Freight payment companies frequently tout audit savings as a key metric to validate the ROI for their customers. Some of these savings are actually an indication of an inefficient and broken process that detracts from the value of outsourcing freight payment, but that topic will wait for a later post.Generally, any amount deducted from the billed amount is reported as a savings to customers. Therein lies the problem.
Many times, freight payment providers who “short pay” invoices (reduce the amount paid to the carrier by the amount believed to be billed incorrectly) end up processing the same balance due invoice multiple times because they don’t have a closed loop process for correcting billing errors at the root. The automated audit systems utilized by freight payment companies and the automated billing systems utilized by carriers conspire to produce a vicious cycle of short payments and balance due bills that show the same “savings” multiple times.
One can easily determine if this is occurring in a freight payment solution by querying the data and grouping or sorting on the invoice number and analyzing the deductions or short payments. A user should keep in mind some carriers add “check digits” to balance due invoices (Example: Invoice 23857-1 or 23857-A). So, one may need to simply sort by invoice number to see how many times an invoice has been processed and short paid for the same amount. Another alternative is to group or sort by bill of lading number, although this will only report upon outbound shipments. Note that the same invoice number may be present for multiple carriers so one should be sure to include the carrier name or carrier identification code (e.g. SCAC code) in the query.
The queries above are not exhaustive and don’t include every variable you may want to include in your analysis, but should provide you with a solid foundation to start the validation of your true audit savings.
PS: Don’t forget that a shipper will likely pay a fee per transaction, so not only are their savings being overstated, they are paying a lot more to have that transaction processed than they believe.