Parcel shipping charges can represent up to five to 10% of a company's total expenses. Fuel surcharges are driving that cost even higher. And shippers are looking to get a handle on the numerous surcharges that are becoming an ever growing share of their parcel shipping costs.
Therefore it’s imperative your parcel invoices be audited. There are just too many benefits to be missed if this process is skipped. Aside from the obvious savings realized by eliminating duplicate invoices and overcharges on these bills, the data captured during the audit process is invaluable for carrier negotiations, trend analysis, general ledger account coding and a number of other reasons.
In-house versus outsource
There are obviously a number ways to accomplish the complicated task of auditing, paying and capturing information from your parcel invoices. Outsourcing this function to a freight or parcel audit and payment company is probably the most commonly used solution. Surveys show that over 50% of shippers currently use an outside vendor. The advantage to this method is that it virtually eliminates any time or resource requirements on the shipper's part. The downside is the ongoing audit process fee.
The alternative solution is to perform this function in house. Many companies choose this route for a number of reasons. They want to maintain control of the coding and payment functions. Or they don't want to transfer funds to an outside vendor for carrier payment.
This in-house processing obviously assumes a certain level of expertise and requires a time and resource commitment on the shipper's part. Do you have EDI capabilities that will allow you to receive and process large volumes of invoices from your carriers? Is there someone on-staff with enough parcel rating expertise to develop an auditing system that can accurately calculate base rates, discounts, fuel surcharges, accessorial charges, on-time deliveries, etc.? And even when the rates are set up for processing, a substantial amount of time is required to update and maintain them due to fluctuating fuel surcharges, annual price changes, etc.
Available auditing and payment software products
There is hope, however. There are a limited number of parcel auditing and payment systems available that allow companies to automate and streamline their internal processing without the substantial time and cost required to develop an in-house system themselves. Many of these products are marketed by freight auditing and payment service providers who already have carrier rating, EDI and information processing expertise.
The overall objective of a system of this type is to allow you to audit your parcel invoices, pay your carriers, and analyze and report your logistics information with minimal manual intervention on your part. These programs typically offer the following features to accomplish this task:
- Ability to accept tracking level EDI invoicing from your carriers. This is critical to processing large volumes of shipment level detail.
- Auto-rating of carrier invoices. These programs will have your carrier rates built into a rating engine. As the bills are processed, they are compared to your contract rates and overcharges are identified. Late deliveries for express shipments are adjusted.
- Automatic general ledger account coding. Account codes can be automatically assigned to shipments through shipper-defined business rules.
- Ability to create carrier payments. Once your invoice data has been audited and processed, you're going to have to export this information for carrier payment.
- Data analysis and reporting capabilities. Probably the greatest benefit to these programs is the ability to easily query, analyze, report and export your logistics information. This function is invaluable for tracking costs including base rates, fuel expenses and accessorial charges; allocating costs to account codes, customers and vendors; producing shipping volume reports by lane for carrier negotiations; etc.
Summary
Due to the complexity of pricing, the increasing usage of accessorial charges, and the need to check for late deliveries, it's imperative that parcel bills be audited before payment. The cost savings realized and the data analysis and reporting available as a result of the process make this a wise decision for virtually any company.
Today, parcel auditing and payment products are available for companies that choose not utilize the services of an outside service provider. These systems streamline and automate the parcel audit and payment process by utilizing EDI invoicing and AutoRating of carrier invoices while offering easy to use data analysis and reporting tools.
Garry Oswald is Vice President of Sales and Marketing for National Traffic Service headquartered in Amherst, NY .He can be reached at goswald@natraf.com.
