What Are Freight Invoice Errors, and Why Are They So Prevalent In Trade?

As the supply chain evolves and expands into a globalized web of interconnected links, the associated paper trail becomes increasingly complicated. While freight accounting may have looked simple in the past, varying strategies have flooded today's market. As the complex and costly transportation landscape dictates that each shipment might require a different method, it's easy for freight invoice errors to fall through the cracks.

What Are Freight Invoice Errors?

Some freight invoice errors can be simple and easy to fix, such as the wrong billing address or incorrect data. Other common but more complicated errors are:

  • Unapplied Discounts or Affiliation Savings
  • Miscalculated Packages or Pallets
  • Unplanned Detention, Demurrage, or Per Diem Charges
  • Freight Class Mishaps
  • Duplicate Freight Invoices
  • Customs Mistakes
  • Undiscussed Accessorial Fees

Supply Chain and Demand Executive further explained, "In fact, assessorial fees that aren't in the contract are among the most common reasons shippers reject invoices and either short pay or delay full payment to carriers." When left with little lead time, it is easy for a company's freight bill financing process to miss critical details resulting in a long-term headache with a carrier or during tax season.

How Often Do Freight Invoice Errors Occur?

Because of the complexities of the freight invoicing process from carrier to carrier, it is difficult for a shipper to know precisely how often errors occur on their own. It is important to catch freight invoice errors as errors happen frequently. Having invoices rejected really holds processes up. Because many companies don't utilize internal or outsourced freight auditing, it's unknown how many freight invoice errors go about wholly unnoticed. Supply Chain and Demand Executive stated that, "Industry analysts believe the number lies between 15-66%. One in every four invoices gets rejected and has to be remediated." These statistics vary significantly from the average maximum threshold of modern machine learning anomaly detection in freight auditing, which tends to max at 4%.

Why Are Errors Common?

While the above numbers are staggering, it's no surprise to supply chain professionals who have to vacillate between opposite shipping methods, such as zone skipping and hub injection, depending on the freight type, carrier capacity, and quoted costs. Freight professionals understand there is no magic formula to get all shipments to their final destinations with the same techniques, but often approach freight invoicing as if there was. When errors arise, shippers are more likely to look for a new carrier rather than analyze their own freight invoicing process.This also does not make the problems go away, it just hides the issues temporarily.

Although carrier-responsible errors are abundant, ultimately, it's up to the shipping company to build a system that creates a mutually beneficial partnership between both sides of the supply chain.

What Can Shippers Do to Reduce Their Impact on Costs?

While shippers already have a lot on their plates, ignoring freight invoice errors can be a source of unnecessary added costs adn time in the present and the future. As high gas prices encourage an already growing inflation, shipping companies must refuse passivity to enable cost control and maximize profit margin. Here are four steps to start with:

  1. Unite All Accounting Data Through One Source of Truth – The easiest way for freight invoice errors to occur is when they are unseen. By funneling all data through one integrating system, shipping companies can maintain visibility over their entire accounting process.
  2. Leverage Machine Learning to Discover Errors – Automation can act as a second set of eyes in today's fast-paced world. Shipping companies can rest assured that anomalies will not be missed by the tired eyes of a manual workforce even in the dead of night by using machine learning to improve freight cost management.
  3. Utilize a Business Logistics Tool That Provides Actionable Data – As opportunistic software experts create new systems to help burdened supply chain professionals, it can be hard to differentiate between helpful and hurtful systems. Shippers can avoid overwhelming data sources by focusing on prospects that boast proven actionable analytics.
  4. Outsource to an Experienced Freight Auditing Team – While investing in an auditing team may seem counterintuitive to a cost-saving mentality, the right freight auditing team will offer case studies on the ROI of current customers. By putting freight invoicing in the hands of experts, shipping managers can focus on the areas where they thrive.

Gain More Visibility Into Freight Invoicing with Intelligent Audit

Without a freight analytics expert on the team to comb through the past, present, and future freight invoices, shipping companies will continue to bear the brunt of missed accounting opportunities. Join the movement of companies trusting Intelligent Audit, a company with over 20 years of experience creating a smoother process for shipping professionals. Start a conversation with Intelligent Audit today to reject passive income loss and actively address your freight invoice errors.

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