Should You Outsource Your Freight Audit and Payment?
What Does Outsourcing Freight Audit and Payment Mean?
When you outsource FAP operations to a third party, you entrust the experts to work through burdensome, costly complications that accompany internal freight audits and payments, such as:
- Dealing with multiple carriers with differentiating procedures, costs, and details
- Tackling an insurmountable amount of FAP paperwork
- Devoting various, valuable internal resources to a task that will take a large chunk of their time
- Resolving mistakes, overcharges, and duplicate charges in a timely manner
Outsourcing FAP ensures that your company will have one point of contact rather than a multitude of carriers and/or providers. Plus, as your company grows and freight auditing becomes more complex, you won’t have to incur additional hiring, training, or even overtime costs.
Outsourcing streamlines your operations while cutting the internal paperwork and workload to a minimum. You can then refocus your internal resources and, most importantly, use seasoned experts to optimize your FAP savings along the way.
How Outsourcing Freight Audit & Payment Works
The process of outsourcing FAP usually looks something like this:
- Parcel & freight invoices of the last half-year are sent to the third-party freight auditor.
- Bills are verified and cross-checked with the pricing contracts/agreements for errors.
- If an overcharge or discrepancy appears, the auditor files a claim or moves to resolve. Pre-audited (prior to payment) invoices have potential discrepancies resolved prior to payment. Post-audited discrepancies have the third-party provider file a claim for repayment.
- Billing to shippers is aggregated, giving a clear overview of freight spend, while the allocation of costs to individual cost centers is set.
- A check is then provided to the company when the payment is made.
The Advantages of Outsourcing Your Freight Audit and Payment
Higher Level of Transparency
Growth Alongside Your Company
- HR—Outsourcing means you don’t need to hire specialized staff to perform FAP tasks. Saving costs on expert staff for FAP is not limited to salaries, but also recruitment, health insurance, training, and more. And when your institutional knowledge is housed and maintained by a third-party provider, you don’t have to worry about the effect of employee turnover on your in-house expertise.
- IT—Be it a rate management system, accounting system, or other, these costly IT systems require a hefty upfront investment, ongoing costs for maintenance and upgrades, and subscriptions. Outsourcing means you won’t have the building, maintenance, or upgrade costs to get a cutting-edge FAP system. A good FAP partner has the system and expertise in place already.
The Disadvantages of Outsourcing Your Freight Audit and Payment
Everything comes with pros and cons, but the deciding factor for outsourcing FAP is how those cons are managed and overcome. Here are some of the main issues to watch out for when outsourcing FAP, and the elements that can reduce those cons—and even turn them into pros in the long run.
Trusting a Third Party
Compliance with Company Rules & Regulations
Compliance with Global Laws
Tech or Product Vision
What to Look for in a Freight Audit and Payment Provider
Flexible master data management framework
Data management aids in present and future operations, providing a clear view of what’s currently going on and what’s to come. With a flexible master data management framework, which is easily integrable and customizable to your needs, you can establish global pricing rules that are visible to all and seamlessly incorporated into FAP.
Third-party freight audit and payment providers can integrate their data management framework with carriers and logistic service providers (LSPs), as well as crucial systems such as ERPs, SAPs, warehouse management systems, and others. The end result delivers a coherent, comprehensive way to view and analyze data.
Look for partners that understand the importance of data management and provide greater visibility into data. This delivers more precise auditing, higher compliance standards, and a more informed vision for the future.
Global managed service capabilities
Is Outsourcing Freight Audit and Payment Right for You?
To learn more about the Trax approach to freight audit services and its Total TSM™, contact us today.
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.