Managing shipping costs can be a headache for businesses. Over time, mistakes can slip through the cracks. These errors can add up, leading to significant overpayments. This is where freight audit comes into play.

By auditing your shipping invoices, you can identify issues, prevent waste, and ultimately reduce costs. In this blog, we’ll explore the importance of freight audits and how you can implement them to gain control over your shipping expenses.

What is Freight Auditing?

Freight auditing is the process of reviewing shipping invoices to ensure they align with the agreed terms and conditions in your carrier contracts. It involves checking whether the charges are accurate and whether the services billed were actually provided.

The main goal is to avoid overcharges or billing mistakes, such as duplicate charges, incorrect fees, or wrong service classifications. These errors can be costly and often go unnoticed in the routine flow of shipments.

Freight audits can also help identify inefficiencies, such as paying for services you didn’t use, or shipping methods that don’t align with your actual needs. By conducting regular audits, you ensure that you only pay for what was agreed upon, bringing more transparency to your shipping costs and boosting overall financial control.

In addition to identifying cost-saving opportunities, audits provide businesses with better leverage during contract negotiations with carriers, ensuring terms and rates are updated based on real usage. Regular audits also provide a clear record of discrepancies, which can be useful in addressing disputes with carriers and preventing future issues.

Advantages of Regular Audit of Freight Invoices

Regular freight audits offer several key benefits for businesses looking to optimize shipping costs and improve efficiency. Here’s why auditing your freight invoices regularly is essential:

Identify Overcharges Early:
Regular audits help spot billing errors like duplicate charges, incorrect service fees, or inaccurate weight charges. Addressing these discrepancies early allows businesses to recover lost funds and avoid paying more than necessary.
Ensure Billing Accuracy:
Auditing ensures that the charges align with the agreed terms in your carrier contracts. You can verify that you’re only paying for the services you actually received, avoiding overpayments due to misapplied rates or services.
Increase Transparency in Shipping Costs:
Freight audits provide visibility into your shipping expenses. They give you a detailed breakdown of what you’re paying for, helping you understand cost drivers and identify unnecessary charges. This transparency allows for more informed decision-making and better financial control.
Leverage Data for Better Negotiations:
Audits provide solid data on your shipping costs and carrier performance. With this data, businesses can renegotiate contracts, secure better rates, and improve terms with carriers, driving long-term cost savings.
Spot Inefficiencies in Operations:
Regularly auditing freight invoices helps identify patterns and inefficiencies in your logistics processes. For example, you may discover that certain shipping methods are more expensive than alternatives, or that peak shipping times are being mismanaged. Identifying these trends helps optimize operations and reduce unnecessary expenses.
Improve Decision-Making:
By analyzing audit results over time, businesses can make more strategic decisions. For example, you can identify opportunities to consolidate shipments, choose different carriers, or renegotiate service contracts, all of which lead to more efficient and cost-effective operations.
Ensure Compliance with Carrier Agreements:
Auditing helps confirm that your carrier is complying with the terms of the contract, reducing the risk of penalties or legal issues. If discrepancies arise, audits provide documentation to support dispute resolution with carriers.

These advantages make regular freight audits an essential part of managing logistics costs, increasing operational efficiency, and maintaining control over your supply chain expenses.

Step-by-Step Freight Auditing Process

Freight auditing might seem complicated, but breaking it down into simple steps can make the process much easier.

Step 1: Invoice Verification

Start by reviewing each invoice. Ensure that the charges match the rates and services outlined in your contract with the carrier. Check for discrepancies like wrong service types, incorrect weight, or unexpected fees.

Step 2: Identifying Discrepancies

During the audit, look for duplicate charges or billing errors. Freight invoices can sometimes include charges for services you didn’t receive. If you spot any issues, make a note to follow up with the carrier.

Step 3: Resolving Issues

Once you’ve identified discrepancies, contact the carrier to resolve them. Often, this will involve negotiations to adjust the charges or correct errors. Having a clear and organized record of the discrepancies will make this process smoother.

Step 4: Final Payment Processing

After addressing the discrepancies, proceed with payment. Ensure that you are only paying for services provided, and maintain a clear audit trail for future reference.

How Technology is Revolutionizing Freight Auditing

In the past, freight audits were manual, time-consuming, and prone to human error. Today, technology has revolutionized the process. With automated freight audit software, businesses can quickly identify discrepancies and reduce administrative burdens.

These tools integrate with your existing TMS (Transportation Management System) and ERP (Enterprise Resource Planning), enabling seamless data flow. Automation speeds up the process and improves accuracy by catching issues that might be missed manually. Additionally, AI-powered solutions can analyze trends and offer insights into areas where savings can be made.

Incorporating technology not only saves time but also improves decision-making by providing real-time data and analytics.

Outsourcing Freight Audits: Is It Right for You?

Outsourcing freight audits can be a game-changer for companies with complex logistics or limited resources. Specialized audit providers bring expertise and use advanced technology to ensure accuracy and efficiency.

If your business is struggling with the time and resources required for an in-house audit, outsourcing may be a viable option. Outsourcing allows you to focus on core activities while experts handle the audits. Additionally, outsourced services can scale during busy periods, providing flexibility when needed most.

However, outsourcing comes with costs, and you may lose some control over the audit process. It’s crucial to choose a trusted provider who aligns with your business needs.

Pre-Audit Preparation: Setting the Stage for Successful Freight Auditing

Before you dive into the audit process, a bit of preparation goes a long way. Proper planning ensures the audit is efficient and effective.

1. Define Your Goals

Set clear objectives for the audit. Are you looking to reduce costs, improve accuracy, or ensure compliance with contracts? Knowing your goals helps you stay focused throughout the process.

2. Gather Documentation

Ensure you have all the necessary documents on hand. This includes carrier contracts, invoices, payment records, and service agreements. Having everything in one place makes the auditing process much smoother.

3. Set a Timeline

Create a timeline for the audit process. Establish deadlines for each step, from gathering documentation to resolving discrepancies. This keeps the process organized and on track.

4. Prepare Your Team

Make sure the right people are involved in the audit process. Communication between departments, such as accounting and logistics, is key. Clear roles and responsibilities help the audit proceed efficiently.

Common Challenges in Freight Auditing (and How to Overcome Them)

While freight auditing is essential, it doesn’t come without challenges. Let’s take a look at some common issues and how to tackle them.

1. Complex Invoices

Freight invoices are often complex and full of jargon. Standardizing invoices can help reduce confusion. Using technology like automated audit tools can help streamline this process.

2. Rate Changes

Shipping rates can change frequently. Keeping up with these changes is crucial for accurate auditing. Regularly updating your rate agreements and contracts will ensure that your audit is based on the most current information.

3. Data Integration

Integrating data from various systems can be difficult. Data consistency across your TMS, ERP, and carrier systems is essential for an accurate audit. Using automated solutions that link these systems will ensure smoother data flow.

Best Practices for Freight Auditing

To make freight auditing more effective, follow these best practices:

1. Standardize Your Process

Establish a uniform auditing process. This helps ensure that every invoice is reviewed the same way, reducing the risk of missed errors.

2. Communicate with Carriers

Keep open lines of communication with your carriers. Discuss discrepancies as they arise and work together to resolve them quickly.

3. Use Technology

Leverage software tools to automate the auditing process. Technology can help reduce errors, save time, and provide valuable insights into your shipping costs.

4. Regularly Review

Freight auditing should be an ongoing process, not a one-time event. Make it part of your regular business operations to stay on top of any issues that arise.

How to Start Your Freight Auditing Process Today

Starting a freight audit doesn’t need to be complicated. Here’s how to get started:

1. Review Your Contracts

Start by reviewing your carrier contracts. Ensure that you understand the terms, rates, and services agreed upon. This will form the basis of your audit.

2. Gather Your Data

Collect all relevant documents, such as invoices and payment records. Make sure the data is accurate and up-to-date.

3. Perform an Initial Audit

Begin by manually checking a few invoices to get a feel for the process. Look for obvious discrepancies, such as duplicate charges or incorrect rates.

4. Implement Automated Tools

If the process seems too time-consuming, consider adopting automated freight auditing software. This will speed up the process and reduce human error.

5. Keep it Regular

Make auditing a regular practice. Set aside time each month or quarter to review invoices, ensuring that you’re always aware of your shipping costs.

Case Study: Motul Leverages GoComet to Achieve Multi-Fold Reduction in Overall Freight Spend

Motul, a leading manufacturer of motor oil for automobiles and motorcycles, faced significant challenges in managing its global logistics. Prior to adopting GoComet’s GoProcure platform, Motul relied on traditional, manual methods like spreadsheets, email chains, and phone calls to handle its import and export logistics across four countries.

These outdated methods led to inefficiencies, errors, and high operational costs, especially in areas such as freight negotiation, document management, and payment reconciliation. This manual approach consumed valuable resources and limited Motul’s ability to scale and optimize their logistics operations.

Challenges

Manual Processes: Motul’s supply chain team spent extensive time and effort on manual tasks, such as managing spreadsheets, coordinating through emails, and making phone calls to negotiate rates.
Inefficient Freight Procurement: Freight negotiations were slow and fragmented, which led to missed opportunities for better pricing and contract terms.
High Operational Costs: The manual reconciliation of invoices often resulted in overcharges, which were either unnoticed or paid due to the sheer volume of invoices.
Lack of Data Visibility: With fragmented data and no centralized system, it was difficult for Motul to gain clear insights into its freight costs and supply chain performance.

Solution

Motul turned to GoComet’s GoProcure platform to digitize and streamline its freight procurement and invoice reconciliation processes. The solution automated key tasks, providing the company with much-needed visibility and efficiency.

Automated Freight Procurement and Negotiations: GoProcure allowed Motul to automate its freight procurement process, including spot and contract negotiations, leading to faster tender closures and more competitive pricing. The platform’s automated negotiation process expanded their vendor pool by 70%, making it easier to engage multiple carriers and secure better rates.
Digitized Contracts: By digitizing rate contracts, Motul could seamlessly integrate its logistics service providers into a digital supply chain. This eliminated manual processes and enabled more agile, responsive vendor relationships.
Invoice Reconciliation with GoInvoice: GoComet’s GoInvoice automatically reconciled overcharged and duplicate invoices, reducing the need for manual verification. By flagging discrepancies, Motul saved 1,008 man-hours per country per month and reduced its freight spend by an additional 3.5%.

Impact

Motul’s partnership with GoComet delivered impressive results. By leveraging GoProcure and GoInvoice, the company achieved:

Nearly 11% reduction in overall freight spend: Through automated negotiations and streamlined procurement, Motul realized significant savings.
6.7% annual savings from freight procurement: The automated negotiation process allowed Motul to close tenders faster and with better pricing, saving substantial costs each year.
Efficiency gains: Automation saved Motul 1,008 man-hours per month per country, which is approximately 15 days of work, allowing employees to focus on higher-value tasks.
Reduced overcharges: GoInvoice’s automated reconciliation flagged overcharges and duplicate invoices, ensuring that Motul paid only what was due.

Key Takeaways

Automation Drives Cost Savings: Automating freight procurement and invoice reconciliation can lead to substantial cost savings by improving efficiency and eliminating errors.
Visibility is Crucial: Centralizing data and digitizing contracts enables better decision-making, more competitive negotiations, and improved relationships with logistics providers.
Improved Efficiency: Automation saves valuable time. Motul saved over 1,000 man-hours per month through automated systems, allowing its team to focus on strategic initiatives.
Reduced Overcharges: Automated invoice reconciliation helps catch overcharges and duplicate charges that often go unnoticed, leading to more accurate payments and greater cost control.

By leveraging GoComet, Motul was able to streamline its supply chain, improve visibility, and reduce costs, demonstrating the power of technology in transforming logistics operations.

Read the complete case study here!

Conclusion

A well-executed freight audit is one of the best ways to regain control over your shipping costs. By regularly auditing invoices, using technology, and addressing discrepancies promptly, businesses can reduce costs and improve efficiency. Start today, and see the benefits of greater visibility and control over your logistics expenses.

FAQs

1. How often should I audit my freight invoices?

It’s a good idea to perform freight audits regularly, whether monthly, quarterly, or after significant shipments. Regular checks help catch errors early.

2. Can I do a freight audit manually?

Yes, but it can be time-consuming and error-prone. Automated freight audit software can speed up the process and reduce mistakes.

3. What should I look for during a freight audit?

Look for discrepancies like duplicate charges, incorrect rates, or additional fees that weren’t part of the agreement.

4. How can outsourcing freight audits help my business?

Outsourcing provides access to expertise, advanced tools, and scalability. It can be especially beneficial for businesses with complex logistics.

5. What are the benefits of using freight audit software?

Freight audit software automates the process, improves accuracy, saves time, and provides deeper insights into your shipping costs.