Freight Invoice Auditing for The Modern Manufacturer
Published on Jan 22, 2019
Ask any manufacturer for a mythical Christmas present and they will likely ask for a time machine. Whether it’s to go back to change a previous mistake, or to simply slow down things to permit them to catch up, time management is usually at the heart of all manufacturing related issues. It’s due to this fact that many manufacturers large and small trust an experienced 3PL or third-party logistics company to handle their supply chain functions – especially the freight invoice auditing task.
Every day across the US, manufacturers, retailers and anyone who ships products to customers are billed incorrectly for services rendered. From inflated mileage charges to being billed incorrectly for fuel surcharges and more, mistakes on freight invoices cost companies thousands of dollars each year. However, proactive thinking manufacturers are beginning to see the value of entrusting this vital business operation to experts in logistics, who not only look after their best financial interest, but can make changes to their supply chain management and processes for improved efficiency, customer service, and bottom line profits.
In the next few paragraphs, we’ll outline a few of the reasons why today’s time-strapped manufacturers from independently owned to Fortune 500 giants trust 3PL’s to complete freight invoice auditing on their behalf.
Why is Freight Invoice Auditing Important for a Manufacturer?
You’ve probably heard of the expression “stay in your lane” in respect to management. This phrase is typically linked to taking on tasks that fall into your area of responsibility or comfort level. Those who operate or manage manufacturing businesses have multiple tasks to deal with including daily production schedules, supply management, people issues, payroll, insurance, billing and more. Due to these facts, several manufacturing companies simply don’t have time to review their freight invoices – or just assume everything is on the “up and up” with their vendors.
Guess what – shipping carriers know this reality too – and tend to take advantage of the opportunity to inflate their invoices without your knowledge. Now, we’re not saying that all carriers are manipulative, evil organizations, but some are not as ethical as others – or simply make more mistakes that tend to benefit themselves.
Experienced freight auditing companies are hired by manufacturers, retailers, and other shippers to help them review invoices for clerical or human errors. Auditing a freight invoice typically involves reviewing data entry on the specific carriers shipping terms, the services rendered, recipient information, proof of delivery, and more. This detailed task reviews every fine-detail, every charge, and documentation noted.
What are the Common Invoice Mistakes Found by 3PL’s?
Most of the time, freight invoice errors are simply human or clerical mistakes that are not done on purpose. However, since most manufacturers assume that their freight charges are non-controllable expenses, they simply pay them without digging into the details. Some of the most common mistakes found on freight invoices of manufacturing companies may include, but are not limited to the following:
Incorrect Negotiated Charges: On the average manufacturers spend more money on shipping than any other industry since everything they make requires raw material or needs to be sent to somebody for consumption or resale. The smart manufacturer will negotiate rates for shipments based on size, mileage, and the number of stops per truckload. These negotiated freight charges are all done on an individual basis. Sometimes a carrier will bill Company “A” at the negotiated rate of Company “B”. If the cost is higher for company “B” – company “A” will overpay. In the end, the loser is typically the manufacturer.
Incorrect Fuel Surcharges: Another item pre-negotiated on an annual basis is the fuel surcharge. The surcharge is a flat fee that carriers charge their customers. Like the negotiated shipping charges, each fuel surcharge is unique to the individual customer. And like the above example, quite often the incorrect agreement is notated on an invoice. A 3PL can discover these common issues and make corrections before payment is submitted.
Dimensions of Freight: This one is becoming increasingly common with manufacturers since multiple carriers are using dimension-based scanning equipment to measure freight. While several manufacturers are quite good at packing their products for shipment, sometimes it’s not very efficient – and extra charges can be incurred by the carrier.
Mileage and Missed-Deliveries: The miles traveled by a carrier is another area that is inaccurate for manufacturing freight invoices. It’s also common for missed delivery charges to be placed on the manufacturers invoice – even if it’s the recipient’s fault.
While each of these examples are generalizations, the truth is that each one has multiple possible error points that can be discovered by a professional 3PL. An experienced freight invoice auditing company will have the resources, experience, relationships, and a proven process for reviewing invoices, locating hidden errors, correcting them, and can in many cases submit the payment for you. 3PL’s are that magic time machine that can free you up to focus on other day-to-day manufacturing operations.