What is FAP in Freight?
When transportation management accounts for nearly 10% of costs incurred by shippers, it’s clear that auditing is necessary to operate a supply chain. However, manually sifting through the data available and deriving meaningful insights is time-consuming, leading to operational inefficiencies.
Adopting a structured freight audit and payment system (FAP) streamlines this process while reducing unnecessary detention and unexpected accessorial charges. Read on to learn more about FAP in freight.
At Trax, we provide freight and audit payment solutions for global businesses. Contact us today to learn how our software can support your company's journey toward maturity in transportation spend management.
What Does “FAP” Stand for in Supply Chain or Transportation?
Freight Audit and Payment (FAP) is a term that may refer to freight audits, freight payments, or entire freight auditing and payment systems.
During a freight audit, a company gathers all transportation invoices and compares them to established rate agreements to validate costs. This ensures that the charges on an invoice are accurate so that the shipper and carrier are both satisfied with the business transaction.
Freight payments typically refer to accounts payable services for transportation invoices, which can include information coming from third-party vendors and the processing and payment of invoices.
Freight Audit and Payment Systems
Combining the processes of invoice collection from freight invoice audits and physical payment to carriers, we arrive at FAP systems. FAP systems are designed to manage the multiple components of freight audits and payments more efficiently than an in-house team.
Related: Read 4 Common Mistakes Freight Audit Software Can Solve
Understanding the Freight Auditing Process
There are several ways to approach the freight audit process: manual, automated, and hybrid. Individuals complete the entire process without automation technology during a manual freight audit. However, a manual audit takes time and resources. In addition, manual audits are subject to human error.
Most companies have upgraded to include some tech-based automations for freight auditing. An automated freight auditing process involves electronically reviewing the payment process of carrier invoices, which saves time and cuts costs. With an automated approach, a shipper utilizes specialized software designed for freight audit and payments. Your company can use a custom in-house solution or outsource the process to an auditing firm. In addition, an automated process ensures greater consistency and accuracy.
Finally, there is also a hybrid approach to freight auditing, which combines manual labor with automated steps or elements. For example, tasks may initially enter the automated system, but a human is assigned to investigate and make corrections as needed if a problem is identified.
Auditing Freight Invoices and Bills
Whether a freight auditing process is completely manual, automated, or hybrid, it follows the same standard steps.
Second, organize invoices by the scope of the audit. For example, the scope may cover a week versus a month if time is limited. Next, rate cards and rate confirmations are validated. Finally, zone and postcode files get matched to the rate cards.
Following validation, a manifest is created, which lists all field data available. Then, data must be verified between the sources: invoices, rate cards, and the manifest. Once this cross-validation is complete, the shipper may create a consignment verification and compile a credit request. In that case, the shipper may negotiate a payment solution with the carrier's account manager.
What a Freight Audit Can Uncover
The benefits of performing regular freight audits cannot be overemphasized. When a company commits to a structured freight auditing and payments system, there are opportunities to uncover problems that may have otherwise been overlooked.
By either manually going through every invoice or adopting a software that can validate the data, freight auditing systems can uncover excess charges. For example, a freight audit can detect unnecessary detention and demurrage charges, such as delays in the return of a container. Likewise, by cross-referencing all of the fee calculations, a freight audit can alert a company’s finance team to unexpected accessorial charges for a la carte services, like reweighing. The sooner you adopt a structured FAP system, the sooner you cut out extra costs and improve your return on investment (ROI).
Uncover operational inefficiencies in your business. For example, when you replace fully manual FAP processes with automated or hybrid techniques, you can increase efficiency and save time across multiple departments. Instead, focus on your core business and service customers rather than spending most of your time on administrative duties. Time is money. Allowing team members to focus on more complex issues is a better use of their time and subsequently better for your bottom line.
Billing errors are inevitable but uncovering them sooner allows a company to address these issues and rectify them before larger problems emerge. If your team or your internal software is properly auditing all invoices, you can quickly calculate shipping costs, see and pay freight bills on time, and streamline payment services. The key to preventing future invoice errors is to catch them early and find out the root cause. Then, you’ll have the chance to optimize logistics and make corrections that carry over for the future.
Uncovering compliance issues isn’t ideal, but it is certainly better than finding out about them when it’s too late to correct things. Having a structured freight auditing system helps identify any noncompliance with routing guides that can make or break a contract. By confirming continuous compliance, your company establishes a firm footing as a market leader and is more likely to attract buyers’ attention and secure supplier agreements.
Missing or Incomplete Data
Having a solid FAP system in place uncovers potentially missing or incomplete data by providing end-to-end visibility into operations. For example, if you’re missing information about routing rules or approval parameters, catching that early and filling in the missing pieces can save time, money, and even contracts.
Freight Audit and Payment Tools
While it is theoretically possible to have a completely manual freight auditing process, the goal should be to find the most reliable tools that streamline and accelerate the process. As a global leader in Transportation Spend Management, Trax technology empowers organizations to gain control and visibility over their transportation costs.
Our overarching mission is to move your organization forward, leveraging sophisticated tools to improve operations. Companies that work with Trax gain the power to optimize processes and advance innovative solutions.
Trax offers the best FAP software; one that your company can begin using right away and rely on for this vital function.
Trax Freight Audit and Payment Software
With Trax Freight Audit and Payment Software, companies gain a competitive edge in Transportation Spend Management. Freight Audit can support 100% data compliance across all invoices, shipments, and rates, no matter how complex your current system is. Feel confident when you settle and pay the invoices while also optimizing costs for your organization.
Schedule a consultation with 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.