If you are new to freight auditing, the process by definition can be a lot to take in. In short, a freight auditor will examine your freight audit records, invoices, and financial accounts and suggest adjustments to those accounts. They will also examine freight invoices for accuracy for the purpose of determining how to maximise savings.
Read on to learn more about freight auditing and how outsourcing this complex process can assist you to turn your current freight costs into incredible savings and profits over time.
What are freight costs?
Companies across the world incur costs associated with moving items from one location to the next. Whether you are an online ecommerce merchant or a large distribution company, freight costs are a common factor in our modern world of consumer trading. Large freight costs are usually done via a contract with a freight carrier and include processes such as packing and unpacking, loading freight, logistic, transport insurance and documentation, just to name a few.
But there are many hidden costs in the freight industry, which are often overlooked and can lead companies to be drastically overcharged, particularly over the course of many years. Such costs are hidden in destination charges, fuel levies, weights, kilo rates, pallet and carton rates, volume discounts and annual rate increases. There are also many variables freight companies use to increase their profits, which makes managing one’s own freight audit almost impossible.
Why a freight audit is important and why this is a complex process
Due to the increase in oil prices, transportation and freight prices have risen dramatically. Because of the constantly changing environment of oil prices and freight, the process of organising freight is highly complex. Companies big and small can lose substantial amounts of money each year
Some companies who are using freight carriers spend up to 10 per cent of their budgets on freight, so getting this daily equation right is extremely important.
An independent freight rate auditor is vital in removing a company’s risk of overspending due to these many and complex factors.
Companies don’t have the time to check
There’s a lot involved in calculating freight rates correctly and most customers are daunted by the idea. When a customer has high shipment volumes, they may try to calculate their large number of shipments via the multiple spread sheets supplied by freight forwarders, however this is extremely time consuming and it could be time better spent. When a company is not outsourcing their freight auditing, typically, they will only have time to do random checks and a smaller sampling of invoices monthly, in an attempt to see if they are receiving the correct rates and invoices. This approach is neither effective nor efficient.
Why outsourcing is becoming the norm
As a result of these facts most companies are realising that they would be better placed to outsource the complex process of freight auditing. While some companies try to do the job themselves, the sheer manpower of the job is enough to turn them off. Their lack of expertise and limited in-house resources makes this endeavour unsuccessful in achieving their dual goal of balancing staff resources with freight cost reductions. Smarter companies believe that outsourcing freight auditing is the best course of action.
Three models of freight auditing
This is where in-house staff manually process invoices and undertake their own audits. They try to find the costs, mistakes and rising charges as their international transportation volumes grow. But this method is difficult and as freight volumes and costs rise, as does the in-house cost of doing manual audits. Manual matching, therefore, becomes a very expensive exercise.
Some companies buy expensive software to determine rates and electronic integrations of the carrier. This method is also expensive in terms of keeping the software up-to-date and takes time to train staff on the use of the software. Unless a staff member is specifically employed to undertake these tasks, performing audits takes staff members away from doing other important tasks relating to the business.
A company can remove the hassle of freight auditing by hiring an expert freight rate auditing company. Freight auditing companies are highly skilled in the task and there is no need for companies to hire and train staff to do the job. This also eliminates risk on many levels. If staff members leave the company, the training does not also go with that staff member. Further, the company does not need to incur costs in expensive software and upgrades on an ongoing basis.
Note: A freight-auditing model is different from a Freight Broker. Brokers may take may make 10-30 per cent on the actual rates but on top of this attain another 20-50 per cent on the cubic conversion.
Leveraged Outsourcing – The Future of Freight Rate Auditing
Freight Cost Solutions™ takes the outsourcing model further with their win-win business model. Their complete solution only takes a percentage of the savings made by a company. Customers become the owner of the total savings rather than the broker via a transparent and honest ‘open books policy.’
As both an Application Service Provider (ASP) and Business Process Outsourcing Service (BPO), Freight Cost Solutions™ combines two expert systems. Their business model leverages several winning factors:
- A team of expert and trained forensic audit staff.
- Cutting-edge software.
- Years of experience in the freight industry.
- A ‘no hidden fees’ and transparent ‘open books policy’ business model.
- Win-win cost savings that remove the middleman.
This model provides a complete solution for customers and solves the current challenges faced by customers in today’s complex freight industry.
Are you outsourcing your freight requirements? Contact us for information on how we can save you hundreds of thousands each year through better freight management.
BIO: Darren Ash is the owner and managing director of Freight Cost Solutions™. With a Bachelor in Social Science, Darren has a thorough understanding of the industry and he strongly believes in adding honesty and integrity into the freight rate process. With vast experience and expertise in freight and service capabilities, Darren and is regarded as a leading figure in logistics.