What Is a Freight Audit, and Why It’s Important

In a perfect freight world, every freight invoice is accurate. The quoted price and the actual cost matched; the invoice details are all correct. You pay, assured that everything is right. News flash: there is no such thing as perfect, and freight invoices often carry mistakes and miscalculations.

Errors in freight bills are common. These errors, no matter how small they are, could have a significant impact on your business’ finances. Often, freight bill issues go unresolved simply because they were overlooked or no daily freight audit was performed. That is why a freight audit is essential.

In this post, find out about freight audit and payment best practices, how to do freight audit, and why freight audit is important to your business.

What Is a Freight Audit?

Generally, an audit is a process of examining or inspecting an account, a financial situation, a process, or a system.

A freight audit specifically checks and verifies freight bills. A freight bill is an invoice that specifies the details of the transaction, including the total charges or cost of the service, as stipulated on a contract. A freight audit examines these invoices to ensure they are accurate and to gain high-quality analytics insight into the business’ logistics process.

The goal of a freight audit is simple: to spot any issues and resolve them as early as possible.

As a business, you want to make sure you are charged what you are quoted. Inaccurate freight bills can mean costly errors. Over time, extra expenses like these can have a significant impact on the profit margins of the company.

What’s Involved in the Freight Audit Process?

Often, small businesses are not aware of how to do freight audits. Well, freight and logistics audits may be performed using a manual, automated, or combination approach.

Manual Freight Audit

With manual freight audits, each freight invoice is checked against specific criteria. Manual audits can be a good option for small businesses with limited freight bills. However, once a company gets big enough, freight bills become hundreds or thousands, and a manual freight audit becomes senseless.

A manual freight audit involves tedious work of comparing, remembering, and verifying. It is inefficient and time-consuming, and human error is highly likely. Manual audits are only as efficient and effective as the person performing them.

Often with in-house audit personnel, an opportunity cost is also involved because the people performing the manual audit might be forgoing other tasks of high priority.

Automated Freight Audit

Systems and processes have evolved, and so is freight auditing. Today, fully manual audits quickly cease to exist, giving way to a more modernised way of freight auditing—automation.

Automated freight audits are possible with advanced software. Auditing software automates and simplifies your freight and logistics audit process. It analyses invoice data by comparing and verifying carrier freight charges and reports any discrepancies identified during the process.

An automated freight audit eliminates manual audit processes, thus minimising errors and providing more accurate and consistent results. It also significantly reduces the amount of time necessary for auditing and saves you money in the long run.

Whether you hire an external audit company or have an in-house audit team to conduct freight audits, automated freight audits are a crucial investment that streamlines the process for your benefit.

Combination Freight Audit

A combination approach to freight auditing is simply the use of both manual and automated processes. The majority of the invoices are audited by the software, and any discrepancies or problems are reviewed and verified manually by audit staff. In case inaccuracy in a freight bill is spotted, the software or the company will report the matter to the freight carrier for recovery or correction.

Why You Should Conduct a Freight Audit

Freight auditing offers many benefits, including the following:

Freight Cost Reductions

With the complexity of freight bills comes the many possible issues that can arise. Errors and inaccuracies in freight invoices are common. Without freight audits, they could go unnoticed for months or years.

Let’s say that for every 10 invoices, 5 of them have errors. If you deal with hundreds of freight bills, any small amount can easily add up to a significant amount.

With the extreme challenge to maximise profit, businesses are expected to optimise their systems and get the most value out of their logistics operations. Being proactive when it comes to freight bill inaccuracy through freight audits is a critical step in reducing logistics costs.

Omnichannel and B2C Shipping

Freight and logistics audit is especially beneficial for companies that do high-volume shipping. Omnichannel logistics involves every aspect of the supply chain, including the manufacturer, wholesaler, and retailer. With all the freight and transportation details businesses are expected to manage and track, it can be easy for them to overlook some. This is where a freight audit comes to the rescue.

Supply Chain Technology

Freight audits provide solutions and analytical insight that can aid businesses in advancing their supply chain networks and strategies. The freight market is ever-changing, and the high-quality data and insight you gain from freight invoice analysis can help your business become smarter and more efficient.

Leveraging supply chain technology such as freight audit software helps organisations optimise their global supply chain by providing critical data and analytical tools.

Freight Costing Errors That Can Occur

The modern supply chain is complex, which means that transportation contracts have also become complicated. This complexity provides huge room for miscommunication and miscalculations that can lead to costing errors and invoice inaccuracy.

Here are the most common freight costing errors that can occur:

  • Delivery rate mistakes
  • Duplicate invoices
  • Extra charges, like residential pickup and late pickup or delivery
  • Incorrect computation of total charges
  • Incorrect or inaccurate shipment details, such as item quantity and package weight
  • Incorrect application of tariffs, taxes, and related duties
  • Incorrect billing or delivery address
  • Miscalculated fuel rates
  • Miscalculated additional taxes

Freight audit and payment best practices help reduce the impact of freight costing errors on your business.

Cario: Freight Management Software

Using advanced smart technology, Cario is an all-in-one solution for all your freight needs. This leading Australia freight management software takes manual work from your hands and digitises your distribution and freight decisions.

Cario allows you to grow with systems, which means less error and more accurate data and results. A smart freight system developed by industry experts, Cario simplifies the processes of quoting, booking, and tracking freight through multiple providers. It also allows you to analyse and review your freight data whenever, wherever.

You don’t have to be a genius to use Cario. Implementing Cario is quick and easy, allowing you to take control of your freight process within your environment.

Is freight auditing a tedious task for you? Contact Cario today and discover how you can make freight easy.