6 Essential Freight Audit and Payment Best Practices
Gaining control of your global transportation spend has become increasingly important as market volatility has increased and rates have soared. As financial stability became increasingly difficult to achieve, many shippers overlooked the benefits of implementing a freight audit and payment (FAP) solution. A technology-driven FAP provider is essential to your global supply chain operation, empowering visibility into your transportation spend to allow complete control.
Trax provides next-generation, tech-enabled freight audit and payment solutions for global enterprises powered by Transportation Spend Management (TSM). Want to learn more? Discover how you can take the journey from simple freight audit and payment to total transportation spend maturity.
What is Freight Audit and Payment?
In a freight audit and payment process, a company’s freight bills are inspected for errors, verified for accuracy, and either corrected for payment or paid if they are accurate. This ensures that you are paying carriers only what you were quoted in your transportation pricing agreements.
How Do Freight Audits Work?
Freight audit allows you to track essential components of your logistics operation - the status of all freight bills, trends in delays and errors, and other critical business intelligence and KPIs.
It is estimated that up to 25% of freight invoices contain an error. This could be an incorrect rate, double billing, or inaccurate delivery information. The addition of accessorial fees and surcharges, plus detention and demurrage charges incurred due to port congestion and staffing difficulties, can make it challenging to ensure your freight bills are accurate.
Trax’s freight audit services are tech-enabled, so the process is automated, lowering your freight costs, enabling more reliable freight payment services, and saving your transportation and finance organizations time and resources.
While a freight audit and payment solution is crucial, it is also important to implement the process correctly. The below freight audit and payment best practices will set your global enterprise up for success.
1. Create a Freight Audit Strategy
When implementing a freight auditing process, a clear strategy is critical from the start. Every enterprise should know exactly what its goals are with a new freight audit solution, and those goals should be clearly communicated to its freight auditing provider.
Once goals have been established, it is imperative to work with your freight audit provider to set up a strategy to accomplish those goals, whether that is to see a cost savings before a specific deadline, hit a certain percentage of on-time freight payments, to gather clean data for managing your total transportation spend, to track carbon emissions in your supply chain, or any combination of these outcomes.
Your freight audit and payment provider should be able to work alongside your transportation leaders to execute a plan that will bring your goals to fruition.
2. Upgrade to Electronic Freight Audit Processes
Manual freight audit and payment processes are inefficient, expensive, labor intensive, and generally lead to incomplete or incorrect data. Automating invoice receipts for auditing almost always shows immediate positive results and process improvements. A few benefits of pivoting to electronic invoices:
- Faster invoice receipt and payment
- Decreased risk of data entry mistakes
- More thorough freight bill audit (when compared to cherry-picking invoicing for auditing)
- Fewer freight bill exceptions
- More efficient freight payment systems
- More accurate cost allocation
- More complete data capture for full visibility into transportation costs and analytics, enabling cost savings
When implementing new electronic processes for freight audit and payment, you need to be prepared to commit for the long-term. The journey to total transportation spend management doesn’t happen overnight, but you should see an immediate cost savings when you start to onboard carriers. With more efficient and faster freight invoice payments, you will see more on-time carrier payments, an important factor in the current market, where carriers have more power and can choose which shippers to prioritize.
3. Standardize Data
Supply chain management relies on data for everything from managing vendors to forecasting revenue. Unfortunately, the sheer volume of available data coupled with disconnected systems makes analysis and reporting nearly impossible for logistics management teams and senior supply chain leadership. It is unfeasible to compare, contrast, and make informed, timely decisions.
Trax’s freight audit and payment software takes all your electronic freight invoices and ingests, cleanses, normalizes, and connects the data from your disparate systems, providing centralized business intelligence while catching errors in carrier invoices and decreasing shipping costs for your organization.
Data analytics is no longer relegated to the world of “what-ifs” and “nice to have, but who has time?” As digitization has taken hold in the supply chain, we now have unparalleled data sets at our fingertips. With mature freight audit practices, transportation leaders can tell a full story, unlocking powerful insights that lead to strategic business decisions.
4. Integrate, Integrate, Integrate
The next step in your journey from simple freight audit to total transportation spend management maturity is creating well-developed and integrated systems throughout your supply chain operations. Interoperability has become more crucial as digitization has become the norm. If all your systems are operating in silos, it is more difficult to minimize disruptions, forecast future issues, and ensure your data is working as efficiently as possible for you. Interoperability provides increased visibility, allowing for more collaboration and better route planning, which leads to lower carbon emissions and higher profit margins.
Bottom line, you can’t afford to stick to manual, siloed supply chain practices. A freight audit and payment solution is critical for an integrated supply chain.
5. Enhance Connectivity
To build on the foundation you’ve laid with integrated supply chain systems, it is important to consider the benefits of enhanced connectivity. A connected supply chain relies on the adoption of digital technologies like the Internet of Things (IoT).
IoT sensors allow for real-time, end-to-end visibility across your supply chain, useful in many ways:
- Aggregating data from shipments via any transportation mode, providing new track and trace capabilities for shippers while allowing for a more robust freight audit
- Automating inventory replenishment and data about consumption trends
- Identifying trends in disruptions to eliminate bottlenecks or common issues, lowering freight costs
- Streamlining communications between shippers and carriers, ensuring a more agile supply chain with the ability to minimize disruptions and delays
6. Create Reporting Cycles and Learn from Data
Now that you’ve put these freight audit and payment best practices in place, it's time to learn from all the raw data you’re collecting. The raw data contains invaluable business intelligence - you should implement a freight audit and payment solution that can take the data and turn it into dashboards, reports, and decipherable, actionable intelligence that your transportation leaders can use to inform business decisions and enable cost savings. By creating automated reporting cycles with your freight audit data, whether it is weekly, monthly, quarterly, or all of the above, you reduce manual processes and increase your enterprise’s ability to predict trends, inconsistencies, and variations in the supply chain.
Freight Audit Services from Trax
These six freight audit and payment best practices are the first steps in executing a successful partnership with a freight audit and payment provider. At Trax, our team is made up of experts ready to set you on a journey to transportation spend management maturity, where we target every possible area of your global transportation network spend for optimization, efficiencies, and cost savings.
Let’s start the discussion today. We’ll meet you where you are to provide a roadmap from simple freight audit and payment to transportation spend management maturity that takes you from reactivity in your supply chain to confident leadership.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.