Freight Auditing: A Shipper's Guide to Invoice Accuracy

Regardless of how hard you try to avoid them – sometimes, mistakes happen. When it comes to logistics and the transportation of commodities, a mistake on billing can cost a shipper a tremendous amount of money. Due to this fact, most shippers and carriers utilize freight auditing programs to ensure billing consistency, reduce lost revenue, and maintain a system of checks and balances. In this blog post, we'll explore what freight auditing is, how it works, and why it's beneficial to shippers.

What is Freight Auditing?

The freight audit is a vital component of the supply chain operation. This system of checks and balances allows a shipper to review all shipping bills for errors. The audit is a multiple-step process that reviews several items including:

• Verifying the shipper and carrier information: Believe it or not, it's quite common for a shipping invoice to contain the wrong carrier. In most cases, this is due to human error – but if not caught, the invoice may be paid to the wrong company.

• Reviews shipment weights & freight charges: While most carriers operate ethically, sometimes inaccurate information on cargo weights and dimensions are noted on an invoice. The freight audit is designed to review the data from the point of origin and throughout the supply chain to verify that weights and other freight charges are accurate on the invoice.

• Inspect the mileage: It is also common for a type-error to note inaccurate mileage for transportation of goods. The freight audit verifies that mileage documented on the invoice matches other reports.

• Check for Bill of Lading, Fuel Surcharges, and other negotiated shipping discounts: Most shippers negotiate surcharges, accessorial charges, and discounts with most carriers. However, these rates are individual and unique for each carrier. The freight audit ensures that any rate upcharges or discounts match the carrier.

How is a Freight Audit Beneficial to a Shipper?

It's estimated that one out of four freight invoices has some type of mistake noted. Whether it's a clerical error or fraudulent data – mistakes on an invoice can cost a shipper a lot of money. Having a proven freight audit process included in your daily operations helps to catch mistakes and errors before it creates problems. There are several benefits to the shipper:

A freight audit allows all freight-related invoices and bills to be reviewed, verified for correct information and accuracy and adjusted prior to submitting. By finding mistakes before they are processed, the company will save money on shipping, ensure the correct parties are paid for their services, minimize future invoice-related mistakes by determining the source of the mistake, and more.
Shippers notice an immediate return on their investment – especially if they work with a proven freight audit service provider. The freight audit and pay program saves a company money by catching data errors and reducing labor costs.
Allows a company to focus resources elsewhere. When a shipper outsources their freight audit and payment services to an experienced company, they can allocate their employee bandwidth on business growth, customer service, and other vital areas of need.

How do you ensure your company is paying the right amount for shipments? Beyond the financial benefits and improved customer service opportunities, having an experienced 3PL handle your freight auditing and payment responsibilities enhances peace of mind. It also helps to keep carriers and others within the supply chain honest. When they know that a professional 3PL is operating on your behalf, they are less likely to make errors on invoicing – especially if those errors magically put more money in their pockets.

Final Thoughts

Trust and honesty are vital in the shipping and logistics industry. While there are several carriers and others within the supply chain who operate ethically and transparently, a shipper simply can't afford to trust them all. By activating a freight audit and pay program through a proven 3PL provider, you'll save money, reduce payroll, improve the bottom line, and allocate your resources to growing your business instead of trying to protect others from stealing from you.

FAQs

What is freight auditing in shipping?

Freight auditing is a review process that checks shipping invoices for errors before payment. It verifies the shipper and carrier information, shipment weights, freight charges, mileage, and negotiated terms such as fuel surcharges or discounts. The goal is to catch incorrect billing, reduce lost revenue, and make sure the right party is paid the right amount.

What does a freight audit check on an invoice?

A freight audit checks several key invoice details, including the correct carrier name, shipment weight and dimensions, mileage, bill of lading details, fuel surcharges, and any negotiated discounts or accessorial charges. It compares invoice data against shipment records to confirm the bill matches what actually moved through the supply chain.

Why is freight auditing important for shippers?

Freight auditing is important because invoice mistakes can be expensive and are common in transportation billing. The process helps shippers catch errors before payment, recover overcharges, pay the correct parties, and reduce future mistakes by identifying where the problem started. It also improves billing consistency and financial control.

How much money can freight auditing save a company?

A professional freight auditing process has been shown to recover 6% to 8% on average. The article also notes that outsourcing freight auditing and payment can reduce labor costs by as much as 10%. Actual savings depend on invoice volume, error rates, and how many billing issues are found and corrected.

How does outsourcing freight audit and payment help a shipper?

Outsourcing freight audit and payment helps a shipper save time and internal labor while improving billing accuracy. An experienced provider reviews invoices, corrects errors before payment, and frees employees to focus on growth, customer service, and other operational priorities. It also adds a layer of oversight that can discourage invoice mistakes.

How often are freight invoices wrong?

The article estimates that one out of four freight invoices contains some type of mistake. Those errors can be clerical or potentially fraudulent, and they may lead to overpayments, missed discounts, or incorrect carrier payments if they are not caught during the audit process.

What is the difference between freight auditing and freight audit and payment?

Freight auditing is the review and verification of shipping invoices, while freight audit and payment expands that process to include handling the payment workflow after the audit is complete. In practice, a freight audit and payment program gives shippers a structured way to check bills, correct errors, and manage invoice settlement through one process.