Freight audit best practices: Maximizing accuracy and efficiency in logistic operations

Struggling with freight auditing? Learn how to overcome common challenges and optimize your logistics costs. 

Freight auditing might sound like a tedious back-office task, but it's one of the most crucial activities for ensuring the smooth running and cost-efficiency of logistics operations. While juggling many other countless tasks, you are knee-deep in shipping invoices, attempting to make sense of the figures. Sound familiar? Did you know that billing errors can account for up to 10% of total freight spending, which is in favor of the carrier? This means that a company spending $10 million on freight could be losing up to $1 million annually just due to inaccuracies. 

However, the interesting part is that this process is a treasure of possible savings and ideas that might change your business practices. We are talking about actual money back in your pocket, saving your transportation budget by 2%-5%. Using freight audit best practices will help you achieve operational improvements and notable cost reductions. It's about optimizing your whole logistics operation, acquiring a better understanding of your supply chain, and guiding strategic decisions—not only about spotting mistakes. 

In this blog, we'll go over the challenges you might run against, offer some battle-tested advice to simplify your workflow, and highlight the noteworthy advantages of perfecting your freight audit.

What is freight auditing?

Freight auditing is closely reviewing freight invoices to guarantee their compliance and accuracy. In the logistics and shipping sectors, this procedure is vital since it enables companies to control expenses, increase billing accuracy, and fulfill contractual responsibilities. By spotting billing mistakes and disparities, a well-run freight audit can save businesses large sums of money.

Importance of freight audits

For numerous reasons, freight audits are absolutely necessary. First of all, by spotting and fixing invoicing mistakes, they offer large cost savings. According to a report, even for big companies, it takes almost three working days to rectify an errorful invoice. Second, freight audits enhance billing accuracy, ensuring that you only pay for the services received. Third, they improve operational efficiency by highlighting areas for auditing process improvements and ensuring compliance with carrier contracts and regulations.

Best practices for conducting freight audits

Audit analysis helps companies find reoccurring problems, which they can then apply focused efforts to stop the next billing mistakes. Let's take a look at some best practices for conducting freight audits for maximum benefit.

• Automate auditing process: As per reports, almost half of the invoices (49.7%) are received manually. When you engage in manual invoices, your accounts payable (AP) teams need to manually classify and enter data from PDFs or paper invoices in your systems. This raises the possibility of human error, such as incorrect number placement or misunderstood material. Additionally, freight audits need a lot of time and effort. Automation can significantly reduce the time required for freight audits, increase accuracy, and minimize human error. All you need is an ideal cutting-edge transportation management solution (TMS) to streamline the auditing process.
• Creating a consistent audit checklist: Standardizing the freight auditing process is essential for the best outcome. To ensure consistency, especially about complicated supplier chains, make a consistent audit checklist. Your checklist can call for checking contract terms, looking over surcharges, and guaranteeing correct weight and volume charges. Applying the same standards to every freight bill will help to lower the likelihood of overlooked mistakes.
• Establish clear guidelines and workflows: Defining clear auditing guidelines and workflows ensures consistency and efficiency. This helps your team follow established procedures and reduces the likelihood of errors. A structured approach to auditing can also improve communication and collaboration within your organization. Additionally, like every industry, the supply chain has its exceptions, such as billing discrepancies, incorrect weight charges, and damaged freight. If you have a clear and streamlined auditing process for handling these exceptions, you can save time and minimize them.  
• Conduct frequent audits: Frequent audits enable quick error detection and help to preserve accuracy. Depending on your cargo volume, scheduling monthly audits guarantees that disparities are found and corrected quickly. Significant cost reductions and enhanced operational efficiency can follow from this proactive strategy.
• Regularly review carrier contracts: Frequently reviewing your carrier contracts helps you guarantee compliance and identify anomalies between contracted prices and billed amounts. This can stop conflicts and overpayments and enable you to bargain better terms and costs with carriers.
• Incorporate data analytics: Use data analytics to find trends of disparities and offer a closer understanding of your shipping expenses. This will enhance your whole logistics plan and enable you to negotiate better pricing.
• Using key performance indicators (KPIs): Clearly defined KPIs let you track development and base your decisions on data. That's why monitoring KPIs, including audit turnaround time, cost savings, and error rates, will help you assess the success of your auditing program and identify areas that need work.
• Maintain comprehensive records: Maintaining thorough records of every freight invoice, audit, and correspondence with carriers is essential. Complete records also help to support contractual commitments and regulatory compliance. Such data help you resolve conflicts more effectively and provide a clear path for validation.
• Train staff on audit procedures: Crucially, you want to make sure your team is highly qualified in the most recent audit techniques and technologies. The more efficient they are, the less the possibility of mistakes. Frequent training courses help your staff to remain current with freight audit best practices and new technologies.
• Develop mutually beneficial audit resolution processes: Although there will always be differences in freight audits, how you address them will greatly affect your relationships with carriers. Both sides gain from the cooperative establishment of fair, effective conflict resolution procedures. For instance, having close cooperation with your carriers can help to establish clear escalation policies and timelines for resolving billing inconsistencies or any such problems to preserve good carrier relations.

In this regard, Pando's post-audit analysis also enables companies to explore the results more thoroughly and provide practical advice catered to their particular needs.

Overcoming common challenges in freight auditing

Freight auditing is daunting due to some common challenges such as invoice discrepancies and data management issues as they often hinder accuracy.

• Invoice discrepancies: Inconsistent formats and errors can make invoice validation difficult. Studies reveal that even with internal corrective initiatives, 25% of invoice mistakes pass through accounts payable systems unnoticed. For flawless certification, use automated technologies that interface straight with carrier systems. Automated invoice validation helps save accounts payable costs, accelerate processing, and lower mistakes.
• Data management problems: Data fragmentation restricts visibility, causes audit delays, and leads to oversight. Most difficulties in freight auditing come from fragmented data and ineffective processes. Use freight management systems like Pando to centralize your end-to-end freight-related data. By using centralized data administration, operations can be simplified, and accuracy enhancement is encouraged.
• Lack of visibility: Limited access to shipping details can hinder accuracy. The high volume of transactions and complex data sources in freight operations can lead to inefficiencies and errors. Collaborate with carriers to ensure transparent data sharing. Enhanced visibility into shipping details can improve accuracy and compliance. By overcoming these challenges, you can ensure precise and seamless freight audits, therefore saving 2% to 5% on transportation costs.
• Manual intervention and errors: Using manual procedures in freight auditing runs the risk of mistakes and inefficiency. Human intervention in data entry and analysis increases the risk of mistakes, such as incorrect billing, missed charges, and inaccurate financial reporting. Using automated solutions helps to greatly lower error risk and increase accuracy. These systems leverage advanced algorithms to cross-check invoices, detect discrepancies, and ensure accurate billing.
• Carrier disputes and delays: Operations may get disrupted by conflicts between carriers about payment delays and billing variances. Automated dispute management systems and open communication can help to rapidly maintain seamless operations and address problems. By fostering transparent and efficient communication, businesses can reduce the frequency and severity of carrier disputes, ensuring smoother operations.
• Regulatory compliance: Handling sensitive data requires robust security measures to prevent unauthorized access and breaches. Maintaining regulatory compliance can be achieved using frequent staff training and investing in robust compliance management systems.
• Data security and privacy: Managing private data calls for strong security policies to stop unwanted access and breaches. These unauthorized activities can compromise sensitive information and lead to significant financial losses. Regular security audits, multi-factor authentication, and advanced encryption help to keep confidence by protecting your data.

Addressing these obstacles effectively can significantly enhance your logistics operations and drive cost savings.

The way forward

Managing freight audits is a real headache, but it should not be like this. By tackling common challenges head-on and embracing smart improvements in freight auditing, you can unlock serious savings and efficiencies, gain control over your shipping spend, and use that data to make smarter decisions. Establishing freight audit best practices and investing in freight audit technology will help transform your logistics operations. Utilizing automated auditing solutions, real-time analytics, and enhanced data visibility, advanced tools like Pando allow your team to make informed decisions. 

Begin optimizing your freight audits today to reduce costs, enhance efficiency, and establish a competitive advantage in your logistics operations. 

Are you prepared to cease squandering money? Utilize intelligent freight audits today to save both time and money. Schedule a demo today!