Cost Savings vs. Cost Avoidance in Freight Audit Services
When evaluating freight audit providers, it’s crucial to understand the distinction between “cost savings” and “cost avoidance.” These two approaches impact how your company manages its freight spend, and knowing the difference can guide your decision when choosing a provider.
Cost avoidance involves preventing future expenses by keeping current spending within projected budgets. It doesn’t immediately reflect in financial statements but helps control long-term costs. On the other hand, cost savings refers to actual reductions in current expenditures, directly affecting budgets and income statements. The impact is measurable and immediate.
While many freight audit companies promote cost avoidance as “cost savings,” it’s vital to examine their processes carefully. Your organization’s goals should dictate which freight audit approach—cost savings or cost avoidance—aligns best with your financial strategy.
What is a Freight Audit?
A freight audit is the process of reviewing and verifying freight bills for accuracy. It ensures that companies only pay what they owe, based on agreed-upon rates and terms. Freight audits can catch billing errors, such as discrepancies in the carrier contract, freight rates, incorrect accessorial fees, or reclassification charges. By identifying these billing mistakes, shipping companies can avoid overpaying for their shipments.
Cost Savings Through Freight Auditing
Working with a freight audit provider can result in tangible cost savings. By automating the audit process and eliminating manual efforts, companies save both time and money. On average, freight audit providers offer cost savings of 3-5%, but with advanced data-driven technologies, savings can exceed 20%. This reduction in freight spend is a direct benefit to the company’s bottom line, improving profitability.
Common Freight Audit Services
Freight audit services offer a range of benefits, from cost savings to increased efficiency. Providers can help streamline the carrier contracting RFP process, improve transportation spend visibility, and ensure accurate, timely payments. The right partner can reduce your administrative burden while giving you deeper insight into your logistics operational performance.
Key Freight Audit Services:
Here are the key services to consider:
- Invoice verification & processing
- Elimination of billing errors
- Rate management
- Exception handling
- Carrier contract management
- BOL/POD Archiving
- Automated GL Coding
- ERP integration
- Transportation spend breakdown
- Data analytics and reporting
By partnering with a freight audit and payment provider like MyFreightAudit, companies can reduce the time spent on manual tasks, increase transparency, and gain control over their freight spend.
The Benefits of Freight Audit Services
Freight costs often represent a significant portion of a company’s expenses. Conducting a freight audit helps manage these costs by identifying errors, streamlining processes, and improving payment accuracy. Here are six key benefits:
- Eliminate Manual Processes: Manual freight auditing is time-consuming and prone to errors. Automating this process with a freight audit provider can save valuable time and resources.
- Reduce Exceptions: Invoice discrepancies can cause significant delays and frustrations. A freight audit provider helps reduce or even eliminate these exceptions by catching errors early and ensuring invoices are accurate.
- Lower Costs: By identifying overcharges, duplicate payments, or incorrect fees, a freight audit can deliver cost savings directly to your bottom line.
- Global Spend Management: Freight audit providers can give you a holistic view of your shipping operations. This allows for better decision-making, as you’ll have detailed insights into costs by carrier, lane, and region.
- Data Quality & Analytics: Modern freight audit solutions provide in-depth data analytics, allowing companies to track trends, monitor carrier performance, and make informed logistics decisions.
- Transparency & Visibility: With access to real-time data, shippers can track their logistics spend in detail. This level of transparency helps companies control costs, manage exceptions, and ensure they’re only paying what they owe.
Why the Right Provider Matters
Choosing the right freight audit company makes a significant difference in your ability to achieve cost savings versus merely avoiding additional costs. Providers with advanced technologies and data analytics capabilities are more likely to deliver real, measurable savings. Look for partners who offer automated processes, advanced rate modeling, and the ability to eliminate invoice exceptions.
Companies looking for long-term improvements in freight efficiency and reduced expenses should carefully evaluate their freight audit provider’s services and approach. By partnering with the right provider, you can optimize your freight spend, eliminate errors, and ensure financial accuracy across your logistics operations.