Freight Audit and Payment Best Practices

Accurate and comprehensive data is the key to an organization’s success. Proper data enables a thorough analysis of systems and procedures within the business. This, in turn, leads to aligned strategic decisions that can boost the overall profitability and growth of the company.

Thorough data, often found through auditing and analysis, helps answer the following questions:

Where do you need to improve?

How do you cut costs?

What decisions do you need to make moving forward?

How are your processes aligned with organizational strategy?

A freight audit and payment system gives you the answers to these questions. The data collected from a reliable audit will help your organization understand broad costs as well as detailed expenses with the general purpose of boosting profits and bettering processes.

What Is Freight Audit and Payment?

Freight audit and payment is the term used to describe a type of transportation expense management process. It takes a deep dive into every expense, every activity, and even every truck in order to see where the overall cost is coming from.

The idea of freight audit and payment has been changing in recent years. This auditing is no longer just about “how much is transportation costing the business?” It isn’t just checking invoices to make sure you paid your carriers and they paid you. It’s no longer about accepting transportation expenses as they are.

Instead, freight audit has become a strategic part of the business. Transportation costs can be exorbitant. Rather than accepting the cost for what it is, a freight audit continuously watches these expenses to truly understand the company’s cost of goods sold, profit margins, and potential future success. These audits look at potential cost savings to determine where cuts could be made along the freight chain.

A freight audit looks at the department’s finances in terms of value and efficiency. How can you improve the numbers and the systems based on the way the audits look?

This process can help improve profitability, optimize logistics, and even be a tool for competitive advantage. If you can find ways to cut shipping and freight costs, you can improve the overall business: you’ll be able to cut costs for consumers, improve efficiencies, and better your service altogether.

To have a successful freight audit and payment system, you want tightened payment controls, accurate and thorough data, and strong analytical reports. This system should be able to:

• Calculate landing costs
• Analyze savings opportunities
• Enforce expense compliance
• Improve and clarify invoices
• Present analytical data

So how can you achieve a successful auditing system?

Freight Audit and Payment Best Practices

Set a strategy

Before you begin to implement a new auditing system, you want to understand and exhibit why it’s important. This begins by creating a transportation strategy and clearly defining a purpose. If you understand why this system is being put in place, you’ll be able to ensure that it’s appropriately managing and cutting costs in alignment with the transportation strategy.

Answer the questions: Why should there be a focus on freight auditing? Why does the organization care? How will this process improve profit margins? How will it help the consumer?

Take a holistic view of freight audit and payment. Look at how this system will fit into both the transportation department’s goals and the strategy of the organization as a whole.

Be communicative and flexible

It’s possible that your auditing process will interfere with other carriers and suppliers. Even though the process belongs to your company, it involves others as well. For thorough auditing, you generally have to gather information from partners and other parties, which can be a time-consuming strain on their resources.

To maintain a robust freight audit and payment system, you have to maintain strong relationships with your partners. Be flexible and adaptable. Show them how your company’s auditing system is also going to help them. Additionally, try to create a standardized two-way communication that simplifies auditing for all parties.

Standardize costs

Just as you should standardize auditing relationships with partners, you should also standardize costs. How can you set rates and limits that will make the process more cost-efficient? How can you harmonize all your finances?

Standardization creates more predictable expenses. With this predictability comes the heightened ability to see where cuts and improvements can be made in the system.

Promote transparency

Auditing should be a transparent and visible process. You’re examining and analyzing procedures and costs—and your workers are directly involved in these processes. When you make your freight audit and payment system visible, people can work together to innovate, grow, and enhance the organization. Furthermore, this makes your employees feel as though they are a part of the team. They can see what management is looking at to better understand changes. This improves engagement and makes for a more positive experience with the auditing system.

Automate

Switch to an automated system rather than doing it by hand. Automated auditing is cheaper and more efficient, and it can usually be personalized for your individual needs. Additionally, these systems have algorithms and software to quickly find and generate analysis reports. This is the fastest and simplest way to see where costs can be reduced or where more attention is needed.

Automated freight auditing systems are proven to save the company money on salaries, the cost of goods sold, and profit losses. You don’t need to worry about auditors losing their jobs by automating the system; you still need people who will strategically implement the cost-cutting findings within the transportation department.

The Bottom Line

You want a freight audit and payment system that’s quick, efficient, and automated. It should offer high-level reporting and analysis to determine how money is being utilized, how expenses fit into the overall COGS and profit-loss statement, and how to better improve financial strategy with regard to transportation.

Save money and improve freight management with Redwood Logistics. With our interactive tracking software, we can strengthen your transportation expenses towards heightened profits, growth, and success.

Contact us today about our Free Freight Auditing & Payment program, going on now!