How To Master Your Freight Audit & Invoicing

Freight auditing and invoicing is an essential part of the logistics process that helps to ensure that transportation costs are accurately billed and processed and that your clients are getting the best value for their shipping dollars. 

While freight auditing and invoicing is a common practice for shippers, freight brokers, and third-party logistics providers (3PLs), many still use an outdated approach to this process and as a result are limiting their corporate growth.  

It is an unfortunate reality, but freight invoice errors are common and can lead to financial losses for the 3PLs and freight brokers and goodwill with your customers. Each of these errors poses risks to your business and can become an obstacle to growth. Some of the most common we see are: 

Payment Disputes  

When there are errors in freight invoices, it leads to payment disputes with your customers. This often results in delays in payment, reduced cash flow, and additional administrative costs. According to a survey conducted by the National Institute of Standards and Technology (NIST) in 2020, payment disputes can cost a logistics provider up to 25% of the invoice amount. For any business that manages a large volume of shipments, the impact of these disputes will be felt quickly. 

Administrative Costs 

Resolving payment disputes and correcting errors requires time and resources which lead to increased administrative costs. According to a report by Supply Chain Dive, logistics providers spend an average of $11 to $30 per invoice to resolve payment disputes and correct errors, leading to a loss in profit. 

Loss of Reputation and Customer Dissatisfaction 

Freight invoice errors can damage the reputation of a logistics provider. Customers expect accurate and timely invoices, and continual errors lead to a loss of trust and confidence in the provider. Given the high value placed on customer experience, these consistent errors can result in the loss of customers and damage to the provider’s reputation in the industry. 

Shippers, freight brokers, and 3PLs can sidestep these risks by having an effective and automated freight audit and invoicing process. The good news is that this can be accomplished in a number of weeks and like other technology implementations, it does not have to cause a major disruption in your business operations. Some of the benefits we have seen our customers realize by automating their freight audit and invoicing process include the following:  

Cost Savings 

By automating the freight audit and invoicing process, organizations will realize significant cost savings. In fact, a study conducted by the National Shippers Strategic Transportation Council found that companies can save up to 5% of their total transportation spend through effective freight auditing and invoicing (source: Inbound Logistics). These savings are most commonly achieved through identifying and correcting billing errors and avoiding duplicate charges and overcharges.  

Lower Days-Sales Outstanding 

Discrepancies and invoicing errors only increase your day’s sales outstanding (DSO) which impacts your cash flow and your profitability. After a review of our customers, we have found that by automating their freight audit and invoicing process, customers lower their DSO by an average of three days. This translates to more cash in the business and the ability to be more agile and spend on growth.  

Improved Efficiency  

Time and again we hear of brokers and 3PLs who believe that in order to scale their operations, they have to hire more people. However, automation enables organizations to grow without incurring the cost of additional overhead. In many cases, current personnel can be reassigned to other parts of the business, because automation is doing the heavy lifting.  

On average, our customers realize a 50% increase in their workforce efficiency due to automating their freight audit and invoicing process.  

The complexity that comes with running a business will never go away and in many instances will only increase as your business grows. However, 3PLs, freight brokers, and shippers can all realize incredible benefits by investing in the right technology that will automate your freight invoicing and auditing process and in doing so improve their business. While technology alone is not a silver bullet, when used to automate a defined process, the value creation and cost savings will be a boost for your bottom line.