From Financial Drain to Business Gain: Exposing the Dirty Secret of Freight Audit

Introduction: In this blog post, I delve into the world of general freight audit, highlighting the potential rip-offs and how businesses can uncover hidden costs while maximizing savings. The freight audit process involves verifying and reconciling transportation invoices to ensure accuracy and avoid overpayment. However, there are instances where businesses can fall victim to costly mistakes and unauthorized charges, leading to significant financial losses. By understanding the common pitfalls and implementing effective strategies, businesses can protect their bottom line and optimize their freight audit practices.

1. The Importance of Freight Audit: Freight audit is a crucial step in supply chain management, as up to 10% of freight bills contain errors [3]. Incorrect rates and charges, duplicate bills, and unauthorized charges are among the most common mistakes that can drain resources and impact profitability. By conducting a thorough audit, businesses can identify these errors, rectify them, and minimize unnecessary expenses.
2. Uncovering Hidden Costs: The freight audit process is essential for uncovering hidden costs that may go unnoticed. It involves pre-auditing invoices for accuracy, approving invoices for payment, and conducting a post-audit for analysis [3]. By scrutinizing invoices and identifying discrepancies, businesses can prevent overpayment, saving between 2% and 5% of their total transportation costs [3].
3. Maximizing Savings: Effective freight audit practices can lead to significant cost savings. Freight bill auditors have the expertise to recover between 1% and 5% of transportation costs [3]. By leveraging their knowledge and conducting thorough audits, businesses can identify billing errors, negotiate better rates, and optimize their transportation spend.
4. Avoiding Supply Chain Nightmares: The freight audit process is crucial for avoiding supply chain nightmares that can result from inaccurate billing and unauthorized charges. By conducting regular audits and implementing robust controls, businesses can mitigate the risk of costly mistakes, ensuring smooth operations and maintaining customer satisfaction.
5. Who is your freight auditor? I often say – if your main expense or problem area, for example, is ocean freight – do you really want a freight audit and payment auditor or post auditor who’s main knowledge is “truck” to audit something so complicated as an ocean freight receipt for shipment date? This is sort of like hiring a plumber to look at your teeth, or a dentist to repair your plumbing. CFO’s get sold a bill of goods when what they really want are solid financial controls on their working capital.