One critical but often overlooked component of successful shipping and logistics management remains freight audit and payment processes. Knowing when invoices get paid, which currently await payment, and tracking payment delays and issues are essential for budget management and financial stability. Following a few recommended best practices makes managing shipping costs easier. So shippers should start by following these seven best practices today.
Having a clear and thought-out strategy for handling payments, invoicing, and budget planning is critical for maximizing profits. According to Logistics Management, logistics advisors need to stay smart with their freight audit and payment processes, from automating invoicing and payment options to intelligent financial backing decisions. Shippers should only use trusted, federally regulated banking institutions for payment of shipping invoices, not third-party, unregulated payment options. For instance, these unregulated entities cannot protect your brand from misappropriation of funds, or they may subject your business to additional delays in payments too. Working with a bank to handle all physical payments eliminates that concern and builds rapport within the network.
Communication represents another critical part of shipping and logistics management where auditing and payment management can be improved. Overseeing carriers, maintaining accountability, and adhering to budget constraints depend on fast and accurate communications. Real-time conversations and data-sharing ensure all network partners stay on the same page. That creates a collaborative approach to work with carriers and vendors to manage exceptions, overcharges or other issues before payments are made.
For efficient freight audit and payment processes, carrier scorecards are another of the top helpful digital tools. Outlining the pros and cons and documenting past experiences and thoughts during interactions with vendors allows for quick and easy reference. Having the same set of data points and information to reference helps ensure fair and precise comparisons. This remains imperative for accurate decision-making when choosing and working with carriers. And that process continues when shippers start working with those parties to process claims following a freight audit and payment.
Freight audit and payment protocols can benefit significantly from automation. Modern tools, such as digital dashboards, online platforms, automated processes, and shipping technology, can make it easier to plan finances and adhere to analytical predictions. Improving communications and reporting procedures between supply chain managers and third-party partners allows for more accurate reporting and data distribution.
Managing payment processes can become a challenge even for the most prepared and informed managers. Working with carriers and vendors within a single dedicated management system and platform exemplifies a practical way to ensure freight audits and payments occur efficiently. Having staff, platforms, and resources dedicated to account management means other tasks can get the attention they need when issues arise.
Careful monitoring of current budgeting controls and robust financial audits and invoice payments are more streamlined and accessible when users have a single source of truth to reference. Data collection and analytics can shed light on past trends and highlight potential issues or problems with payment collections. Furthermore, that same information is valuable for optimizing freight routes and more. After all, optimizing shipments and carrier relationships can help supply chain managers improve relations with carriers and vendors.
For example, consider using parcel, hub injection, or other services, but the increased volume or complexity will increase the risk of errors in invoices. Regardless, it's all about getting the right quality, service and value from the network. And successful, outsourced auditing services can ensure parcel transportation costs are accurate and within reason.
The final example of payment best practices for managers today remains diversifying their focus and market reach. When a setup seems to work, it still needs careful monitoring because things can change instantly. Ensuring adaptability and knowing when to scale up or scale down the network can maximize profits and keep expenses low. And that decision must be based on the continuous assessment of invoicing accuracy, freight costs and more.
The first thing to know in the digital age of freight audit and payment best practices is the importance of the digital twin. With advancements in technology, all processes and functions have a digital twin. In freight auditing, that amounts to using electronic invoicing. Of course, not all carriers use the same invoicing features. This first step in our list of freight audit and payment best practices combines with data normalization as a result. This ensures all data is accurate and comparable, regardless of how the invoice originated. Shippers can seek out a partner that will work with your carriers to digitize all your invoices for faster auditing and increased efficiency.
The next step is to streamline invoice matching with analytics that combs through countless general ledger (GL) codes to validate quotes against billed rates. This is perfectly suited to connect with anomaly detection to identify inconsistencies and correct them automatically. Invoice matching is the next natural step of checking costs and ensuring your team is following the right freight audit and payment best practices. Invoice matching provides validation of actual cost per general ledger and even down to the SKU level to provide accurate data on profitability. Of course, there will be inconsistencies that arise, making this best practice a natural precursor to anomaly detection and correction.
Anomalies will inevitably happen. They might result from problems with GL codes, incorrect user data entry, and more. In some cases, anomalies might occur due to region-specific issues, such as missing postal codes from portions of the world where ZIP codes do not exist. In other cases, an anomaly might arise from a misspelling of a location or address.
Anomaly detection allows for benchmarking on extremely detailed KPIs when the shipper steps out of its determined guardrails. For example, if there is a higher cost per shipment in a specific lane the system will notify the shipper when they are outside of the "norm." While they may not change an overall high-level KPI, the higher cost will still affect spend and shippers need a mechanism, such as a platform, to view these instances in a detailed view. A great freight audit and payment provider will aid with the anomaly detection to address any anomaly and course correct so everything is all good with correction.
The right freight auditing tools can identify these issues, make the correction, check the data, and move it along through analytics to understand total landed costs.
Measuring and tracking shipping KPIs is among the best ways to control shipping spend, and using analytics helps shippers identify their average cost by zone, mode, carrier, and other granularities of preference. Together, this helps shippers understand how their costs vary based on origin/destination pairs and avoid waste and make data-driven insights to operate more efficiently when selecting services or carriers by getting actionable insights.
Even in the best of circumstances, carriers will make mistakes on invoices. Past reports from Intelligent Audit have uncovered a general rule regarding inconsistencies and errors in invoices: they occur on up to 80% of all invoices.
Now, that might seem excessive, but it's important to remember that not all inconsistencies result in added costs. Regardless, the invoice inconsistencies that do add to costs need to be found prior to initiating payment for transportation. After all, it's easier to avoid an overpayment in advance rather than try to initiate a chargeback against a carrier. You must ensure your team follows established variance thresholds and avoids wasting time on errors that account for pennies and focus on the bigger opportunities to lower total spend. Doing so will also help to hold carriers accountable along the way.
The advantages of following industry-leading freight audit and payment best practices come from the application of data across both automated, on-demand reports and customizable reports.
Shippers have different needs, and shareholders may be more interested in understanding how historical and real-time data compare across unique geographies and different granular views. That's where having a partner like Intelligent Audit can generate on-demand reports and allow for customization of metrics to suit the most demanding of enterprise shareholders. This was further explained by Intelligent Audit's now CEO, Hannah Testani, in 2019 via Inbound Logistics, "The reporting capabilities also include trends and historical dashboards that can help shippers identify spikes and anomalies as they occur; relevant KPIs that provide insight to the trade-offs between cost, speed, and performance; and interactive heat maps that pinpoint bottlenecks and problematic or high-cost locations. The system's 700-plus prebuilt reports provide real-time reporting and tracking, time-in-transit analysis, and data on accessorial management, carrier performance, and hub injection analysis, among others."
Change is inevitable, and stagnancy, even in times of growth and profit, is not tolerable when it comes to monitoring and adapting freight audit and payment practices. Unfortunately, many supply chain administrators still lack the insight, tools, resources, and experience to control their shipping budget. The freight audit and payment services available from Intelligent Audit can make a world of difference. Contact Intelligent Audit to get started.
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