Are Freight Bill Audits Worth It?

The global supply chain has been incredibly volatile over the past five years. While freight rates have dropped slightly compared to 2022, the cost of moving goods remains high. With so much attention on the cost of doing business in the modern freight market, it begs the question – are freight bill audits beneficial?

The simple answer is a resounding – YES, but like most things within the supply chain, the freight audit process can be complex. This is especially true as your business scales, enters new markets, acquires new business, or expands your carrier network.

Freight audit and payment(FAP) tools are making the process easier. Still, many organizations remain behind the curve when it comes to moving to a more automated internal process. Those who have can simplify the complex challenges associated with freight billing and dramatically reduce transportation management costs.

Trax’s modern FAP processing system leverages AI and machine learning to streamline the billing audit process, catch errors, lower freight costs, and improve vendor relationships. With a digital process, visibility increases, and working with 3rd-party logistics providers (3PLs) becomes much more transparent and efficient.

Understanding Freight Bill Auditing

Before we jump into the nuts and bolts of how freight bill audit works, we need to lay some groundwork and understand precisely what freight bill auditing is and is not. In its simplest form, a freight bill audit is a verification process that inspects the accuracy of each invoice submitted by a freight partner, or 3PL.

Admittedly, this is a very high-level overview. As you dive deeper, it becomes very clear that an audit is substantially more complicated, as several factors impact the accuracy of an invoice. Items such as fluctuations in the market, clerical errors, incorrect product classifications, accessorial charges, duplicate invoices, and more must all be carefully inspected.

As your business grows and becomes more complex, so does the auditing process. Each vendor invoices according to its internal processes, each with its pay schedule, all outlined by an agreed-upon contract. Organizations with manual auditing processes must either invest in the additional workforce or implement technology to offset the added workload to meet payment deadlines.

Those who opt for a larger workforce might see gains, but the team must scale alongside your business. At best, they can meet vendor expectations, but it may mean that not every invoice is inspected for accuracy, leading to overpayment and chargebacks.

The Process of Completing Freight Bill Auditing

Whether you are using human capital or are leveraging technology to conduct your freight bill audits, the process is the same. The approaches differ in how long it takes to interpret the data and provide actionable insights accurately.

Organization

The first step in the audit process is to gather comprehensive supply chain data. That may seem easy enough, but remember that with a manual audit process, this means waiting on third-party data supplied by each 3PL or vendor. As we have already covered, time is critical because payment is expected in a prenegotiated timeframe.

To add to the challenge, data received from each vendor may be incomplete. This leads to information gaps that make evaluating carrier performance, transportation modes, and service level commitments difficult.

With a digital FAP process, there is a single source of truth. This makes it much easier to aggregate data and evaluate the accuracy of freight bills in real-time. FAP systems also give you the flexibility to scale up or down as the market dictates without the additional burden of hiring and overhead.

Review

Once data has been collected, the process kicks into high gear, and each freight invoice is put under the microscope – or at least it should be. Putting eyes on every line of every invoice is as tedious as it sounds, but it is essential to the audit process.

Manual reviews are notorious for consuming time and resources. Even then, they aren’t bulletproof. Human error is just as likely in the review process as in the invoicing process. Line items can quickly be overlooked and missed, especially when an auditor looks at a never-ending stream of freight invoices.

Automating the process with AI shifts removes the potential for human error, significantly improving the accuracy of the review process. Contractual obligations, fluctuations, and more are clearly defined within the FAP system, creating a process where errors trigger real-time alerts. 

Auditing

The end goal of a freight billing audit is accuracy before payment. You probably can't eliminate the human component even with a FAP system in place. The technology centers on providing information on billing discrepancies in real-time; the information is much more manageable, even when errors occur.

Rather than an auditor tediously reviewing every line of the bill, they can focus on known errors and process each invoice in a much shorter time. This, in turn, makes it easier to catch issues before payment is made and maintain on-time payments as outlined in each contract. 

Efficiency in the Supply Chain

Mistakes will happen When you move millions of dollars worth of freight across the global supply chain. Invoicing errors, duplicate invoices, shifts in freight rates, and more are common culprits, making it essential to have tools to minimize errors and reduce costs.

FAP tools are an added layer of protection, creating additional controls that make scaling within the supply chain much more manageable. As your organization explores different verticals and new markets or acquires new businesses, visibility, and efficiency should be focal points.

Freight Bill Audits With Trax’s FAP Technology

The audit process is essential whether you are working in a single market with a small handful of vendors or working across the breadth of the global supply chain. As your business grows, complexity follows. Having the correct freight audit tools saves you time and money. The ability to quickly diagnose billing issues, make corrections, and issue accurate payments will improve your bottom line, help you evaluate carrier performance, and more.

At Trax, we aim to help global organizations simplify the complex challenges of working within the global supply chain. Our tools streamline the audit process, provide real-time insights, and help reduce transportation management costs, regardless of the size of your operation.

Connect with our team to learn more about leveraging AI in your freight bill auditing process.