Freight Audit and Pay - What should you expect?

Posted by Marc Wojnowich on Dec 18, 2018 9:43:48 AM
Marc Wojnowich
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Recently, an article from the Journal of Commerce (JOC), "Tech Transforming payment services into shipper intelligence," explored the evolution of freight audit and pay firms to data managers. Surprisingly, the article seems to suggest audit firms are creating a new space, but are they?

Leads me to question, if you are using a 3rd party to audit and pay carriers on your behalf, what are today's reasonable expectations?

Recon Logistics was founded on the principal that there is a much better way of doing things. The Audit and Pay Process had meaningful flaws; hence since inception, Recon has done it differently.

Before API connectivity was available, Recon went to extremes to regularly update the status of shipments. Not only tracking detail, but as soon as rate adjustments were posted, Recon was engaging in corrective actions.

Today, by taking advantage of almost every API connection available from LTL carriers, ReconOps is notified immediately when a rate change occurs. This gives Recon shippers a distinct advantage in mitigating the frustrations caused by incorrect billing.

Freight Pay Options

So what are the reasonable expectations in the Audit process?

1. Limit the delay in notification of a change

In the earliest days of freight audit, firms collected paid invoices, compared then to pricing agreements and filed claims for reimbursement. Obviously, shippers would rather pay the right amount and avoid the risk of not getting refunded, so the industry shifted to an audit prior to payment. While the likelihood of paying the right amount improved, the delay in notice of a change in cost to the shipper created a number of problems:

  • Accounting - Delay in knowing what to bill to customer or post to A/P
  • Inability to argue adjustments prior to delivery 
    • Reweighs / Re-classifications / Incorrect discounts
    • More likely to get a positive result from carrier terminal operations than accounting department; once in billing, more delay and complication getting a meaningful response.
  • Inability to prevent additional services from being used
    • Lift gates, inside delivery, residential adjustments 

The Recon Real-time Audit allows our team to deal with adjustments immediately, even before the shipment is delivered. Reweighs are a common example of a frustrating, and at times arguable rate change. If a carrier weighs your freight at the origin terminal and makes an adjustment that increases your cost, ReconTMS will  capture the change and notify the user or ReconOps team member before the freight is delivered. This gives the shipper the opportunity to fight the charge while the freight is still in the carrier's possession. Why not ask the carrier to weigh the freight at the delivering terminal?

Further, a terminal representative or local account executive who has a much greater likelihood of knowing your company and your freight, has the opportunity to make an adjustment long before the shipment makes it to accounting where answers can be hard to come by.  

2. Maintain control of payment timing

If you've been following this Blog long, you know, 2018 is the year to make nice with the carriers. Fast payment is a good way to get on the carriers' good side. 

I recently spoke with a newer Recon client who shared with me that he was still receiving billing notices from their prior audit firm from 3 months ago! Traditional Pre Audit firms limit your control over timeliness of payment because you are beholden to their processes and operational challenges. If the firm is backlogged or it's a busy time of year, your bills may be pushed out longer than you ever imagined. How would it affect your accounting if you weren't getting invoiced for 3 months?

Given Recon knows of and reacts to rate adjustments immediately, we are able to consistently distribute weekly notice of payment for the prior week shipments allowing shippers to pay an accurate rate within a few days of being delivered; or at least on their own schedule. Never a reason for bills to be held for excessively long periods of time.

3. Capture actionable data 

Also a regularly discussed blog topic, accurate and actionable data capture is critical to incorporating best practices. Audit firms are limited to invoice data, but without connectivity to the shipper's TMS, they cannot capture all data needed to make relevant and impactful business decisions. 

Educational and Creative composition with the message Stop Wasting Money on the blackboard

Arguing rate changes is next to impossible unless it's solely related to a pricing agreement. Any re-weigh or density related issue is futile without more than a delivery receipt, often the only source document an audit firm has available.
ReconTMS and associated reporting capabilities combine to provide not only billing guidance and shipment level detail, but also carrier KPI monitoring, customer/vendor freight cost analysis and tools for user accountability.

The Recon "Real-Time" approach gives the shipper or ReconOps team member the chance to deal with issues as close to immediately as possible.  

The article referenced from the JOC shares some updates related to existing Audit and Pay firms, but would benefit greatly from looking at Audit and Pay from a new perspective. Or... maybe not-so-new if you've been working with Recon long!

Curious what Real-Time Freight Management looks like in your world? Lets schedule some time to review!

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Tags: Freight Terms, Density, LTL Pricing, Accessorials, Freight Tariffs, LTL, Freight Rates, Freight Management, Ship Smarter, Freight Data, Logistics, LTL Carrier, Reweigh, Reclass, Carrier performance, Freight Audit, Freight Pay

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