Should I Outsource Freight Auditing and Why?

Even with the best network optimization, the modern supply chain network is still challenging for shipping companies struggling with freight audit systems. Companies must explore every possible avenue for improving profitability, reducing expenses, and maximizing savings in the current market. For several reasons, outsourcing freight audit and payment services may be the best option for many transportation and shipping companies. Let's take a closer look at what outsourcing can do for total financial health and why it's better than trying to manage auditing in-house.

What Is Outsourced Freight Auditing?

Outsourcing freight auditing has become a popular option for many business-driven services across many industries today, including shipping and transportation. In this light, outsourcing is an agreed-to arrangement where one company hires another company to manage and carry out specific tasks. These activities are typically handled internally to free up in-house workers and resources. Outsourcing to freight audit and payment providers can also help companies capitalize on the expert services and help them tap into skilled and experienced workers who otherwise would be unavailable to them internally.

Choosing to outsource freight audits can help shippers overcome driver shortages, increased freight rates, and capacity crunches. Supply chain bottlenecks and rising international tariffs make shipping more costly than ever. Auditing services can help make it more affordable to move freight from Point A to Point B through improved network optimization. Increased freight costs and spending translate into higher fees to customers to still profit from their shipping services. These problems represent an industry-wide trend, and there is no sign of the disruptions and challenges going away anytime soon.

According to Intek Freight & Logistics, "Outsourcing logistics services puts the day-to-day execution in the hands of trusted logistics experts that frees up a shipper's resources and capital to focus on their competitive advantage and growth. According to a recent Armstrong & Associates report, ninety percent of Fortune 500 companies use third-party logistics providers (3PL) for outsourced logistics and supply chain services, which is a strong endorsement of the value in outsourcing to a logistics service provider (LSP)."

Freight audit and payment services are a vital part of modern shipping and logistics and can be improved with outsourcing and partnerships with freight audit companies.

How Much Does In-House Freight Auditing Cost?

There are two essential cost breakdowns to consider when looking at the price paid for outsourced freight audit services compared to in-house auditing. Looking at indirect and direct costs separately, and then the combined costs can better visualize the operating cost involved with sorting through the data, assessing it, processing analytics, managing general rate increases, generating reports, and other expenses related to freight services.  

It can be helpful to consider these freight audits and payment expenses as a breakdown of costs per hour. For example, assuming a manual audit takes 10 minutes, it limits daily audits to 48, and if it comes at the expense of $20 per employee, then that's $160 for 38 audits.

Now, imagine the cost of trying to audit 1000 invoices per day. That would amount to $160 x 48, creating an expense of $7,680 in labor alone, assuming no one is getting overtime and no other indirect expenses are coming into play here. Auditing invoices, payroll, and other expenses can help shippers cut costs and control financial bleed within the company. For example, the time saved for employees working on just invoices can be used for other strategic initiatives or deployed to other work that needs done.

Many shipping companies benefit from a move to outsourced freight audit, and looking at direct and indirect expenses can help them better visualize where those expenses and potential savings lie. Here are some points to consider when looking at these expense breakdowns through the lens of evolving logistics:

Direct ExpensesIndirect ExpensesDirect expenses come about from the production of products or the execution, such as shipping.Indirect expenses often come about from routine day-to-day business activities and processes.Direct expenses make up most of the direct costs associated with a service.Indirect expenses often get classified as overheads and secondary expenses.These expenses are taken into account when calculating the cost of goods sold.These expenses are not included while calculating the cost of goods sold.Direct expenses are inevitable and are necessary to continue providing shipping services.While shippers cannot avoid indirect expenses altogether, they can reduce overall costs.Expenses are related to the actual cost of production or service execution.Expenses are related to the income statements in business operations.Common direct expenses are worker wages, raw material cost, fuel costs, vehicle maintenance, warehouse rental, and so forth.Common indirect expenses are printing, document filing, equipment rentals, customs, and regulatory fees, legal charges, and so forth.

Outsourcing Yields Strong Benefits, Including Insight Into Spend

Shippers can easily outsource freight audit and payment services to cut costs and improve services by tapping into specialized and industry-specific services. Managing expenses can yield several core benefits when utilizing freight audit data.

• Freight spend insight and analytics allow for faster and easier monitoring of multiple direct and indirect costs. Shippers can maintain a clear picture of spending and where funds are going by analyzing data and looking for short and long-term insights.
• Improved balance between profits and losses so transportation service providers can better manage routine processes. Outsourcing auditing services frees up team members to focus on the more critical internal service while still accessing reliable data-backed strategies.
• Short and long-term collaboration opportunities with freight auditing service providers can improve overall efficiency. Shippers can collaborate with industry experts on short-term project goals and long-term financial goals with dedicated auditing partners.
• Enhanced management and budgeting practices are more accessible with innovative services from dedicated third-party providers. Financial planning and auditing become more efficient and practical with expert insights and assistance every step of the way.

A properly developed freight audit system and outsourcing partnership can provide shipping companies with many other benefits and help them keep supply chain management and networking processes effective and streamlined.

Included Services, Like Anomaly Detection and Advanced Analytics, Add More Value

Another reason more shippers and transportation managers are looking at outsourced freight audit service options is they improve shipping and logistics cost management. Working with a secure solution for payments processing brings valuable services.

• Added security for management services helps reduce routine and more specialized shipping risks. Advanced auditing and financial insights allow shippers to make informed decisions while keeping data, assets, and resources secured and protected.
• It is knowing when to use one mode over another and when zone skipping or hub injection may reduce shipping costs.
• Faster responses and reactions to disruptions are possible with outsourced auditing services because it allows experts in anomaly detection to find problems sooner rather than later.
• A dedicated auditing management team can promptly address any issues when disruptions occur.
• Advanced analytical tracking and monitoring make it easier to track multiple areas of finances, both income and expenses, in real-time. Outsourced auditing and payment service providers bring a host of assets that otherwise would not be available to improve internal monitoring overall, helping your team stay apprised of changing conditions through actionable analytics.
• Improved value with reliable payment processing services and on-demand access to data is another benefit shippers can enjoy. Shippers can easily customize freight auditing services to meet company-specific needs while also ensuring day-to-day operations remain efficient despite congestion.

More shippers find that outsourcing these financial management services to freight audit companies is more effective and cost-efficient to handle vital auditing services without bogging down team members with mundane tasks.

Choose to Outsource Freight Audit Management by Partnering With Intelligent Audit

The modern supply chain network has endured pressures and disruptions at an unprecedented level over the past few years. Freight audit and payment services are vital in contemporary shipping and logistics for all market niches today. The current state of the market, both domestically and globally, has created a unique set of challenges for shipping companies looking to manage transportation spend and keep profits high. Despite continued recovery and growth in some markets, many shipping companies struggle with their freight audit systems.

Outsourced freight audit services can help improve budgeting and financial services and can be improved with outsourcing partnerships with freight audit companies. Streamline your freight auditing processes by connecting with Intelligent Audit today and see what freight audit and payment providers can do for your company. IA's customers realize cost reduction in auditing and payment costs including a comprehensive and systematic three-way contractual audit of more than 150+ data points across all modes globally down to the penny.

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Freight audit and recovery services automate issue identification, claims submission, and recovery in key areas to eliminate costly mistakes and uncover hidden savings.

• Service-Related Issues
• Residential Surcharges
• Dimensional Rates
• Address Corrections
• Carrier Compliance
• Lift Gate Charges
• Duplicate Billing
• Manifested Vs. Billed Weights
• Lost & Damaged Packages