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One out of every four freight bills contains an error that could affect your company’s bottom-line. In fact, here at Redwood Logistics, we catch numerous errors a day in our client’s invoices. These errors would often go unnoticed and uncorrected without a daily manual freight audit by the company and their staff.
Manual auditing and payment is time-consuming and often requires additional administrative staff time. For companies who lack these resources, they can save time and money by outsourcing Freight Audit and Pay through a Third Party Logistics (3PL) company.
In this article, we will explain exactly what freight audit and pay is and why it’s critical to making your supply chain successful.
A freight audit is a business process where the company’s freight bills are examined, adjusted and verified for accuracy.
The first step is to examine the company’s invoices for errors. An 8-point system is used to check shipper information, carrier information, mileage, shipment weights, Bill of Lading, tracking number, discounts, and price. The invoice will also be verified that it has not already been processed to ensure there are no
If errors are found on the shipper’s invoice, their chosen freight audit and payment company would reach out to the carrier to ensure that it is corrected and a new invoice is issued.
In short, a freight audit service ensures that your actual freight invoice matches what you were quoted at the time of shipment.
Freight pay is essentially an accounts payable service for your transportation invoices. To you, that might look like relying on your logistics or transportation manager to round up all of your various carrier invoices, and then have your accounting team tackle the task of processing each separate payment by a direct clearing house, or cutting individual checks.
The majority of variances found during a freight audit are related to shipper inaccuracies, detention, or accessorial.
As a shipper, you will see an immediate return on investment. Freight audit and pay saves you money in two direct ways. First, it allows you to catch those data errors discussed above. Secondly, it helps you eliminate unnecessary labor costs.
Auditing has an average recovery on errors of 6-8%. If you’re sending 100 shipments a week but 8 are performing cash deficit errors, an audit could drastically change things.
In addition to the error correction savings, freight auditing can also help your bottom line by cutting labor costs. The average cost of labor to verify, process and pay an internal freight invoice is $11. But outsourcing this activity is only approximately 5 to 10% of that internal cost.
Outsourcing your freight audit and pay responsibilities to a 3PL can relieve a lot of stress. Partnering with a 3PL gives you the peace of mind that you’re always paying the correct amount for your shipments.
Redwood Logistics has a top of the line, 8 -point auditing system that ensures you never pay a penny more than you should. Contact us today to discover what we can do for you.