Freight logistics are ever changing, subject to the constant ebb and flow of supply and demand. Freight rates are similarly in flux, made all the more complex by the many variables that go into calculating the expense of individual shipments. Even shippers selecting from a well-vetted pool of carriers can find themselves combing through complex invoices with numerous variables dictating the total cost.
As is common with already complex practices, the more variables added to the equation, the more difficult and prone to error the situation becomes. Such is the case with complex freight rates. It all adds up to an arduous freight bill audit process, where every contributing variable needs vetting to ensure total bill accuracy.
The many moving parts of freight logistics
Freight rates change daily. The spot market is a constant give-and-take that’s governed by supply and demand, among other factors. Moreover, how companies approach the freight transportation market is highly situational — their needs may differ significantly from the many other companies vying for space or capacity. The destination, season, terminal fees, logistical considerations, and more become price-dictating variables. It all culminates to a bottom-line price that’s (quite literally) the sum of many moving parts.
It’s also important to remember that gaps in expectation can easily creep into freight rates. The quoted rate based on a bill of lading (BOL) might be X, but the final invoice might include Y cost, which reflects unforeseen variables in the form of accessorial charges. The onus is then on the shipper to determine what’s accurate and where the discrepancy comes from. Again, this means dissecting the many complex variables that comprise the invoice.
Is it any wonder 20% of customers pay incorrect freight invoices — or upwards of 30% of ocean invoices are incorrect?
Complex variables demand attention during audit
While staying abreast of changing rates and tallying transport costs based on a BOL can get complicated, the majority of inaccuracies in freight invoices stem from charges that are unknown or unaccounted for at the outset, such as accessorial fees and carrier charges.
There are BOL terms to consider, as well, which dictate who pays whom, how much, and under what specific circumstances. Examples that can complicate a freight invoice audit include:
- Consignee collects. Recipient of delivered goods pays freight charges upon receipt.
- Prepay and add. The shipper pays freight charges upfront and then invoices the customer.
- Third party. A 3PL pays freight charges, rather than the shipper or recipient.
- Cash-on-delivery. The carrier collects payment and forwards to shipper for reimbursement.
Additionally, there are free-on-board (FOB) and various iterations to consider, which all dictate different expectations for freight costs and the party responsible for paying them. Couple these with situations where pro-rata or dead freight rates come into play and the final freight invoice becomes a tangled web of costs that may (or may not) be accurate.
Closing the gap in freight invoicing
As one might imagine, it’s incredibly time consuming and difficult to comb through the many situational cost factors and details contained within a final freight invoice. It’s why freight bill audit is often an outsourced, intelligently automated process — one that’s well worth the cost in the amount of bottom-line savings it’s able to generate by catching overpayments before they’re made.
Freight rates and terms aren’t getting any simpler; in fact, they’re prone to even more complication in the post-pandemic era. Do you have a freight bill audit partner to ensure you’re not overpaying on costly invoice errors?
Struggling to decipher the many variables that factor into freight bill auditing? Partner with nVision Global and let us help you verify each and every cost, to validate or remediate invoices with confidence. Visit corporate.nvisionglobal.com to learn more about our freight bill audit capabilities.