When you ship goods from place to place, you need to know that you’re paying the right price and that those goods make it to their destinations intact. Freight audits are regular and vital processes that allow you to double-check freight invoices.
If you've never done a freight audit before, or aren't sure how it works, read on – we'll break down freight audits in detail.
What Are Freight Audits?
A freight audit is an investigatory process in which a shipper verifies freight bills, cargo loads, and other vital details after completing recent shipments.
For example, a freight audit may examine the freight bill – the invoice of costs given to a shipper from a carrier – to ensure that the shipper paid the correct price based on load weight and transportation distance.
Freight audits can also concern things like:
- Whether cargo loads make it to the correct locations
- Whether cargo loads are delivered on time and in an undamaged condition
- Whether there were any ancillary or extra costs, like detention fees
- Which weigh stations the carrier stops at (if any)
Essentially, freight audits double-check all the costs and essential metrics associated with a shipment. It's similar to performing an inventory audit for retailers/vendors.
What Kind of Errors Can You Find in a Freight Audit?
Over the course of a standard freight audit, you may encounter one or several potential errors, which may require correction on your part or a call to your carrier/transportation company.
Detention Penalties
Detention penalties are very standard fees in the shipping industry. They're levied for any delays to the carrier's pickup time. However, detention fees can be expensive and add up over time if you don't control them.
Therefore, you should regularly audit detention error rates. This will help you learn whether a carrier is under or overcharging you for these fees. Generally, you'll be charged two different fees:
- Per diem fees, which occur if the shipper (you or another organization) doesn't release the cargo or merchandise at the predetermined time
- Driver detention fees, which apply if the driver is detained beyond any free time calculated for loading and unloading their truck
If detention penalties/fees are higher than usual, you'll need to correct them or speak to your carrier.
Shipper Inaccuracies
Shipper inaccuracies can and do occur by accident all the time. For example, a document might direct a carrier to deliver cargo to the wrong destination or tell them to pick up the wrong type of cargo.
Freight audits are most important so you can catch shipper inaccuracies before they impact your bottom line or supply chain. Think of a freight audit as a chance to see any shipping inaccuracies before your carrier leaves with your cargo.
Accessorial Charges
Many carriers will charge accessorial fees if they must perform duties outside of their standard tasks or beyond regular pickup/delivery times and routes.
For example, you might be charged accessorial fees if the driver has to perform extra labor to deliver cargo to a limited access delivery area or if they have to pick up cargo from a residential area.
A freight audit will let you identify these charges and then have a conversation with your carrier.
You can avoid accessorial charges or errors if you and the carrier have clear expectations of each other's duties and obligations and if you know how your shipping destination will receive the cargo load(s).
Shipping Weight
From time to time, freight may be improperly categorized or weighed. Because of this, you could be charged more than the standard or going rate for a given freight type. A freight audit will help ensure you aren't overcharged because of shipping weight inaccuracies.
How Do Freight Audits Work?
Because of their complexity, freight audits can be carried out in three distinct ways: manually, via software automation, or a combination of the two.
Manual
With the manual freight audit process, you'll perform the audit step-by-step using manual labor. Naturally, this is very time-consuming, and it exposes you to further errors.
It's easier for humans to make mistakes when looking through lists and charts of numbers and cargo load descriptions than computers.</p
You must be able to accurately compare invoices, shipping documents, and other information from memory to carry out a manual freight audit correctly. If you choose not to do a freight audit yourself, be sure that you trust the person you assign the job.
It may be wiser to assign two or more people to do the manual freight for the best results. That way, they can check each other's work and ensure that there aren't any preventable mistakes.
Automated
Most shippers and transportation companies use automated freight audits instead. Automated audits use electronic software to:
- Quickly compare invoices against each other and examine current market rates for shipping prices.
- Quickly compare shipping loads and orders to ensure that carriers pick up and deliver the right cargo.
- Determine whether the cargo is delivered on time and in the correct condition/quantity.
- Determine whether a shipper/carrier is being charged unfair fees or is being expected to do things beyond their stated duties.
Automated freight audits are advantageous because they are faster and less likely to result in errors. Specialized software doesn't make mathematical mistakes, for example, and can quickly find problems between billing invoices.
Shippers can use either customized, in-house software or outsource the freight auditing process to a dedicated firm. In any case, consistent, streamlined, and fast results are guaranteed.
Combination
That said, some shippers like to use a combination freight audit process. Combination freight audits use specialized software for most of the labor.
However, a human supervisor or manager then looks over the more technical or complex parts of the audit to make business decisions or to catch things that a computer system might miss.
Furthermore, the combination freight audit process calls for any data flagged by a software app, such as a potential invoice error, to be reviewed by a human.
This way, a human can make an informed decision about potential flags or mistakes rather than relying on the software to make wrong guesses.
Any method of performing a freight audit can work. However, it's recommended to either use an automated freight audit process or a combination process. If you sign up for the exemplary transportation service, the shipper might offer freight audits as part of their packages.
Why Should You Use Freight Audits?
There are many reasons why you should use freight audits regularly, even if you believe your carrier to be honest or if you trust your transportation provider.
For starters, freight audits will ensure that any shipping invoices are accurate and reflect the actual freight costs you need to pay.
Note that invoice errors can happen by accident instead of through deliberate actions. Still, a freight audit can catch such invoice problems and allow you to correct them instead of overpaying for a given shipment.
You'll also avoid paying more than the current going rate for your shipments.
It would help if you also used freight audits to ensure your cargo gets to the right place, in the correct quantity, and in the proper condition. This is even more important for perishable goods, such as foodstuffs.
Freight audits are also a good idea when you've just hired a new transportation company or carrier and want to ensure you can trust them for future shipments. If the freight audit reveals no errors, odds are they are trustworthy and can be hired for future jobs.
The Bottom Line
In the end, freight audits are typical tools you can't afford to ignore and should perform regularly.
Even if you trust your carrier or shipping company, doing a regular freight audit from time to time is a good idea to ensure that human error doesn't result in an inaccurate bill or other issues.
Fortunately, carrying out an accurate freight audit is easier than ever with RPM.
As a trusted end-to-end transportation provider, we give you the tools you need to track shipments, make sure cargo gets to its location on time, and offer all the data you need to verify the accuracy of your invoices and other shipping records.
Contact us today to learn why RPM is the best choice for all your shipping needs.
Sources:
Freight audit & freight payment services | U.S. Bank
What Does Per Diem Mean? | Investopedia
Accessorial Charges | SCM EDU
