Auditing freight bills is essential for keeping margins strong—helping to rectify invoice errors and put money back in the bottom line. But the freight audit process is not uniform across providers, and this can have a major impact on the value freight auditing can bring.
Even if two companies generated identical freight bills with identical mistakes, they could still wind up with drastically different results—both in terms of dollars saved and long-term business outcomes—depending on the type of freight auditing they invest in. Here are a few factors to consider when evaluating providers or deciding whether or not to switch from a traditional to a next-gen freight audit company.
Traditional freight audit companies aren’t incentivized to drive continuous improvement
Most legacy freight audit companies operate on a post-audit basis—reviewing invoices after they’ve already been paid, finding any mistakes, and ensuring the shipper is credited for them. They then charge a percentage of every error they find.
On the surface, this may seem like a good thing. The more errors the company finds, the more money it makes, so the more motivated it will be to track down mistakes, right? Well, yes, and that’s part of the problem—because this model removes any incentive to permanently rectify recurring mistakes.
Say one carrier is consistently applying an erroneous accessorial charge to invoices. The freight audit company could flag this to the shipper and carrier to prevent it from happening again. But if the problem is fixed, the company won’t be able to charge for it again, so it’s in its best interest to let it continue unchecked.
By contrast, next-gen companies like CTSI-Global tend to pre-audit freight bills and charge a flat fee for their service. This not only improves the accuracy of accruals, since errors are caught and rectified before an invoice is paid rather than weeks after the fact, but also motivates the freight audit company to drive positive change. After all, they’re charging the same amount no matter how many errors they find—but if they provide exceptional service, they’re more likely to retain clients and earn referrals.
At CTSI-Global, for example, we generate carrier report cards, making it easy for shippers to assess whether the lowest-cost carrier is actually delivering on its promise or is causing more accounting problems than it’s worth. This allows our clients to make more informed decisions about the carriers they work with.
Next-gen freight audit companies deliver additional value through business intelligence
Another reason to consider working with a next-gen freight audit company is the business intelligence and advanced analytics capabilities it brings to the table.
Let’s assume a shipper reaps immediate savings of about 3-5% regardless of the type of freight audit company it works with. With a legacy provider, the savings stop there. But with a next-gen company, the insights generated from all the invoices processed unlock a goldmine of opportunities to save even more money.
For instance, next-gen companies can run “what-if” scenarios, backed by millions of data points. This can help shippers to evaluate things like whether direct or multi-modal service will be cheaper, so they can make strategic changes to bring costs down—without negatively impacting clients.
Next-gen freight audit companies provide shippers with unparalleled visibility
At many companies, data becomes locked up within different transportation management systems (TMS) and enterprise resource planning (ERP) platforms, creating barriers to visibility. Varying invoicing formats between carriers can exacerbate this issue, making it hard for shippers to gain a complete picture of their spend.
Next-gen freight audit companies can eliminate this problem by capturing, centralizing, and normalizing data to provide total visibility. This can help shippers understand what they’re actually spending in any given lane—which is often significantly more than they originally believed.
This isn’t necessarily a bad thing to discover. After all, knowledge is power, and a shipper realizing it’s moving more volume in a lane than it thought it was could actually help it save money, allowing it to offer more volume to carriers to access lower rates. This knowledge can also improve planning—such as indicating a prime spot for a new distribution center.
Get more value from every freight bill audited
CTSI-Global is a leader in next-gen freight audit solutions—delivering impressive savings and next-level insights.
Why settle for an outdated approach? Maximize your savings: contact us today.