3 Minute Explainer: Why Automate Freight Bill Auditing?

Transportation makes up a significant portion of the costs associated with getting goods to an end user. In this 3 Minute Explainer we look at how automated freight bill auditing works and its benefits.

Controlling transportation costs is vital for any organization that ships goods. However, in many companies there is a disconnect between what logistics managers have agreed with carriers, and the staff that pay invoices.

Freight bill auditing software automates the process of approving freight bills. This enables an organization to manage freight spend and control supply chain costs. 

Shipment History vs Carrier Invoice

Freight bill auditing solutions begin with a shipment’s history. This includes movements, origin and destination addresses, package weights, volumes and relevant tracking numbers. 

The shipment history also includes anticipated freight costs. These estimates could be generated by a company’s transportation execution solution, transportation management system, or a third party application. These estimates are used for auditing once the invoice has been received.

Once a company has received the carrier invoice, this is uploaded to the freight bill auditing solution. The carrier invoices contain details of the billed shipment, including a breakdown of the costs for that shipment’s movement.

Invoice Matching and Review

The next step is invoice matching. This compares the shipment history to the corresponding invoice via tracking numbers. 

The solution will match the values based on the appropriate cost type. In other words, the estimated movement costs are matched to the actual costs, and anticipated fuel costs are matched to the actual fuel costs.

Once the matching is complete, the solution reviews the invoice. If there are no invoice errors or discrepancies the invoice is automatically approved. Furthermore, if there is a small difference that does not exceed a company’s predetermined threshold, the invoice is also approved.

However, the system will generate an exception should a disparity be found. An exception is also created if the solution cannot find a match between the estimates and actual costs.

An exception alerts the relevant personnel that there is a problem. Staff will then compare the shipment history and the carrier invoice to see what has caused the error.

When the source of the mismatch is identified, a company can choose to accept it. Then the discrepancy can be allocated to the shipper or the supplier, or both. 

If the carrier has made an error, the process for disputing an invoice will be applied.

Once the invoice has been fully reviewed and audited it is then approved.

Freight Bill Payment

The final step is the payment process. Freight bill auditing software can also be configured with general ledger rules. Therefore, a GL account breakdown can be generated. This can be sent to a company’s financials application.

An organization can choose to batch approved invoices together as part of the payment function. After this, all appropriate reports, including the payment report are generated.

Users can also generate discrepancy reports. These identify issues found during the auditing process and highlight discrepancies where a company expects to receive credits from the carrier.

The Benefits of Automating Freight Bill Auditing

Freight bill auditing offers an analytical, financial review of carrier invoiced costs versus supplier agreements. Therefore, it is an essential part of controlling supply chain costs. This is true whether you ship via ocean freight carriers or expedited parcel carriers. 

Companies that process carrier invoices without auditing them for accuracy are likely overpaying. This can add up to a significant amount over a financial year. Furthermore, companies do this without realizing it. 

However, manually auditing carrier invoices is time-consuming. Therefore, many companies outsource this to freight auditing and payment companies.

Automated freight audit systems allow companies to move this process in-house. This gives them more visibility and control over their shipment data, without having to use time-intensive manual processes.

Best-in-class freight auditing software solutions can process, check and reconcile high volume carrier invoices. This includes parcel carrier invoices that are hundreds of pages long and include tens of thousands of line items.

A comprehensive automated freight bill auditing solution should offer the following functionality:

• Identify unexpected accessorial charges

• Address correction to avoid paying surcharges for incorrect or non-existent delivery addresses

• Global capabilities so that all invoices can be audited, irrespective of language, currency, geographical location, carrier or mode of transport

• In-depth reporting

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About QAD Precision – Trusted Global Trade and Transportation Execution

QAD Precision, a division of QAD Inc., provides industry-leading global trade compliance, and multi carrier transportation execution solutions from a single, integrated platform. An ISO-certified company, QAD Precision assists companies to streamline their import, export and transportation operations, optimize deliveries, and increase logistics ROI. QAD Precision’s scalable and extensible solution easily integrates with existing ERP and WMS solutions. Industry leaders in every region of the world rely on QAD Precision’s global support centers to leverage thousands of carrier services and manage millions of global trade and shipping transactions every day. For more information about QAD Precision, visit www.qadprecision.com.