If you happen to be the owner of a business that produces goods, then, more often than not, you need to ship them. And where there’s shipment involved, there is also a lot of paperwork, costs, and logistics. This entire process needs to be managed in the best way possible so that it doesn’t cost you more money than it should. One way of doing it is via freight auditing. Controlling your shipping might be easier than you ever though and here is a short guide to prove just that and give you all the info you need.
What Is Freight Auditing?
Simply put, freight auditing is merely a method through which you can control all the shipping that occurs in your company. An audit, in general, is the process the covers the following three branches.
- It examines a business’ records and financial statements to make sure they are accurate
- It adjusts and corrects all the accounts and transactions in case there is any misleading information.
- It examines and verifies an account.
Taking these three purposes an audit serves into account one can deduce that freight auditing means the examination, verification, and adjusting of all freight bills to ensure they are accurate.
Why Do You Need Freight Auditing?
The simple answer to our predicament question is ‘money.’ Let’s say, for example, that you own a bakery which, apart from selling goods over the counter, it also delivers on a daily basis. This, in legal and financial terms, means that you are moving goods. Evidently, transportation is not free, hence the bills.
Every scenario that we might pick as per transporting baking goods from your kitchen to your customers involves invoices of some sort. Here are some of the costs included.
- Paying for the transportation itself if this is a service you are offering your clients.
- Paying for the vehicle used to transport the goods, as well as for the gas and the person doing the actual delivery.
- Hiring a third party to deliver the goods in your stead.
- Paying for packaging.
- Paying for storage of said goods, so that they don’t spoil or get damaged in any way during shipment.
- Paying for loading and unloading them, depending on their size and method of transportation.
- Paying for insurance if they happen to be very costly.
All these elements go to prove just how complex freight is, in fact. It’s not just putting a dozen cupcakes in a box and sending them to a birthday party. There is actually quite a large sum of money involved, as well as a vast deal of paperwork to be completed and kept in check.
This idea brings us to the reasons why you need freight auditing.
- To make sure that, among all the bills we mentioned, you don’t pay extra for anything and, therefore, lose money.
- To make sure that all the bills and paperwork are on track. When you get an external audit, you are going to want all these documents to be correct and up to par.
One simple way of making sure you check both these points is freight auditing.
The Freight Auditing Process
A freight auditing action is considered to be a type of ‘internal audit.’ This category means that you, the owner of the bakery, have not been asked by any type of authority to conduct this assessment. It was your own initiative. Even so, business owners typically hire a third party company to conduct this audit.
This third-party is called a freight bill payment company. To begin the process, they must receive all your freight invoices. Where they receive these bills from depends on the transportation method you use. If you do all your deliveries, then you must be the one to put all the paperwork at their disposal. If not, then you have to ask your carriers to do so.
You can send the bills in electronic format or hand them over physically, in hard-copy format.
Here are two tips related to this action you must undertake.
- If you send the bills electronically, make sure you use a secure transfer protocol. Do not use social media, such as Facebook, unsecured emails or Skype.
- If you deliver the bills in hard-copy, do not send the originals, but rather copies. Keep the originals for yourself. If they wish to see them, they can visit your offices.
Once the examiner has received the bills, the freight auditing process can now begin. They will be reviewed to assess their accuracy. Here are the things they will be checking.
- The paperwork’s and especially the bills’ validity
- If there are any duplicate payments and why
- The accessorial charges
- Whether or not you have used tariffs correctly
When the freight auditing process in itself is complete, the charges will be coded. They can also be reconciled if need be. The last step is the bills, which need to be paid.
You can also try conducting the freight assessment yourself. This is quite a new approach to the matter at hand and, if you feel you have the time to do it, give it a go.
Several Models of Freight Auditing
The freight auditing process is typically conducted in three ways.
#1. Manual match – you need to hire a team or staff to come in-house and process your invoices manually. They will conduct the audit itself with all its errors, costs, and risk. However, you need to pay attention because the unrecovered charges will rise as the volume of international transportation grows.
#2. Using specialized software – you can buy packaged software to perform your audit. You need to pay for a license upfront and then download it, install it on at least one machine, and operate it. As time goes by, you will have to maintain the software and integrations that go out to carriers. This typically takes up a lot of expensive internal resources.
#3. Outsourcing – the last option you have as far as freight auditing goes is to outsource the entire process to a third-party company, exactly as shown above. Send them the freight invoices and they will do all the work. It usually involves administration, discrepancy tracking, and recouping of charges that are unrecovered.
If you opt for freight auditing as a means of managing this part of your business, you will be able to steer away from overbilling, select only the most efficient carriers of your goods, and choose the perfect conveyance strategy, one that will suit your business perfectly.