Insights & News

The Five Biggest Mistakes Companies Make with Freight Audits

A person at a desk performs a shipping audit, reviewing invoices with a calculator

Posted On November 16, 2020

You’re being audited.

At least, we hope you are. Freight invoice audits (sometimes called parcel audits or shipping audits) make sure carriers are invoicing properly, and companies are being charged accurately.

Over the years, the systems that carriers use to charge for transporting cargo have become increasingly complicated. Taking into consideration everything from shifting base rates and re-weighs to over-dimensional and other accessorial charges, modern freight invoices are complex and involved.

Frequent, comprehensive audits are as essential to modern companies as a transportation management system or enterprise resource planning system—they can help companies not only ensure they’re being charged the right amount by carriers, but also make strategic choices for their business. Flat World audits every shipment our clients execute, but we hear from companies all the time that their audit process isn’t as effective as it could be.

Keep reading to see if your company makes any of these mistakes—and how to fix them.

 

1. Not auditing every shipment.

We get it—auditing can be a time-intensive process. But often, companies only audit a random sample of their invoices, maybe 10 or 25 percent. While that saves their team time, it’s also probably costing them money. When companies only review a fraction of their invoices, that means they’re only finding a fraction of the issues—and the majority of problems are going unnoticed.

 

2. Not performing audits at all—or worse, assuming audits are being performed when they’re not.

Especially at larger companies with multiple layers of leadership, senior leaders and company owners often assume audits are being done—and they’re wrong.

If only auditing 25 percent of invoices prevents companies from finding a majority of incorrect charges, the costs add up fast. Now picture those costs when none of the invoices are being audited.

Beyond those specific charges, however, there are bigger costs to not doing full shipment audits. Auditing all transactions ensure a company’s supply chain data is clean. With more accurate reporting, businesses can discover important insights and make more strategic (and cost-saving) changes, like consolidating shipments, setting up warehouses in different regions and more.

 

3. Performing audits based on old numbers.

It’s a simple misstep, but it can lead to major costs: relying on carrier websites for accurate rates. Every carrier has its own base rate system, and the rates often change slightly from year to year. However, the rates aren’t always accurate online, so companies need to double-check the carrier quote against the invoice and current pricing agreement.

 

4. Not learning from audits.

Comprehensive audits help companies find incorrect charges, but they can also identify patterns and trends. Flat World’s invoice team looks for repeat issues that may indicate that a change in system is needed. For example, constant re-weigh fees because a company is under- or over-estimating its cargo weight could be avoided if the company invests in a scale, saving money over time. Or frequent overcharges by a specific carrier could suggest a company switch carriers to save money.

 

5. Performing audits after invoices have been paid.

While there isn’t a universal frequency for how often invoices should be automated, one thing is for sure: audits should be done before the invoices have been paid. Otherwise, getting a refund from the carrier will be a headache. Flat World audits invoices weekly, passing on our findings to clients (and before paying carriers) to make sure these situations don’t happen.

 

Freight audits can be complicated and time-consuming—but they don’t have to be. Flat World’s dedicated audit team audits 100% of the shipping invoices our clients receive, and typically find issues in about 10%. The total cost savings vary depending on the company, but the time saved and system changes made possible through frequent audits make auditing essential. It’s a service we’re happy to provide for our clients to ensure they’re performing the best they can.

If you have questions about your company’s auditing process or want to learn more about Flat World’s auditing system, reach out!