The management of transportation accounts for a considerable portion of the costs incurred by shippers — nearly 10%. As such, a thorough auditing process is necessary to ensure optimal supply chain performance. However, manually sifting through the available data to derive insights is time-consuming and can lead to operational inefficiencies. 

The adoption of a structured freight audit and payment system (FAP) is recommended, to streamline this process and reduce unnecessary detention and unexpected accessorial charges. The term freight audit and payment refers to various components, including freight audits, freight payments, or the entire freight auditing and payment systems.  

A freight audit aims to collect all transportation invoices and compare them to established rate agreements, in order to validate costs. This ensures that the invoice charges are accurate, satisfying both the shipper and carrier. Let’s take a deeper look into what FAP means in terms of freight, and give a clear outlook into some of the key concepts that lead to a thriving business.  

Understanding Freight Auditing and What a Freight Audit Can Uncover

Freight payments typically refer to a service provided by accounts payable departments for transportation invoices. This may include third-party vendors' information and the processing and payment of invoices. FAP systems integrate the processes of invoice collection from freight invoice audits and physical payment to carriers, providing a more efficient management system for freight audits and payments than the alternatives. 

In the world of logistics, the importance of conducting regular freight audits cannot be overstated. By implementing a comprehensive freight auditing and payments system, businesses open themselves to a wealth of benefits beyond saving money on shipping costs. 

Freight audits provide a structured approach to evaluating a company's shipping procedures and identifying areas for improvement. These audits enable businesses to uncover problems that may have otherwise gone unnoticed, such as over-charges, duplicate charges, and incorrect billing. By rectifying these issues, companies can protect their bottom line and ensure they are paying only what they should for shipping. 

Furthermore, regular freight audits provide insight into carrier performance, enabling businesses to evaluate different carriers' speed, reliability, and cost-effectiveness. This information empowers companies to make informed decisions about which carriers to work with in the future, ultimately leading to a more streamlined and efficient shipping process.

Unnecessary Costs and Time Wasted

Through either manual inspection or specialized software, freight auditing systems can effectively identify excess charges that may have gone unnoticed. A case in point is the detection of avoidable detention and demurrage charges resulting from delays in container returns. Additionally, a freight audit can cross-reference all fee calculations to bring to light unanticipated accessorial costs for auxiliary services, such as re-weighing. Adopting a structured FAP system can lead to the early detection and eradication of unwarranted expenses, thus enhancing your return on investment. 

You can reveal operational inefficiencies within your business by replacing entirely manual FAP processes with automated or hybrid techniques, which are more efficient and time-saving across multiple departments. By doing so, leaders can allocate their focus on core business concerns and serving customers, instead of getting caught up in administrative duties. As the famous saying goes, "time is money." Giving more time to team members to handle more demanding issues would result in a more productive use of their time and a better yield for the business.

Invoice Errors and Compliance Issues

Business owners know that billing errors are bound to happen, no matter how efficient their team is. However, detecting them early and addressing them promptly can save the business from potential larger problems down the road. In addition, companies can accurately calculate shipping costs, avoid late freight payments, and streamline payment services by implementing a comprehensive auditing system for all invoices. 

It's crucial to catch any invoice errors as early as possible to prevent them from happening again in the future. This also gives the opportunity to investigate the root cause and optimize logistics for the long term. 

It's always better to be proactive than reactive. A solid freight auditing system will help identify non-compliance with routing guides, ensure you remain compliant, and avoid any potential breach of contract or regulatory issues. Maintaining a continuous compliance record can establish your reputation as a market leader, attracting potential buyers and securing supplier agreements. Staying vigilant and focused on correcting issues will help to increase operational efficiency and avoid disruptions.

Missing or Incomplete Data

The importance of having a robust FAP system cannot be overstated, as it enables comprehensive monitoring of operations, revealing any inaccuracies or gaps in data.  

Such a system allows for the timely detection of incomplete or absent information regarding routing guidelines and authorization criteria. By addressing issues early on, businesses can avoid unnecessary losses in terms of both finances and contractual agreements. Ultimately, a well-established FAP system is key to optimizing operations and achieving long-term success.

Freight Audit and Payment Tools

In the realm of freight auditing, it is possible to conduct the process entirely through manual means. However, in the interest of efficiency and dependability, it is wise to seek tools to expedite and streamline the process.  

In pursuing a suitable technology provider, it is of utmost importance to collaborate with an established entity possessing the requisite abilities to acquire command and perceptibility over one's conveyance expenditures. Employing an appropriate FAP solution from a trusted provider can determine whether a company is thriving in the present or lagging behind in the future. 

Josh Bouk is president of Trax Technologies.