Uncovering the hidden costs and benefits of getting freight audit and payment software in-house.
Uncovering the hidden costs and benefits of getting freight audit and payment software in-house.
Did you know that accessorial charges, like fees for liftgate services or inside delivery, are often overlooked on freight invoices and can lead to significant financial losses if not carefully audited?
A freight invoice includes several charges, including fuel surcharges, brokerage fees, and costs like detention, insurance, customs, and storage. With frequent freight rate fluctuations, complex tariffs, and differing billing practices across carriers, managing these invoices can be particularly difficult.
There are two ways to go about it: outsource or get an in-house solution. If you are outsourcing the process to a third party, you probably have to integrate 3rd party systems and be transparent about your logistics data, thereby, exposing your business to a plethora of risks.
However, with an in-house freight audit and payment solution, you maintain complete control over transportation expenses, data, and processes, ensuring that sensitive logistics information stays within your organization. 360-degree visibility allows you to tailor the audit process to meet your specific needs, whether it's adapting to complex tariffs, managing fuel surcharges, or handling varying brokerage fees across different carriers.
What is freight audit and payment?
Freight audit and payment is the process where you verify freight invoices for accuracy and check for several errors, such as duplicate charges or incorrect rates.
After these verifications, you have to make sure that all your carriers are paid on time. You also have to ensure that the invoices against contracts and shipping documents are reconciled, which is a complex task given the multitude of carriers, shipment types, and pricing structures involved.
Key components of freight auditing include:
- Invoice verification: Ensuring that charges align with agreed-upon rates.
- Dispute resolution: Addressing discrepancies between the billed and contracted amounts.
- Data analysis: Gathering and analyzing data to identify trends, reduce costs, and improve efficiency.
- Payment processing: Ensuring timely and accurate payments to carriers.
Signs it’s time to consider in-house freight audit and payment
Have you ever overpaid or sent out the wrong invoice, causing disruptions in your operations? If your processes are being hindered by issues with freight cost management, it could be a sign that your current freight audit and payment system isn't keeping up. These delays and inaccuracies can strain relationships with carriers, disrupt cash flow, and even lead to service interruptions.
So when do you decide to get an in-house FAP?
Here is a checklist to help you:
Billing errors
✅Frequent duplicate charges or overcharges in freight bills.
✅Regular discrepancies between billed rates and contracted rates.
✅Persistent issues with incorrect freight classifications.
Complex freight billing
✅Handling significant multimodal shipments with complex billing structures.
✅Managing custom contracts with various carriers, including variable costs.
✅Multiple carrier agreements with varying terms and conditions.
Visibility issues
✅Difficulty accessing or analyzing detailed freight spending data.
✅Challenges generating consistent and comprehensive freight cost reports.
✅Struggles with obtaining accurate performance metrics and KPIs.
Increased freight spending
✅Continuous rise in freight costs without clear reasons.
✅Significant unexplained variances in freight spend.
Manual processing challenges
✅Reliance on labor-intensive, manual freight bill auditing processes.
✅Time-consuming audits delay payments and strain resources.
✅Inability to scale audit processes with business growth.
Compliance and risk management
✅Challenges ensuring compliance with industry regulations and standards.
✅Inadequate documentation or record-keeping practices.
✅Concerns about data security and confidentiality of shipping and billing information.
Dispute management
✅Prolonged resolution of billing disputes with carriers.
✅Difficulty tracking and managing disputed charges.
Reporting and analytics
✅Limited ability to perform data analysis for trends and cost-saving opportunities.
✅Inability to generate actionable insights for decision-making.
Business complexity
✅Growth in operations is making manual processes harder to manage.
✅International shipping challenges complicate the audit process.
Vendor management
✅Dependence on unreliable third-party providers.
✅Frustration with lack of customization in third-party audit services.
Cash flow pressure
✅Frequent delays in payment processing affect carrier relationships.
✅Difficulty managing cash flow due to unpredictable freight costs.
Savings and ROI tracking
✅Unclear identification and tracking of cost savings from freight audits.
✅Challenges measuring ROI from current audit practices.
If you checked multiple boxes, it might be time to consider in-house freight audits and payment software to address these issues.
Advantages of in-house freight audit and payment
Managing your freight audit and payment in-house allows you to manage freight costs with instant data access for quick decisions. It’s a custom-fit solution that integrates with your business, keeping everyone aligned and boosting team efficiency by up to 20%.
Direct oversight and instant data access
You're in the driver's seat when you manage your freight audit process in-house. Imagine having the ability to see your data as it comes in—no delays, no middlemen. This level of control means you can make decisions in real time, helping you stay ahead of potential issues. According to a survey by McKinsey, companies that utilize real-time data can reduce costs by up to 15% simply by being more proactive in their decision-making.
Customized processes and systems
Let’s say you have a specific way of generating reports or need to integrate the system with your current ERP. Suppose your business operates in a niche market with particular reporting needs. In that case, an in-house system can be customized to provide exactly what you need without the limitations often imposed by outsourced solutions.
Seamless integration with business operations
In-house FAP systems aren’t just standalone tools; they can be woven into the fabric of your business operations. From procurement to finance, every department can tap into the same pool of accurate data, ensuring everyone is on the same page. This leads to smoother communication and better coordination across the board. A study by Gartner highlights that companies with well-integrated systems see a 20% improvement in operational efficiency, simply because their teams are working with synchronized, reliable information.
Is your company ready for an in-house FAP system?
Before jumping into the deep end with an in-house freight audit and payment (FAP) system, it's essential to take a step back and evaluate whether your company is truly ready for this transition. This decision requires careful consideration of your current processes, internal capabilities, and long-term business strategy.
1. Evaluate current processes
Start by analyzing your existing freight audit operations:
- Audit volume: Assess the volume of freight invoices you handle. High volumes may require more robust systems and resources to ensure efficiency.
- Error rates: Identify common errors in your current process and their impact on costs and efficiency. Understanding these pitfalls will help you determine whether in-house management can resolve them.
- Current costs: Calculate the costs associated with your current system, especially if you are outsourcing freight auditing. Don’t forget to account for any hidden costs or fees that may add up over time.
2. Assess internal capabilities
Once you’ve evaluated your current processes, it’s crucial to assess whether your team has the skills and resources to manage an in-house FAP system:
- Expertise: Ensure your team has the necessary expertise in freight auditing, including a strong understanding of carrier contracts, tariffs, and compliance.
- Resources: Evaluate if you have sufficient manpower to handle the audit process internally. Managing an in-house system can be resource-intensive and may require hiring additional staff.
- Training Needs: Identify any training requirements for your team to effectively use the new technology. Implementing an in-house FAP system can introduce complexities that require skilled handling.
3. Technology requirements
Having the right technology is critical to the success of your in-house FAP system:
- Software Solutions: Research and select a freight audit & payment technology that fits your business needs. Look for features like automation, data analytics, and integration capabilities that can help streamline your process.
- Integration: Ensure the new technology integrates seamlessly with your existing systems, such as your ERP or transportation management system (TMS). Smooth integration will reduce disruption and improve data flow across departments.
- Scalability: Choose a solution that can grow with your business. If your company is shipping large volumes now and expects further growth in the future, the system should be capable of scaling to meet increased demand.
4. Cost-benefit analysis
To make an informed decision, conduct a thorough cost-benefit analysis:
- Initial Investment: Calculate the upfront costs of purchasing and implementing the new technology, including hardware, software, and any required integrations.
- Ongoing Costs: Consider ongoing expenses such as maintenance, software updates, and the potential costs of managing the system internally.
- ROI: Estimate the return on investment by comparing the costs of in-house management with the expenses of outsourcing. An in-house system could save you money in the long run, but it's essential to weigh those potential savings against the initial and ongoing investments.
Aligning with your long-term business strategy
Finally, think about how this decision fits into your broader business strategy. Are you planning to expand your operations or enter new markets in the next few years? If so, having an in-house FAP system could give you the flexibility you need to support that growth. A survey by PwC found that companies with a clear alignment between their technology investments and business strategy were 60% more likely to achieve their long-term goals.
Making the move: Steps to transition from outsourced to in-house FAP
Switching from an outsourced Freight Audit and Payment (FAP) system to an in-house one is like planning a big home renovation—you need a solid plan, the right tools, and a team that knows what they’re doing. Let’s break down how you can make this transition as smooth as possible.
Planning and timeline: Your roadmap to success
To transition to an in-house system, you need to map out a detailed plan with specific milestones. Your timeline might include selecting the right technology, system testing, and going live in one quarter. A structured approach will keep transportation expenses on track and help everyone involved stay aligned. A study by PMI found that organizations with well-defined project timelines are 52% more likely to complete projects on time and within budget.
Technology selection and implementation: Finding the right fit
Choosing the right technology is more than crucial—it will be the foundation of the entire process. Whether you’re selecting brand-new FAP software or customizing your existing ERP system, the key is to ensure the technology aligns with your business goals.
Process customization and change management
Customize the new technology to fit your specific workflows, allowing for adjustments as your business grows. Clearly communicate the benefits and changes to all stakeholders, and offer continuous support to help your team adapt to the system.
Team building and training: Getting everyone on board
Your technology is only as good as the people who use it. That’s why building and training your team is just as important as choosing the right software. You might need to hire new staff with specialized skills or invest in training your current employees to manage the new system effectively.
Data management and performance metrics
Once your system is in place, you will need to manage data and monitor performance for long-term success. So, establish key performance indicators (KPIs) to track improvements in efficiency and cost savings. Regularly review and refine the process based on performance data for continuous improvement. Ensure the technology handles data accurately and provides real-time insights for quick decision-making, while also assessing its security features to protect sensitive information and maintain compliance with data protection standards.
Pilot testing and vendor support
Before fully implementing the system, ensure that it is ready for daily operations. Start with a pilot test using a small set of invoices to assess performance and make adjustments. Collect feedback from your team during this trial to refine the system. Double check with your provider about strong technical support and training for quick issue resolution, and regularly check for software updates to keep everything running smoothly.
Hybrid approaches: Mixing in-house and outsourced solutions
Sometimes, the best solution lies in a balanced approach. A hybrid method for managing your freight audit and payment (FAP) processes offers a blend of in-house control and the efficiency of outsourcing.
Partial in-house implementation: A balanced approach
One option is to handle the audit process internally while outsourcing payment processing. You will be able to maintain oversight of the accuracy and compliance of your freight invoices while payments are taken care of by experts. You can focus on auditing large volumes of invoices to catch discrepancies early while benefiting from a streamlined payment process managed externally.
Collaborative models with freight audit companies: Tailoring the partnership
Another hybrid approach involves close collaboration with an outsourced provider. You can share necessary data, processes, and insights with a freight audit company and create a customized solution that aligns perfectly with your operations. During peak times or seasonal shipping fluctuations, you can outsource a part of your operations and integrate in-house systems with the provider’s tools to meet the demands.
Overcome freight audit challenges with Pando's AI-powered platform
Pando’s freight audit and payment solution is the ideal in-house tool for simplifying and optimizing your freight management processes. With OCR-based invoice ingestion, anomaly detection, and automated dispute resolution, Pando streamlines freight audits while ensuring accuracy. Its integration with preset accessorial charges and ERP-ready systems accelerates value realization and drives significant shipping cost savings. The platform’s automated audit and reconciliation ensure 100% accuracy by matching contracted rates with shipment data and purchase orders.
Pando’s ability to deliver streamlined freight audit processes, superior accuracy, and substantial cost reductions positions businesses for strategic success.
Ready to unlock the full potential of your freight operations? Schedule a demo with Pando today and discover how our AI-powered solution can transform your business.
