As explained by Inbound Logistics, freight charges form up to 10% of a company’s total expenses. Unfortunately, carriers and logistics service providers make mistakes. Estimates on the rate of errors within invoices range from 1 to 5%. Operating an internal program means shippers are spending more money than necessary. Shippers could be spending up to $5 more per $100 of freight spend than necessary. While a freight auditing program can identify these issues and recover unnecessary spend, risk, and challenges auditing freight invoices riddle internal programs. Even the most robust of in-house programs can still have problems holding carriers accountable, recovering costs, and navigating the complexities of a global supply chain. Instead of building an internal freight auditing program, shippers need to seriously consider the benefits of outsourced freight accounting and how it can improve profitability.
Increased Financial Security Coincides With Outsourced Freight Accounting
Outsourced freight accounting improves the financial security of the supply chain. Since shippers rely on third parties to handle the payment process, they are less likely to make mistakes. Mistakes may range from a failure to pay invoices on time or even blindly paying invoices with erroneous charges.Listen to “The Big Benefits of Understanding Transportation Accounting to Reduce Transportation Costs” on Spreaker.
Outsourcing Puts Customer Service at the Center of Accounting Processes
Outsourcing is also a customer-service-driven process. Think about it. Outsourced freight accounting services only make money when a problem is identified. Take the following example. The servicer issues a chargeback against the carrier. When the carrier pays that fee, the charge for auditing is deducted from the transaction. Such processes eliminate the hassle of tracking current auditing spend versus total freight spend and recovery. Since it all depends on the service to the shipper, outsourced freight accounting becomes reliant on the servicer’s ability to provide the best customer service possible. Yes, it sounds a bit confusing, but it works.
Outsourcing Eliminates Concern Over Carrier Relations Management
Outsourced transportation accounting services are not limited to auditing either. Outsourced freight auditing also helps with accounts payable, ensuring your carrier invoices are paid on time and correctly. Moreover, shippers are more likely to continue carrier relationships as auditing recaptures up to 8% of total freight spend. Carriers begin to work with the third-party servicers, and any disputes are mediated by the third-party. Having a third-party also increases the integrity of the accounting, ensuring all parties live up to their obligations.
Accounting Providers May Only Charge a Percentage of Recaptured Costs
As noted previously, accounting providers may only charge fees concerning recovered costs. The exact charges vary. For instance, accounting service providers that provide more than auditing may charge additional costs to handle invoicing, payment processing, and more. For clarity, for parcel or small package invoice auditing, Cerasis has a standard gain share program, for LTL freight invoice auditing, there are no fees and the service is included when you are a Cerasis customer. However, each servicer may still allow shippers to pay for such services as a percentage of recovered costs. Even if accounting costs up to 1% of total freight spend, shippers still see a net-zero balance for the service. Meanwhile, the partnership guarantees accuracy within all transactions, which has natural implications for improved compliance.
Guaranteed Audits Validate Supply Chain Visibility Initiatives and Increase Accountability
Gains in compliance will go hand-in-hand with improved accountability within the supply chain. More information from accounting services also plays into the visibility discussion. Data is power, and when paired with accounting services, data can help everyone in the supply chain measure and improve performance.
Outsourcing Transforms Auditing From a Cost-Intensive to Turnkey Process
Speaking of measuring performance, outsourced freight accounting transforms complex processes into turnkey operations. Instead of devoting countless resources to managing accounting in-house, shippers realize faster payment management, reduced errors, and better service for their end-users. Meanwhile, advanced reporting capabilities lend themselves to bargaining power when negotiating new contracts and securing better rates across all modes.
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Reap the Benefits of Outsourced Freight Accounting With the Right Partner
The global supply chain is growing in complexity, and shippers are continuously faced with new challenges. Unfortunately, resources are stretched to the limit, and the entire system could snap. The solution lies in reducing costs where possible and streamlining operations. Outsourced freight accounting represents a vital business function that can free internal resources and help shippers stay focused on fulfilling more orders and pleasing their customers. Ensure your business is on the path to success by outsourcing redundant business processes, including freight auditing and accounting needs.