What is FAP in Freight?

Updated: 02-21-25

Key Takeaways:

FAP Definition: FAP involves auditing transportation invoices and managing payments to ensure accurate billing and reduce errors.
Audit Methods: Audits can be manual, automated, or hybrid. Automation saves time and increases accuracy.
Process: The audit includes organizing invoices, validating rates, and cross-checking for discrepancies to identify billing errors and unnecessary charges.
Benefits: Regular audits uncover excess costs, prevent errors, improve compliance, and save time, leading to cost savings and better ROI.
Technology: Tools like Trax Freight Audit and Payment Software streamline the process, improve data compliance, and optimize costs.
Operational Impact: A structured FAP system boosts efficiency, reduces administrative work, and drives business growth.

When transportation management accounts for nearly 10% of costs incurred by shippers, it's clear that auditing is necessary to operate a supply chain efficiently. However, manually sifting through the data available and deriving meaningful insights is time-consuming, leading to operational inefficiencies in logistics operations.

Adopting a structured freight audit and payment system (FAP) streamlines this process while reducing unnecessary detention and unexpected accessorial charges. Read on to learn more about FAP in freight.

At Trax, we provide freight audit and payment solutions for global businesses. Contact us today to learn how our freight audit software can support your company's journey toward maturity in transportation spend management.

What Does "FAP" Stand for in Supply Chain or Transportation?

Freight Audit and Payment (FAP) is a term that may refer to freight audits, freight payments, or entire freight auditing and payment systems.

Freight Audit

During a freight audit, a company gathers all transportation invoices and compares them to established rate agreements and carrier contracts to validate costs. This ensures that the charges on an invoice are accurate so that the shipper and carrier are both satisfied with the business transaction.

Freight Payments

Freight payments typically refer to accounts payable services for transportation invoices, which can include information coming from third-party vendors and the processing and payment of invoices.

Freight Audit and Payment Systems

Combining the processes of invoice collection from freight invoice audits and physical payment to carriers, we arrive at FAP systems. FAP systems are designed to manage the multiple components of freight audits and payments more efficiently than an in-house team.

Understanding the Freight Audit Process

There are several ways to approach the freight audit process: manual, automated, and hybrid. Individuals complete the entire freight auditing process without automation technology during a manual freight audit. However, a manual audit takes time and resources. In addition, manual audits are subject to human error.

Most companies have upgraded to include some tech-based automations for freight auditing. An automated freight audit process involves electronically reviewing the payment system of carrier invoices, which saves time and cuts shipping costs. With an automated approach, a shipper utilizes specialized software designed for freight audit and payments. Your company can use a custom in-house solution or outsource the process to an auditing firm. In addition, an automated process ensures greater consistency and accuracy.

Finally, there is also a hybrid approach to freight auditing, which combines manual labor with automated steps or elements. For example, tasks may initially enter the automated system, but a human is assigned to investigate and make corrections as needed if a problem is identified.

Auditing Freight Invoices and Bills

The freight audit process follows a standard set of steps, regardless of whether it is conducted manually, through automation, or using a hybrid approach. First, invoices should be organized according to the scope of the audit. This could involve categorizing invoices by time frame, such as weekly or monthly, depending on available resources. Next, rate cards and rate confirmations are validated to ensure they align with the agreed-upon terms. Following this, zone and postcode files are matched to the corresponding rate cards.

Once validation is complete, a manifest is created that lists all available field data. It is essential to verify this data across multiple sources, including invoices, rate cards, and the manifest itself. After cross-validation, if discrepancies are identified, the shipper may create a consignment verification and compile a credit request. In such cases, it may be necessary for the shipper to negotiate a payment solution with the carrier's account manager.

Implementing these steps systematically enables shippers to conduct a thorough and effective freight audit process that identifies discrepancies and uncovers potential cost-saving opportunities.

What a Freight Audit Can Uncover

The benefits of performing regular freight audits cannot be overemphasized. When a company commits to a structured freight audit and payment system, there are opportunities to uncover problems that may have otherwise been overlooked.

Unnecessary Costs

By either manually going through every invoice or adopting software that can validate the data, freight audit systems can uncover excess charges. For example, a freight audit can detect unnecessary detention and demurrage charges, such as delays in the return of a container.

Likewise, by cross-referencing all of the fee calculations, a freight audit can alert a company's finance team to unexpected accessorial charges for a la carte services, like reweighing. The sooner you adopt a structured FAP system, the sooner you cut out extra costs and improve your return on investment (ROI).

Time Wasted

Uncover operational inefficiencies in your business. For example, when you replace fully manual FAP processes with automated or hybrid techniques, you can increase efficiency and save time across multiple departments.

Instead, focus on your core business and service customers rather than spending most of your time on administrative duties. Time is money. Allowing team members to focus on more complex issues is a better use of their time and, subsequently, better for your bottom line.

Invoice Errors

Billing errors are inevitable, but uncovering them sooner allows a company to address these issues and rectify them before larger problems emerge. If your team or your internal software is properly auditing all invoices, you can quickly calculate shipping costs, see and pay freight bills on time, and streamline payment services.

The key to preventing future invoice errors is to catch them early and find out the root cause. Then, you'll have the chance to optimize logistics and make corrections that will carry over in the future.

Compliance Issues

Uncovering compliance issues isn't ideal, but it is certainly better than finding out about them when it's too late to correct things. Having a structured freight audit system helps identify any noncompliance with routing guides that can make or break a contract. By confirming continuous compliance, your company establishes a firm footing as a market leader and is more likely to attract buyers' attention and secure supplier agreements.

Missing or Incomplete Data

Having a solid FAP system in place uncovers potentially missing or incomplete data by providing end-to-end visibility into operations. For example, if you're missing information about routing rules or approval parameters, catching that early and filling in the missing pieces can save time, money, and even contracts.

Freight Audit and Payment Services Tools

While it is theoretically possible to have a completely manual freight audit process, the goal should be to find the most reliable tools that streamline and accelerate the process. As a global leader in Transportation Spend Management, Trax technology empowers organizations to gain control and visibility over their transportation costs.

Our overarching mission is to move your organization forward, leveraging sophisticated tools to improve operations. Companies that work with Trax gain the power to optimize processes and advance innovative solutions.

Trax offers the best freight audit and payment software, one that your company can begin using right away and rely on for this vital function.

Trax Freight Audit and Payment Process Software

With Trax Freight Audit and Payment Software, companies gain a competitive edge in Transportation Spend Management. Freight Audit can support 100% data compliance across all invoices, shipments, and rates, no matter how complex your current system is. Feel confident when you settle and pay freight bills while also optimizing costs for your organization.

Schedule a consultation with us today.