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Most companies are not effectively equipped to audit carrier freight invoices, making outsourcing an increasingly viable option. In many cases, an excellent service provider can probably perform this function better, faster and cheaper than manufacturers.
It can be complicated and difficult to evaluate freight or parcel carrier pricing. In addition, it takes a lot of time to manually enter every carrier invoice, and the cost of cutting multiple checks is high. Let’s take a look at two compelling statistics based on credible research.
The Cost of Processing an Invoice
In 2008, one of the most well-regarded research firms in the U.S. evaluated the real-life financial impact that processing invoices has on companies.* The firm reviewed the bill processing of nearly 500 companies and considered many criteria: labor, cost of cutting checks, postage, time, etc.
The findings showed that the top 20% of companies with a best-in-class operation were able to process invoices for $2-3 per bill and could process them in 2-3 days. Fifty percent of the evaluated companies were considered “industry average” and were able to process invoices for just under $10 per bill in 15-16 days. The bottom 30% of companies processed invoices for nearly $35 per bill in over 35 days.
The Cost Savings of a Pre-Audit
I was recently privy to a private study of the cost benefit generated by auditing freight invoices. This study reviewed close to 1 million freight invoices, and the results showed a cost savings of a little less than 2% to clients by discovering freight carrier errors. This study was done by a company that is highly rated by Armstrong Associates as one of the leaders in this space; their audit process is efficient and respected.
Impact and Benefits
Those numbers are compelling, but what kind of impact might that have on your company? What is the cost benefit of a freight audit and payment service?
Most freight audit and payment companies charge $1-2 per bill for their services. Knowing that, Table 1 shows how the cost savings can impact companies with several different transportation spends.
This review assumes that it costs a company the industry average of $9.38 per invoice, and that the average freight invoice cost is $250. Pre-audit savings were calculated at 2%. Bottom-line results are determined by adding the cost of a pre-audit and payment company and the pre-audit savings and subtracting the $2 maximum fee for processing invoices. A self-appraisal of your own business will shed light on the actual cost to process an invoice to your company.
The Next Step
Be thorough when hiring a freight audit and payment company. While many great options are out there, the industry does have its share of sub-par players. Be sure to check references or track down a recommendation from a trusted source.
*I am not allowed to share the name or exact results of this study, but I’m happy to share the source of this study privately.
Any views or opinions expressed in this column are those of the author and do not represent those of Ceramic Industry, its staff, Editorial Advisory Board or BNP Media.