Why Do I Need a Freight Bill Audit?
Authored by SMC³ on April 29, 2021
What is a freight bill audit, and why do I need one? In order to answer this question, let’s start by contextualizing the problem. According to a recent report, incorrect freight billing affects somewhere between 5-6 percent of all freight invoices. These errors can stem from a variety of different sources, but three main errors make up the vast majority of all invoicing mistakes:
- Human Error: LTL pricing programs can be complex with multiple discounts, so every point of manual data entry or communication that lacks automation is a potential entry point for errors. This includes the loading of any new or revised pricing agreements in both the carrier and shipper systems, transcribing information to and from the bill of lading, or inspection of the shipment while in the carrier’s network.
- Accessorial Charges: These bill charging errors occur when a carrier must perform add-on services such as inside delivery, residential pickup, etc. during the shipping process. These services are often manually marked in the field and added to the invoice. It is wise to ensure the service was performed prior to paying.
- Detention: Detention charges are penalties shippers must pay for delaying carrier pickup. Detention invoice rate errors occur when the detention charge comes in at the wrong hourly detention rate or for the wrong amount of detention time.
Because billing errors generally go unnoticed, it’s virtually impossible to know how much money these errors could be costing your business each year. However, freight bill audit data can begin to give you a better idea. One recent study suggests that adopting a freight auditing process to identify and remedy many of these errors can help businesses recover up to 5 percent of their freight costs. Without a proper audit process in place, these costly errors and overpays equate to unrealized revenue your company is literally giving away—for free.
So how does a freight bill audit help catch the mistakes internal teams can’t?
Most freight audit services are executed by a third-party provider. As part of the bill review process, the chosen provider deploys automated software that combs through each freight bill to closely examine and verify it for 100 percent accuracy. When errors are found, remediation mechanisms are activated that enable both parties to rebill the LTL freight charges quickly and accurately.
Firms that audit LTL invoices must compare the rate on the invoice with the details of the pricing agreement between the shipper and the carrier. It is fairly easy to compare the itemized accessorial charges, but how do you efficiently compare the correct application of base rates, discounts, FAKs (Freight-All-Kinds), and minimum charges across hundreds or thousands of bills? One answer is SMC³’s BatchMark XL.
BatchMark® XL provides access to the industry’s most comprehensive library of more than 4,000 carrier-specific tariffs, 3rd party base rates and CzarLite®—to ensure accurate freight billing across every carrier agreement. Upload the shipment and pricing program details and BatchMark goes to work, quickly rating thousands of bills per minute.
In addition to uncovering potential freight bill invoice errors, BatchMark XL can assist with price negotiation and planning, enabling users to:
- Assess the impact of a carrier price increase or general rate increase on your business
- Illustrate the impact of changing from carrier base rates to a neutral base like CzarLite
- Calculate the impact of a new or revised FAK program
- Support bid analytics – compare multiple carrier price offers and transit standards
- Derive discount adjustments required to maintain a revenue neutral price program
For a closer look at our BatchMark XL freight bill analysis tool and to request additional information, visit our product page.