Updated 04-15-25
Key Takeaways
- Freight settlement is the goal of a mature freight payment process, requiring complete and accurate invoice data.
- Automation in freight audits reduces errors and administrative costs while improving data standardization.
Timing audits properly ensures errors are caught and corrected before major costs are incurred. - Comprehensive audits require complete, clean data and advanced analytics tools like AI and IoT.
- Optimizing audits with reliable data leads to better forecasting, compliance, and long-term cost savings.
According to Logistics Management, there are four stages of maturity to a shipper’s freight payment process. The goal is to arrive at step four, which is referred to as “freight settlement.”
At this stage, not only does the shipper pay for and receive the agreed-upon services, but all freight invoice data is in a usable format. Therefore, supply chain leaders must adopt complete freight invoice auditing processes to achieve freight settlement. This article reviews the four key components of a reliable freight invoice audit.
Trax empowers supply chain leaders worldwide to advance their freight invoice auditing process and ultimately achieve freight settlement. Trax’s Global Freight Audit software allows global enterprises to identify and resolve transportation risks through sophisticated data analysis processes and automation.
What is a Freight Invoice Audit?
A traditional freight audit process includes five steps:
- Centralizing invoice data
- Categorizing and standardizing data
- Verifying charges and items
- Data analysis
- Freight audit reporting
This thorough review allows supply chain leaders to cut costs, optimize operations, improve data visibility, and ensure accurate and timely payments. In addition, by completing regular freight invoice audits, enterprises gain a competitive advantage.
The Challenge with Freight Invoices
Freight invoices contain extensive information, including the names of the shipper and carrier, date of shipment, point of origin and destination, payments applied, number of packages, and a freight description.
While having access to all this data can offer benefits in terms of analysis and forecasting capabilities, it’s also possible for information to be lost, misinterpreted, or misclassified. Because of this, at minimum, 20% of all freight invoices contain errors. These include duplicate payments, billing, and human and process errors.
Global supply chain leaders can implement a structured freight invoice audit process to combat issues with poor visibility, overcharges, and costly accessorial charges. It’s important to recognize what makes a successful FAP process so businesses can create more cost savings opportunities and ensure accuracy through their transportation management systems.
1. Automation in Freight Audit and Invoicing
While freight audits can be completed manually, introducing automation gives supply chain leaders freight spend cost savings opportunities by saving on administrative fees while improving accuracy. Relying on manual processes to verify freight invoice audits increases the risk of human error.
Automating the freight invoice auditing process enables enterprises to abide by all business rules. For instance, a solid freight audit and payment (FAP) program will standardize the data collection, including cleansing and normalization protocols, to ensure the highest accuracy.
Data integration is simple to automate when the right software is in place. Because freight invoice data tends to come from disparate sources, integration is key to keeping all files compatible and usable for regular audits.
Ultimately, outsourcing freight auditing with FAP technology enables companies to experience all the benefits of automated processes with a plug-and-play interface.
2. Timing Freight Invoice Audits
Because freight invoice audits must be completed regularly, time is of the essence. Enterprises can think about the pre-auditing process early to ensure the data is ready before each structured audit. The pre-audit compares the charges to the contractual agreement between shippers and carriers to uncover incorrect rates, accessorials, fuel charges, or tax inconsistencies.
When timing is optimized for freight invoice audits, supply chain leaders catch errors sooner. Doing this allows them to correct mistakes and recalculate rates before they incur major costs.
Freight invoice auditing is an ongoing process. To manage it, a FAP tech stack should be chosen and implemented as soon as possible. Transportation Spend Management software is designed to go through each step of the freight invoice audit at the appropriate time so that supply chain leaders know when to expect their reports and analyses.
3. Comprehensive Freight Invoice Audits
When data is incomplete, the accuracy of a freight invoice audit is compromised. The right freight audit and payment solution provides end-to-end visibility into all available data. Part of the challenge is dealing with larger data sets and big data analytics.
Reliable data analytics tools, systems, and technology organize and mine data for meaningful insights. Internet of Things (IoT), machine learning, and artificial intelligence contribute to a comprehensive freight invoice audit because the process is ultimately more than just verifying costs.
Different types of analysis are used in the freight invoice auditing process depending on the goals. Looking at internal data, vendor data, and customer data, analysts can better understand complex behavior in the supply chain, which uncovers inefficiencies. Real-time tracking improves forecast accuracy while helping leaders make more data-driven decisions related to delivery.
4. Optimizing the Freight Audit Process with Data
Once an enterprise has a FAP system in place that they can trust, it’s important to look at what comes next. Leaders can scale and optimize their enterprise based on everything they’ve learned from the data and auditing process. Through extensive analytics, there are different data applications, but only one source of truth.
The first step is to choose a proven analytics platform. Next, identify the company’s priorities, whether saving time by improving efficiency, cost-saving opportunities, or ensuring regulatory and contractual term compliance. One of the most important aspects of freight invoice auditing and data analytics is choosing tools that match the current system’s capabilities.
The benefits of advanced analytics in the freight invoice auditing process cannot be overstated. Positive outcomes include:
- Normalizing data
- Lowering the risk of errors
- Better business intelligence
- Ability to identify trends
- Process optimizations
- Cost savings
When businesses gain a deeper understanding of the supply chain, they can apply this knowledge to the freight payment processing system.
Better Audits for Freight Invoices
According to Inbound Logistics (regarding the FAP market), “no matter where they’re based, a growing number of shippers are looking for freight bill information that takes a global perspective.” Tech-driven audits are cost-effective and data-rich. By normalizing the data, the system can run continuously with automated rules and requirements that will be met.
The days of manual freight auditing are gone. Supply chain technology and automation are necessities, not luxuries. Trax’s freight audit and payment services encourage companies worldwide to move toward transportation spend management maturity.
Take the next step toward uncovering efficiencies and saving costs by scheduling a consultation today.