Ten Facts About Freight Invoices Everyone Should Know

Posted by jax lee on January 20th, 2021

Today we're continuing our series of freight bill settlement. Although Freight Audit & Payment is unlikely to be the first point of interest on the supply chain agenda, more and more companies are increasingly focusing on freight payment in terms of transportation data and reducing freight spend. In this blog, we're making an infographic so we can take a closer look at ten key facts about freight invoices.

INFOGRAPHIC: Freight Payment - Ten Facts About Freight Invoices That Affect Your Freight Spending Click the picture if you want to see the infographic

Three Freight Audit Best Practices That Are Gold For Logistics And Finance Professionals As the infographic clearly shows, structured auditing of freight invoices pays off. To begin with, we start with the definition of a freight invoice. According to Merriam-Webster (American reference work): an invoice sent by a carrier to a consignee that contains an identifying description of the cargo, the name of the shipper, the point of departure of the shipment, its weight, and the cost.

Logistics managers, employees, and business controllers are some of the people in an organization who are regularly confronted with freight invoices. And they know only too well that a freight invoice can be processed without any problems, but can also cause headaches! Sometimes all payments go smoothly, other days it's more like a thunderstorm of complaints; unknown extras, and bills that just don't match for some reason. And how do we turn every day into a sunny day?

Let's try the famous quote from "El Salvador" Johan Cruijff: There is an advantage in every disadvantage! After these wise words, we would like to bring you closer to three related points and give you an insight into how you can turn your bills into a helping one Hand instead of billing chaos.

1. Outsourcing Freight Audit & Payment Freight audit service providers are increasingly helping companies reduce freight spend. Regardless of whether they are retailers, e-commerce companies, or manufacturers in the healthcare and pharmaceuticals industries, all logistics departments must cut shipping expenses. Freight invoices play an important role in this, especially because international complexities in logistics mean that the use of a freight verifier is becoming increasingly necessary. This is due to a lack of transparency, the need for control, cost savings, and the need to pay carriers on time. According to inbound logistics, freight costs can represent 10% of a company's expenses.

As a result of rising freight costs, many companies are increasingly proactively oriented towards freight invoice management using the services of freight verification providers. Often, one of the reasons to start outsourcing the freight audit is the fact that for many companies, outsourcing can be the most economical way to process freight invoices. They also found that the in-house cost of reviewing, processing, and ultimately paying a freight invoice is around $ 11 and that the cost of outsourcing it is only about 5 to 10% of the in-house cost.

Freight Audit: Nowadays versus traditional method

Traditionally

- Processing of the freight invoice (first the invoice then the audit)

- Reclaiming the overcharging

- Cost allocation and account assignment Today

- modern freight audit solutions - Elimination of wrong billing

- Cost allocation and account assignment

- Make the shipper responsible for the administrative procedures

- Creation of uniform and efficient processes

- Transparency (costs, transports, contracts and processes)

- Data centralization and standardization

- Paper reduction

- A single data source for different departments (procurement, accounting, operations)

Outsourcing of freight audit and payment process The freight audit process begins when a third-party logistics company receives the customer's freight invoices directly from carriers. After receipt of the invoices, they are transferred to the Freight Audit platform; a visible invoice path is created. After completing this process, all invoices from the logistics service provider (carrier) are checked for correctness, double calculation, additional costs, and applied freight rates. The process ends with the correct account assignment and the freight invoices are ready for payment.

However, a freight payment service usually consists of several combined Services such as freight audit services, freight payment, data collection for logistics, and freight data analysis. Freight audit providers are connected to customers through electronic data interchange (EDI), transport management systems, and paper freight invoices. It is common for such companies to provide additional tools such as shipping booking, freight tenders, transportation cost accounting, and automatic invoicing.

Freight payment: the added value of outsourcing Reduce freight costs by 3 to 5% Reduction of the time required for tariff updates, processing of exceptional Operations, KPI-controlled processes with full transparency Reduction in the number of invoices Rationalization of the carrier base Timely payment for carriers Automatic cost allocation Consolidated reporting Certified services

2. Consolidation of the freight invoice Regardless of the shipping profile or the shipping method, the consolidation of freight invoices is essential to ensure that your company runs correctly. Consolidating your freight invoices is an efficient answer to traditional (paper) invoices that your accounting team receives every week. Find out more about the consolidation of freight invoices and how the areas of logistics and accounting can save time in processing invoices.

3. Freight payment data is your free ticket for freight expense analysis The data extracted from freight invoices, accompanying transport records and other data records are a powerful source for the transparency of your company's freight spending. For transport and logistics managers, this data becomes the basis for strategic decisions, (carrier) benchmarking, tendering support, and savings in logistics costs.

General Business Practice: Typically, companies separate transport data from actual invoice amounts as these are not processed through the same platform. A freight audit provider makes exactly this connection, and that leads to modern analysis possibilities.

Common data reports from the freight payment data Geographic activity, Carrier activity, Service costs, Order situation Use of different modes of transport Ecological Footprint Benchmarking between the corporate division's Average scope of delivery and costs per delivery Extra cost reporting (waiting for charges, etc.) Additional cost reports (waiting times, etc.). Tradeline analysis for network optimization KPI reporting For freight cost control (meaning) For those unfamiliar with it, let me first explain the basic principles of freight invoice auditing. The core activity to which ControlPay is dedicated is freight auditing. For our customers, this means that none of the carrier invoices will be forwarded for payment until the details have been verified by ControlPay. This means that each carrier has to send their final invoice to ControlPay, which after review and approval by ControlPay is passed on for further payment. When ControlPay was founded 18 years ago, it processed thousands of paper invoices every week. In those early years, electronic freight invoices were still a long way off. The process of paying freight bills between large corporations and logistics companies consisted of long paper receipts that were sent back and forth and required a large stamp with the words "Approved" on it. As you can imagine, it took a lot of time, effort, and money to get a bill to their last stop. A standard paper invoice flow was as follows:

Day 1: The carrier received the billing instructions from ControlPay Day

2-5: The carrier issues a paper invoice and mailed it to ControlPay Day

5-7: ControlPay received the paper invoice and booked it into the system Day

8: If the invoice was created correctly, it was approved and mailed to the shipper; if the invoice was incorrect.

it was rejected and the carrier had to issue a new one. It was obvious that the procedure described above had to be changed. The high degree of ineffectiveness and the complicated paper routes were a thorn in the side of shippers and carriers. For the uninitiated: First of all, it took at least eight days to approve the verified and correct invoice. for more information click here

The following data can be extracted from your freight invoices so you can better review them: tenders, benchmark carriers, control of cost allocation, provisions and understanding of service costs. This enables you to view and simplify your logistics processes as a whole.