clientele, and system capabilities can help companies ace freight auditing.
Pando has been leveraged by top brands like Nivea, Castrol, Accuride, and many more to optimize their freight and payment processes. Pando’s battle-tested Freight Audit and Payment System can:
- Automatically captures and ingests invoices from various sources, such as emails, electronic data interchange (EDI), or direct uploads.
- Employ multi-layered verification processes like contract and rate card matching, AI and ML algorithms, OCR technology, shipment data validation, and compliance checks for verifying, rechecking, and reviewing invoice data.
With these advanced technologies, you get smart ways to resolve any disputes. Because of data-backed analytics, you get a clear picture of your freight spend and make informed decisions.
You can see how partnering with Pando can lead to 100% visibility across freight and payments, streamline their logistics processes, and achieve a 7% reduction in overall freight spend.
Pando also helps you gain full control, scalability, and peace of mind, effortlessly managing an increasing volume of invoices without driving up costs or compromising data security.
Pando's platform ensures real-time visibility, seamless documentation, and accurate and efficient audit and payment processing, making freight management error-free.
Ready to streamline your freight processes? Book a demo with Pando.
