What Is the Best Way to Perform Freight Audit?

If the cost of shipping is stretching your business’ Transportation Management System (TMS) budget to the limit, taking a renewed approach to auditing cargo invoices-a process that can be outsourced, performed manually, or performed with the help of TMS software-may be the answer. Regardless of which method you use, a freight audit has three primary functions:

Examining the accuracy of cargo invoices
Resolving any inaccuracies found
Verifying the resolution

What sounds like a simple process can be complex, especially when invoices are received for multiple services and from multiple cargo forwarders. Lacking the work force to check the accuracy of each invoice manually, some companies examine cargo invoices randomly-a scenario that can allow valuable cost cutting opportunities to slip through the cracks.

Small to midsize businesses that wish to examine each invoice often outsource the auditing function to a third party logistics (3PL) provider. Outsourcing to a 3PL provider can be more cost effective than hiring in-house staff to check invoices manually, but it can be less cost effective than using software to analyze invoices.

The Benefits of Logistics Software

The benefit of logistics software for invoice analysis is best understood when the software is compared to its natural competitor, the 3PL provider. Before the software was available commercially, outsourcing a freight audit to a 3PL provider was the sole alternative to performing it in-house. Shippers sent 3PL providers copies of cargo invoices and paid a fee to have them analyzed. Although this model is still practiced today, it is becoming less popular, because TMS software allows shippers to perform their own analysis and avoid paying a significant service fee to a 3PL provider.

Logistics software is available on a Software as a Service (SaaS) model and an in-house model, with the former being the most popular due to its flexibility and long-term cost effectiveness. Implementing the product on a SaaS model typically takes thirty to forty-five days. After the provider analyzes the needs of a shipper, it builds a system that meets the needs, and then puts the system online. In addition to facilitating basic auditing functions, the system can also include value added services such as rate analysis, rate negotiation, and invoice discrepancy recovery.

Conclusion

When they analyze cargo invoices, companies can save money by discovering and recovering unnecessary charges, but the amount of money they save also depends on the model of analysis they use: manual, outsourcing, or software based.

The manual model requires a staff of invoice analysts-a requirement that is difficult for small to midsize shippers to afford. Outsourcing can cost significantly less, although it still requires a significant service fee. Using TMS software to perform a freight audit is typically the most cost effective solution, as it allows shippers to analyze cargo invoices in-house without using the manual model. After training to use the program, users can take the place of a team of analysts.