Why Companies Outsource Freight Audit and Payment

Why Companies Outsource Freight Audit and Payment

Outsource Freight Audit

Freight audit and payment processing play a crucial role in ensuring shippers only pay for actual costs incurred and not for errors caused by carriers and other service providers. And while it seems straightforward and simple on the surface, the manual auditing process is time-consuming and tedious. Shippers have to wait on an invoice to arrive, find the original quote, review the general ledger codes, verify the proof of delivery, validate payment information, and initiate payment to carriers. That has driven companies to consider an alternative: outsource freight audit and payment to save resources through applied business intelligence. Why? Consider this.

Assuming an employee audits one invoice every 15 minutes, that would still limit the total number of invoices audited to 600 for a 40-hour workload. That’s an extra FTE cost for simply reviewing information. Many companies may have thousands or tens of thousands of invoices that require auditing. That is why more companies are making the decision to outsource. Further, the decision to outsource comes from much more than a need to reduce in-house delays, and it’s important to understand what they are and how outsourcing this process works.

The Decision to Outsource Freight Audit and Payment Reflects Increased Use of Data

The need to audit invoices is absolute. Carriers want to get paid in a timely manner, and shippers want to pay only for services rendered. The ability to apply technology to ingest, cleanse, normalize, and analyze invoice data is among the driving forces of change in the auditing process. While a company could conceivably create these capabilities in-house, software vendors like Intelligent Audit have already built the foundation with advanced software that can process data from all modes, including parcel and last mile. Of course, not all solutions are created equally, and the added capabilities of an auditing provider can be the differentiator.

As further explained by John D. Schultz of Logistics Management, “Nearly every freight bill company can process invoices accurately and efficiently, but experts and industry officials contend that even more streamlining comes from examining how to enhance working capital while providing carriers timely, predictable payments. A good freight bill payment analysis can help shippers improve decision making with tools and services that can turn raw data into valuable insights about their shipments.” 

Auditors need to do more than simply visualizing data. It’s the ability to leverage something more than simple auditing — in other words, deriving actionable insights  —  that leads to the implementation of a turnkey solution to freight bill auditing and payment, or FBAP. That’s the preeminent reason why companies outsource freight audit processes.

How Outsourcing FBAP Works

Outsourcing FBAP works by leveraging connections between your supply chain tech stack, the invoicing systems of your carriers, and a dedicated FBAP software suite to automate the whole process.

  1. It begins with aggregating data, ingesting it from sources and ensuring its readiness for analysis through cleansing and normalization. Remember that different systems have different coding algorithms. The data from one system for a single invoice may appear radically different from the data of another platform. That’s why normalization is critical; normalizing the data helps you compare apples to apples.
  2. Next, an analytics engine processes the data, matches data based on predefined parameters, validates invoice details, and, if necessary, addresses anomalies. 
  3. If the data align properly, the software authorizes payment and initiates the payment process
  4. If automated anomaly detection and correction cannot resolve an inconsistency, the software brings it to the attention of an account manager or software user for manual intervention.
  5. Lastly, the ongoing process results in additional, actionable insights into total shipping cost, carrier performance and accountability, and opportunities for improvement.

Top Benefits of Outsourcing

Gaining instant access to actionable insights into invoicing is the leading reason companies opt to outsource freight audit processes. The decision to outsource auditing needs also comes with several benefits that are too great to ignore, including:

  • Increased efficiency by auditing more invoices, faster invoicing, and having customized reports available on demand.
  • Data-driven management, allowing your company to see average zone, cost by mode, and other granularities.
  • Reduced transportation spend by identifying shipments and carriers that are associated with higher error rates in freight invoices, which helps shippers hold carriers accountable.
  • Identification of weaknesses in shipping strategy, such as overuse of airfreight for shipments better suited to ground transport when time isn’t a major concern.
  • Recognition of what to watch for in invoicing, such as inaccurate GL codes, accessorials, peak season surcharges, and anomalies. 
  • Fewer interventions, by leveraging business intelligence to automatically correct anomalies, such as a slight difference in the official delivery address, when all indicators show a valid alternative.
  • Streamlining carrier payment is another benefit and reason to outsource freight audit needs; it offers a secure resource that can help extend payment terms for shippers while shortening the payment clock for carriers.

Reap the Rewards of Outsourcing Auditing Practices With Intelligent Audit

Freight auditing and payment are about more than ensuring you pay for shipping services provided; it’s about maximizing your transportation network’s efficiency with actionable data insights. That continues through a secure, data-driven process that benefits all parties involved and builds trust with your network partners. Find out how your team can tap into the potential of a world-class solution to outsource freight audit and derive analytics-driven insights by connecting with Intelligent Audit today. 

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