Simplifying the Freight Audit Process: Auditing & Payment Guide

Freight audit and payment is a process companies use to monitor and manage their transportation costs. This process includes reviewing freight invoices to track costs, verify their accuracy, and pay carriers according to your contracts.

If you’re dealing with freight shipments, you’re familiar with the freight audit and freight payment processes. As freight shipping gets increasingly complex, auditing does, too.

Traditional audits increase the likelihood of costly errors, create bottlenecks that slow logistics down, and prevent your supply chain from achieving maximum efficiency. However, when done right, with the latest best practices and the right software, the audit and payment process can do the opposite: cut costs and improve efficiency.

This guide will explain the freight audit and payment process and show you the crucial steps to take to get up to speed. 

By the end, you’ll know how to efficiently check freight invoices and make accurate payments, which will help you avoid overpayments and streamline your supply chain.

What Is A Freight Audit?

Freight audits ensure your freight invoices are accurate to help save you money. These audits are essential because invoices are complex, it’s easy to make mistakes, and the risk of missing errors can significantly impact your shipping costs. 

Effective auditing ensures you only pay the amount you owe by reviewing every field for billing errors and other mistakes that cut into your bottom line.

Freight auditing is essential for all businesses, especially high-volume shippers, where cost savings of 15% or more mean saving thousands or even millions in freight spend.

What Does A Freight Audit Look For?

The primary purpose of the freight audit process is to identify billing errors and discrepancies that force you to overspend on shipping costs. By identifying these overcharges, you can work towards recovering credits or refunds for them with your carriers.

Freight audits look for:

• Accurate Rates: Ensuring the shipping rates you’re charged reflect the rate outlined in your carrier contract.
• Weight and Dimension Accuracy: Verifying correct measurements to prevent overcharges for large or heavy shipments.
• Accessorial Charges: Verifying pricing and whether additional services like lift gate fees were necessary.
• Duplicate Billing: Ensuring you haven’t paid already paid the freight bill.
• Service Level Provided: Checking that appropriate delivery timelines were followed and tracking was provided.

With freight audit services or an auditing tool, you can quickly check all of these details, and more, to increase your cost savings.

What Is Freight Audit and Payment?

Freight audit and payment (FAP) is the process of managing your transportation costs. It involves auditing incoming freight invoices, paying carriers according to your contract’s terms, and analyzing your spending to identify ways to lower shipping costs.

What Is The Freight Audit and Payment Process?

The FAP process spans from receiving the invoice to clearing payment with the carrier. 

Here’s a quick rundown of the process:

1. A company receives invoices from its freight partners (carriers, third parties, contractors, shippers, etc.) and uploads them into an online system.
2. Invoice data is grouped and sorted by factors like carrier, date, or company. 
3. Each invoice is closely scrutinized for accuracy. This means checking for:

• • Accessorial charges
  • Duplicate charges
  • Freight classification
  • Compliance with rules and regulations
  • Timeliness
  • Rate accuracy, possible discounts, reductions, or additions
  • Confirming accurate taxes and totals

4. The company handles exception management and dispute resolution to finalize invoices requiring changes. Repeat auditing to confirm changes are implemented.
5. Audited and finalized invoices are approved for payment
6. The company or payment provider pays the invoice using the agreed-upon method between the company and carriers. Methods may include:

• • Paper checks
  • ACH wire transfer
  • Credit/Debit Cards

7. The company logs transactions and costs in accounting systems 
8. Company and carriers track payment status through to successful receipt 

Each of these steps must be completed accurately to avoid costly delays or mistakes, which is where technology comes in.

How Does Technology Help Improve Freight Auditing and Payment?

Technology has significantly impacted logistics throughout all industries–and freight auditing is no exception. 

Freight audit software automates the audit process, reduces manual errors, and provides analytics tools for improved decision-making. 

Digitization of freight auditing offers several benefits, including:

• Automated data entry and document management, which significantly reduces your labor cost
• An expedited freight audit process with improved accuracy
• Greater supply chain efficiency
• Improved insight into optimizations

The combination of the right software and the right solution provider simplifies the freight audit and payment process in a variety of ways.

Real-Time Data Processing

The market moves fast–data needs to be available as soon as possible to keep up. Real-time enhances precision in examining and verifying freight bills, effectively reducing errors in freight billing and payments that cost you money.

By automating freight data collection and analysis, real-time audit data processing greatly improves time efficiency and lets you focus your time on other, more important tasks.

Integrating Systems for Seamless Operations

Integrating freight audit systems with enterprise resource planning (ERP) and transportation management system (TMS) tools is vital for complex and large-scale multi-national and multi-currency transactions. 

Customizable integrated systems support business compliance and adaptability. They’re crucial for sustaining relationships and quickly handling changes in logistics to streamline operations, increase scalability, and improve freight audit efficiency.

Ensuring Timely Freight Payments

Timely freight payment helps improve relationships with carriers, which can lead to benefits like prioritization and discounts. At the same time, late payments can jeopardize the shipper-carrier relationship, potentially resulting in elevated rates and lower capacities to protect against financial risk.

Automation in the freight audit process and payments offer immediate cost savings and encourage more on-time payments to carriers. You can even prioritize the highest-volume carrier relationships to ensure your operations are as efficient as possible.

Zero Down Case Study: An Example of Technology in Freight Audit and Payment

Starting with freight audit services today can help deliver results now and help you future-proof your operations.

For example, a Zero Down client who’s an industry leader in the US was having trouble with their previous auditor. Unclear communication and a lack of visibility led to late payments that damaged crucial carrier relationships– and they had no visibility into the issue.

Luckily, Zero Down was able to automate their general ledger (GL) coding to streamline operations and payments. They were then able to improve their carrier relationships and operations visibility to make everyone, including stakeholders, happy.

The Benefits of Outsourcing Freight Audit and Payment

Especially for larger companies, the sheer volume and complexity of freight bills highlight the importance of effective auditing. Without it, you risk overpayment due to error-prone manual processes, shipment issues from unclear terms, and missed refund opportunities from discrepancies and disputes. 

With your financial well-being and business success on the line, efficient auditing isn’t optional. You need a trusted, reliable, and effective freight and parcel audit solution like Zero Down to maximize your cost savings and your efficiency.

So, how can freight audit providers like Zero Down help optimize freight costs?

How Freight Bill Auditing Optimizes Your Shipping Operations

Billing errors and service failures are major problems in your logistics operations. Approximately 16% of invoices have an error, which is easy to miss manually and can cost you over time. Plus, poor service quality hurts customer satisfaction and your overall business performance.

Fortunately, the right freight auditing solution can help– and here’s how.

• Saving Time: Manually detecting and resolving errors takes time. Instead, your employees can spend their time improving other elements of your logistics process that provide you with a higher return on labor costs.
• Avoiding Duplicate and Incorrect Invoices: Large-scale often struggle with the volume of invoices coming in. The right solution detects costly duplicate invoices and incorrect freight bills that may lead to exceptions and create late payment charges, missed early payment discounts, or unnecessary fees.
• Streamlining Payments: Carriers want to get paid on time and hassle-free via their preferred payment providers. If you are not using efficient processes for freight payment, you risk straining that relationship and threatening good faith, trust, and negotiating power.
• Identifying Logistical Improvements: Optimizing efficiency is critical for lower costs and better service. Transportation management solutions can examine processes such as inventory management, packaging, shipping routes, delivery times, and others to find improvements.
• Analyzing Carrier Performance: Great carrier performance is critical to your service quality. You can use FAP solutions to monitor how freight carriers comply with your carrier contracts, including their on-time delivery rates, accessorial fee costs, and refund processes. If they’re falling short, you can use that as leverage for negotiations.

Overall, these benefits show how essential the right freight audit and payment solution is for optimizing your shipping costs and efficiency.

Choosing the Right Provider

The right freight audit provider should:

• Fit your needs
• Enhance your bottom line
• Drive growth through optimization
• Improve overall operations. 
• Offer continuous strategic suggestions for optimizing processes
• Use the most modern, cutting-edge technology.

The freight audit process has several pitfalls, which is why having the right partner and technology by your side can make all the difference.

Zero Down has the experience, knowledge, and technology to simplify and optimize freight auditing efficiency and payment processing. FreightOptics, their proprietary automated logistics platform, can help you perform both auditing and payment processing in a fraction of the time and with higher accuracy than manual processes.

FreightOptics will uncover more discrepancies, identify valuable trends and insight to shape your operations and provide you with the data you need to prevent and recover overpayment. It’s an all-in-one solution that helps with parcel audits, freight audits, payments, and much more.

Streamline Your Supply Chain with The Right Freight Audit and Payment Solution

Freight audit and payment services play a critical role in streamlining workflows, saving money, and improving logistics. With the growing integration of technology, the future holds promising advancements in freight auditing and payment processing efficiency. 

Don’t get left behind– choose the right freight audit provider and payment solution to help future-proof your operations and improve efficiency over traditional practices.