Choosing the Right Freight Audit Provider: A Detailed Guide for Shippers
Selecting a reliable freight audit provider is one of the most important decisions a shipper can make. With the right partner, you can identify and recover overcharges, streamline processes, gain visibility into transportation spend, and ultimately reduce costs. However, finding the perfect match requires in-depth research and evaluation.
This comprehensive guide will walk you through the key factors to consider when vetting prospective freight audit companies. Follow our tips below to choose a provider that aligns with your specific needs and supports your overarching supply chain objectives.
Define Your Requirements
Before even beginning your search, clearly lay out your must-haves for an ideal freight audit partner. Ask yourself:
What transportation modes will they need to audit?
Do you only ship TL (truckload) and LTL (less than truckload), or are air and ocean freight part of the mix too? Make sure any prospective provider can handle all your shipping channels.
What volume of freight spend will they be auditing?
Large, complex transportation networks will need more sophistication and bandwidth than smaller shippers.
Where are you shipping to/from?
Domestic, cross-border, global? Auditing international shipments requires expertise in classifications, tariffs, and regulations across multiple countries.
What is your tolerance for risk?
Some shippers prefer 100% pre-payment audits to eliminate billing errors on the front end. Others are comfortable taking some risk in exchange for faster processing.
What level of customer service do you expect?
Look for a provider that matches your standards for response time, communication preferences, escalation protocols, and more.
Clearly defining these parameters early will help you zero in on the providers most qualified to meet your needs.
Assess Their Technology Capabilities
The right freight audit software can optimize efficiency, visibility, and savings. When vetting providers, look for:
Advanced automation and exception-based auditing
This approach uses data analytics to flag only the highest risk bills for manual review instead of auditing 100% of bills. Shippers can cut audit costs while maintaining accuracy.
Integrated transportation management system (TMS)
An integrated TMS gives shippers a centralized platform to execute, manage, track, and audit freight moves in a shared database. Data flows seamlessly without duplicates or manual entry across systems.
Reporting and business intelligence
Robust reporting enables data-driven decisions on shipping. Look for customizable dashboards, analytics, benchmarking across carrier performance, modes, and other KPIs.
Carrier contract management
Centralized access to carrier contracts ensures bills are audited according to agreed rates and terms for greater accuracy.
Verify Their Audit Methodology
Freight audit providers may utilize a pre-payment, post-payment, or hybrid auditing model.
Pre-payment auditing
The provider reviews and approves carrier invoices before they’re paid. This prevents overcharges from occurring but can slow the payment process.
Post-payment auditing
Invoices are paid immediately then audited after-the-fact to identify any overcharges. This is faster but you may need to recoup overpayments later.
Hybrid auditing
Uses a combination of pre-payment and post-payment, typically flagging higher risk bills for pre-payment but allowing lower risk invoices to fast-track. This balances risk management with efficiency.
Look for a methodology that aligns to your tolerance for risk, need for speed, and appetite for disputing overcharges after-the-fact.
Verify Their Accuracy Rate
There can be zero tolerance for error when auditing freight bills. Before partnering with a provider, verify their proven audit accuracy rate. Look for 95% or higher; anything less suggests potential for considerable leaked transportation savings.
Evaluate Their Dispute Resolution Process
Even with air-tight audits, disputes with carriers may arise. Choose a provider who can not only identify but also successfully resolve overcharge claims on your behalf, keeping the burden off your team. Typical dispute resolution services include:
- Formal escalation protocols for addressing carrier disputes
- Benchmarking carrier dispute rates against industry norms
- Leveraging shipment and carrier performance data to win disputes
- Assuming financial risk for failed dispute recovery to guarantee your reimbursement
Understand Their Pricing Model
Freight audit providers typically price services based on:
- Percent of recovered revenue – The provider earns a cut of all overcharges successfully identified and recovered. This incentivizes maximal cost recovery for shippers.
- Per transaction – Shippers pay a flat rate per bill audited. Simple and predictable but less incentive to maximize overcharge recovery.
- Hybrid – Combination of both, including caps and floors to limit upside/downside risk.
The model that works best depends on your risk appetite, need to control costs, and confidence in your provider’s capabilities.
Vet Their Data Security Standards
Freight invoices contain highly sensitive shipment data. Before partnering, thoroughly vet how data is secured:
- Ask about their security standards, protocols, and certifications. Top providers will have robust measures in place and may be ISO 27001 or SOC 2 certified.
- Verify data encryption protocols for data both at rest and in transit. Look for top standards like TLS 1.2+ and 256-bit AES.
- Understand policies for data access. Data should only be accessed on a strict need-to-know basis by authorized personnel under robust cybersecurity controls.
- Ask about employee screening. All staff handling your data should undergo rigorous background checks.
- Ensure they have backup and disaster recovery systems in place to prevent data loss in the event of breaches or outages.
- Require regular audits. The provider should undergo frequent independent audits of their data security environment. Review their latest audit results.
Compare Pricing of Different Providers
The combination of audit fees and your share of recovered revenue makes the “true” cost of a freight audit provider. Thoroughly compare proposals from multiple bidders to understand the net impact under different scenarios. Pressure test their assumptions to ensure the best value.
Ask prospective partners to audit a sample of your recent freight bills to generate a free analysis of potential recovery opportunities. This will provide more tangible insight into the value they can unlock.
Speak to References
Vet all prospective freight audit providers thoroughly before engaging. Ask for multiple shipper references and call them. Inquire about overall satisfaction, audit accuracy, dispute resolution, customer service responsiveness, data security, and more.
Conclusion
Selecting the right freight audit partner requires focused analysis of providers against your specific transportation profile, risk sensitivities, and service expectations. While the vetting and selection process takes time upfront, it pays dividends through optimized freight spend, reduced overcharges, improved visibility, and more. Invest the time for a rigorous review grounded in the criteria above. With the perfect freight audit partner, you can confidently scale transportation operations while keying in on savings and efficiency.
FAQs
What are the benefits of a third-party freight audit?
Outsourcing to a third-party specialist enables shippers to identify and recover overcharges, prevent future billing errors, gain visibility into spend, redirect resources internally, leverage audit technology, and ultimately cut transportation costs.
When should you consider outsourcing freight audit?
Outsourcing is ideal for shippers lacking resources internally to conduct comprehensive audits. It is also preferred when specific transportation expertise is needed, such as for ocean, air, or cross-border freight.
What qualifications should a freight audit provider have?
Look for an experienced provider with proven expertise across all your shipping modes, transportation technology, dispute resolution, customer service, process optimization, and data security protocols.
How can you manage the implementation process?
Careful planning and project management ensures a smooth transition. Develop a detailed timeline mapping out milestones, data transfers, system integrations, staff training, and go-live. Assign key internal stakeholders to oversee the transition.
How can you measure the ROI of a freight audit program?
Track key metrics pre- and post-implementation: audit recovery results, dispute resolution success, time spent auditing and disputing, audit accuracy rate, days to process invoices, etc. The optimal partner will drive clear ROI through reduced costs and resource efficiencies.
