Most Common Mistakes Made on Freight Invoices
The bottom-line objective of any business is making money. And the key to making more money is simple and deceptively hard; find a way to reduce overhead expenses.
In the retail world, certain expenses can be modified to an extent. The cost of goods, manufacturing and payroll expenses are all good examples of this. However, the one thing that really seems to fly under the radar is hidden charges on freight invoices. And since these mistakes go unseen more often than not, they have a very good chance of drastically adding undue expenses little by little.
Every day, shippers receive freight invoices that are sometimes not entirely accurate. In some cases, these inflated costs are due to basic clerical errors, inaccurate freight surcharge or shipping rates, or intentional manipulation. The main problem retailers have is understanding where the problem exists, what is legitimate, and what might be an example of an error or fraud.
To combat this issue a bit, many shippers choose to work with experienced 3rd party logistics companies to handle their freight invoice auditing and payment solutions. A 3PL company has the experience, access to advanced technology, and solid relationships with multiple carriers. When combined, these things allow them to get to the bottom line of all freight invoice mistakes, correct these problems and save their clients thousands of dollars each year.
There are many ways retailers can benefit by hiring a 3PL to manage their freight invoicing operations.
Let’s discuss a few of those reasons in this blog post…
Breaking Down the Process of Auditing Freight Invoices
When you receive any bill in the mail, how do you examine it?
If you are like most people, you go directly to the final total to determine whether that number “seems right”.
Professional 3PL companies, on the other hand, breakdown every charge, every item and every document that has been notated on every carrier invoice before they review the total. This is the detail, precision and accuracy offered by proven 3rd party logistics companies.
Most mistakes on most freight invoices are human errors. Sometimes it’s just a simple keying error, while in other instances the freight invoice mistake is due to accessing the wrong customer data.
For example, if your company has negotiated a fuel surcharge of $2.60, but the invoice notes a surcharge of $3, it is quite possible that the carrier is using a different company negotiated rate. This happens frequently because most carriers utilize one template for each freight invoice. Then, these invoice templates are reused for the next customer. Well, sometimes between that shift from one invoice to the next, some data may be overlooked and left on the template that then turns into the next customer’s invoice.
The job of a third-party logistics company is to first determine whether the information on the invoice matches your negotiated rates. If a mistake is found, the 3PL will reach out directly to the carrier to resolve the problem quickly. While a physical inspection of each invoice is crucial, 3rd party logistics companies also use advanced technology solutions that help them to expedite the audit and find mistakes the human eye can easily miss. This permit the 3PL to discover errors that most in-house accounts receivable departments simply can’t find.
What Are the Most Popular Mistakes on Freight Invoices?
There are multiple errors that are often found on a carrier’s freight invoice. However, there are some that pop up more frequently than others. This is especially true on retail freight invoices.
Most of these issues seem rather minuscule. In regards to the act of actually doing them, yes, that may be true. But in the grand scheme of things, these minuscule mistakes can have severe repercussions.
Let’s take a quick peek at a few of the most common.
Wrong Negotiated Rates
The most common mistake on a retail freight invoice is the wrong negotiated rate. This is usually due to carriers using a template and forgetting to make the change of the rate per mile before submitting it to their customer, as we mentioned previously.
Changes in Freight Dimensions
It is also common for carriers to document the incorrect freight dimensions. However, this is not always a mistake. It’s actually more of a “guesstimation” once processed at a freight terminal.
One thing to always remember is that shipping estimates are just that – “an estimate of the final charge”. It does not mean that you will have to pay that, and yes, they generally round up. This is a fairly common practice, but you still need to keep your eye on it.
Because of the loose nature of estimates and because there is other paperwork needing to be completed, as well, sometimes the estimate makes its way into the total cost. This is usually just an oversight or laziness. Both of which affect you the same way; added expenses.
Sometimes the number of miles traveled to deliver a product is also entered erroneously. There are some carriers who are notorious for inflating or rounding up miles. And far too often, their retail customer will not take the time to verify this information.
Honestly, this is where having a solid TMS or FMS in place comes in massively useful!
Every retail manager understands the value of working with the right people. Whether it’s hiring customer-friendly cashiers or managers who are proactive, having the right people on your team often produces quality results. Likewise, it makes sense to work with an experienced 3PL to help manage your backend and maybe start auditing your freight invoices.
An experienced company like Redwood Logistics has been providing freight invoice payment solutions and auditing services for years. If you’d like to learn more about freight invoice auditing and payment solutions, contact us today!