Freight Bill Auditing – Telling Statistics from Those Who Do and Don’t

American Shipper, in partnership with the Retail Industry Leaders Association, recently published a revealing study highlighting shipper’s freight bill auditing activities. Transportation Payment Benchmark Study: A Step Forward, written by James Blaeser, Publisher of American Shipper, reveals aspects of an often closed subject of supply chain management – the financials.

Auditing of freight billing, a practice consisting of both pre- and post-payment processing, is a multi-step system; preformed properly, substantial cost savings result, as unwarranted costs and fees are discovered and eliminated. An additional benefit is improved carrier relations, as payment processing is improved between shipper and logistics service provider (LSP).

Here’s the study’s table-setter:

“Survey results show that the average respondent audits 77 percent of its invoices received from LSPs. Only 48 percent of the respondents review every invoice. The other 52 percent who claim they are auditing are really doing themselves a disservice. An incomplete audit is not an effective audit.

Three quarters of respondents claim the invoices they receive from LSPs are accurate 90 percent of the time or more. This could be considered better than what was expected which is a positive, but compared against other industries, such as utilities, this is very poor. Consider for example the problems that would arise if your home electric bill was wrong 10 percent of the time or more.

Auditing 100 percent of invoices received is only part of the story. Payers should be auditing all the variables in their bills for inaccuracies. Study results show that payers are very focused on the obvious issues, such as rates, accessorials, duplicate invoices, and fuel surcharge. Less obvious trouble areas, such as Inco terms, taxes, and currency conversions, are overlooked by most payers.”

Getting more personal, the study’s sampling of 300 companies reveals these realities:

In 2011, 50% of companies audited their supply chain’s transportation bills prior to payment, 8% post payment, 39% engage in both, and 3%, neither. The 39-percenter’s are benefitting the greatest, as billing accuracy was discovered to be sub-80% a full 24% of the time.  Only 58% were accurate up to 95% of the time. Errors abound, as is opportunity for found money.

The study reveals the percentages of variables audited by bill payers in the 3PL, manufacturing and retail industries. Here’s the breakdown:

·         Accessorials (rate, validity, etc.)

3PL – 90%

Manufacturing – 93%

Retail – 99%

·         Transportation Rates

3PL – 100%

Manufacturing – 94%

Retail – 90%

·         Duplicate Invoices

3PL – 75%

Manufacturing – 88%

Retail – 89%

·         Fuel Surcharge

3PL – 80%

Manufacturing – 85%

Retail – 82%

·         Incoterms

3PL – 35%

Manufacturing – 34%

Retail – 31%

·         Taxes

3PL – 25%

Manufacturing – 33%

Retail – 25%

·         Currency Conversion

3PL – 35%

Manufacturing – 39%

Retail – 24%

These figures highlight opportunity, as auditing 100 percent of invoices received is only part of the story. Payers should be auditing all the variables in their bills for inaccuracies. Study results show that payers are very focused on the obvious issues, such as rates, accessorials, duplicate invoices, and fuel surcharge. Less obvious trouble areas, such as Inco terms, taxes, and currency conversions, are overlooked by most payers.

This study highlights a fiscal need, and the areas under-addressed. For organizations who seek to maximize billing-payment accuracy, an effective way to optimize an organization’s transportation information with utilization of the company’s historical data and industry benchmarks is to form an alliance with an independent freight bill processor that provides thorough pre- and post-payment auditing and payment services, to maximize accuracy and resulting cost savings.

– Tim Nissen, Data2Logistics http://www.data2logistics.com/ + http://twitter.com/Data2Logistics