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How Audit Controls Can Recover $9M+

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Most companies will tell you they have comprehensive audit controls in place for many, if not all of the functions they perform.  Well, if you consider all of the data breaches we hear about week after week, you have to take those comments with a grain of salt.  While transportation and logistics expenses may not contain sensitive information that can put a company in jeopardy of being sued or having to pay extremely large fines, lack of audit controls will make company’s vulnerable to paying much more than they should for their transportation and logistics costs year after year.  In some cases, these increased costs go on year over year without anyone in the “C” suite having any idea that their bleeding dollars.

A fact that at least one major corporation experienced as you will see when you finish reading this post.

Very often “audit” processes are entirely left up to the accounts payable department as part of the invoice payment function.  Any company that relies solely on their accounts payable department as the only source for audit controls is missing the boat and setting itself up for paying much more than they should for transportation and logistics services.  Not only that, they may also be subject to fines and penalties for utilizing non-licensed service providers, or not adhering to strict import and export regulations.  Here are some key areas that require considerable expertise when it comes to providing comprehensive transportation and logistics audit controls.

  1. IMPORTS:  Invoices for imported goods are extremely complex and contain a variety of items that must be comprehensively audited to ensure that a company does not pay more than it should for the services provided, or pay fines for violating Federal rules and regulations.  First of all import rates are extremely volatile and can change on a dime based on a variety of factors, including the day the goods are shipped.  It may be cheaper to ship goods over the weekend instead of during the week, or to take advantage of consolidated shipment services and not ship goods on an individual order basis.

The type of service provided for ocean shipments will also vary from port to port, so knowing when the goods actually need to be at their final destination is critical to obtaining the most competitive rates available. What are the correct freight terms for the various shipments?  Who is responsible for paying inland freight charges in the origin country?  Who is responsible for the inland freight costs once the shipments arrive here in the US?  Has the company benchmarked the various rates that are available and does the accounts payable department truly understand the ocean freight costs and ancillary charges which vary widely between forwarders and change oftentimes during the year based on import supply and demand?

What about Duty rates, does the accounts payable department really know the correct duty rate for the various products a company imports…probably not.

  1. Parcel Shipments:  We hear over and over again from clients and prospects that their accounts payable department performs an audit on the company’s parcel carrier invoices.  To be totally frank here, that is virtually impossible.  Parcel carrier invoices vary from carrier to carrier and in some cases the paper invoices themselves do not contain all of the shipment information that is required to perform a comprehensive audit.

Also, the sheer volume of parcel invoices many companies receive makes it impossible to track every package to make sure it was delivered on time and to file for refunds for those late delivered packages.  And, most importantly make sure the company actually receives a refund for the late shipments.

Discounts also vary based typically on annual rolling averages, and that information is also difficult to determine if you are not an “expert” in auditing parcel carrier invoices.

  1. LTL Shipments:  Over the years we have found many companies processing these LTL invoices for payment without first matching the invoices to the bill of lading.  Without the bill of lading matching process how would the payables department know their company is responsible for the freight charges.  The bill of lading is the contract of carriage and states whether the shipment is prepaid, (paid by the shipper); Collect, (paid by the consignee); or perhaps a Third Party billing which means the shipment is to be paid by a party other than the shipper or the consignee.

How would the accounts payable department validate the true weight of the shipment; is the shipment actually 5000 pounds or only 500 pounds?  How can the rates the carrier charged be validated without knowing the actual freight classification, carrier base rates, discount applications, fuel surcharge percentage, (which is based on the average price of diesel fuel on the date of shipment). What about accessorial fees, did the shipment actually require a lift gate for delivery?  Was a lumper required for delivery?

Don’t get us wrong here, we absolutely have no problem with a company utilizing their accounts payable department to perform a cursory audit and process transportation invoices for payment.  Where we have a problem is relying on the accounts payable department to be fully responsible for providing a comprehensive audit.

But wait, there’s good news and a concrete solution for these companies to receive comprehensive audit controls by having all of their transportation and logistics invoices post audited by firms that specialize in these services and actually perform the service after the invoices have been paid.  These firms work on a gain share percentage of the actual recoveries they receive for their clients.  No recoveries, no fees charged!  How can a company pass up this deal?  Sorry to say…..many, many companies do.

Some companies on the other hand have outsourced the audit and payment function for their transportation and logistics invoices to a third party freight audit and payment firm.  Benefits include comprehensive audit processes, much lower invoice processing costs, comprehensive and detailed reports on their shipping lanes, cost per unit, data metrics and analysis to help these companies better manage their overall costs now and into the future.

Even companies that do outsource their transportation and logistics invoice processing should also consider a post audit firm as a “sanity check” on the primary auditor.

There is one story that sticks in our head that clearly validates the value of post auditing services involves a large company that contracted post audit services for all of its global divisions.  A major part of the audit results for the company involved recoveries of $9 Million dollars in duplicate payments covering many invoices that were paid by various divisions without the individual divisions knowing the other division also paid the same invoices.

Well, if that doesn’t convince a company that post audit services are critical for any and all business, regardless of how they process their invoices for payment, especially multi divisional companies, perhaps nothing will.

Truck

Breaking: Truckload Rates on Rise- No surprise here!

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We have been hearing for quite a few months now that Truckload, and LTL rates for that matter have been on the rise.  This fact is not a surprise to any logistics manager utilizing these services, however there is a real need to alert corporate management to this fact as this is something every company must budget for.

According to Mark Montague, Senior Industry Pricing Analysts for DAT Solutions, a company that operates a network of load boards and Rate Review rate-analysis tools provides a variety of facts to support this well known fact.

  • National average van rates in January averaged $2.26 per mile.  These rates were up 15 cents per mile from December, 2017 and 59 cents from January, 2017.
  • The average rates for refrigerated loads in January were $2.66 per mile, 18 cents higher than December, 2017 and 71 cents per mile higher than January, 2017.
  • While February is usually a slow month for truckload freight, rates remained high in February a true sign that these rates higher rates are not a fluke.
  • The retail environment usually sees a spike in April and May so this fact is sure to keep rates stable for the foreseeable future.

So while budgeting for these increased rates is critical, making sure a company has a complete pool of qualified carriers under contract for the long term is critical to staying within budget and provides the ability for a company to maintain its customer’s delivery expectations.

Success concept

When Auditing Isn’t Enough

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–What a Comprehensive Audit Looks Like and the Profit Leaks You’re Likely Missing–

Whether a company ships small packages via parcel carriers, larger items in LTL or Truckload quantities, or imports and exports products via ocean and air carriers, creating a comprehensive invoice audit function is critical to ensure the company only pays what it should pay.  Sounds logical enough-but there is much more to auditing a company’s transportation and logistics expenses that very often is overlooked.

First and foremost, transportation and logistics invoice auditing requires specialized skills that many companies do not possess within their own organizations.  The accounts payable department usually has the responsibility to ensure the invoices are correct before processing those invoices for payment. However, they usually do not have access to the service provider’s base rates, discounts and incentives and the technical expertise to know when various accessorial fees apply and when they are not applicable.

Verifying the charges to be paid on transportation and logistics bills is only part of the audit process companies must consider before paying any invoice.  The first step in the invoice audit process is to make sure the company is actually responsible for paying an invoice in the first place.  A complete understanding of the terms of sale, or terms of purchase is most critical.  It doesn’t matter what charges the carrier or service provider assesses, if the invoice is not the company’s responsibility to pay in the first place.  And yet, we are amazed at how often companies actually pay invoices they are not responsible for paying in the first place.

Comprehensive transportation and logistics invoice auditing should actually be a multi-step process.  The first step is to ensure the invoice being audited should in fact be paid.  The second step in the audit process is to ensure the charges are 100% accurate.  The third and final step in the invoice audit process is to make sure the company is not experiencing any “profit leaks” which can increase a company’s transportation and logistics costs by as much as 30%.

What do we mean by profit leaks; here are some examples.

  • Sometimes, corporate purchasing departments will purchase goods on a delivered basis with the inbound freight costs included in the actual merchandise cost. In these cases, unless a comprehensive analysis has been performed that guarantees the portion of the product cost which represents the freight cost is actually less than the company would be able to negotiate on their own, a company could be losing significant dollars.
  • In some cases inbound freight costs are detailed as a separate line item on the merchandise invoice. Often times in these cases it is impossible for the accounts payable department to discern if the freight charges included on the supplier invoice are in fact as competitive as they should be.  In many cases the supplier will add a “little extra” to the invoice to cover their costs of prepaying the freight costs and waiting for their customer to pay the merchandise invoice.
  • Some companies have waived their right to file claims for refunds for late delivered packages with their parcel carriers. Sometimes parcel carriers will put this waiver into a recently negotiated contract without ever pointing it out to their shipper customer.  In these cases, the parcel shipper could lose tens of thousands of dollars in missed refunds annually they were previously receiving when no waiver was in place.
  • In some instances parcel carriers will offer an additional incentive to the shipper for agreeing to the late delivery refund waiver. The real question for shippers receiving this additional incentive is the need to absolutely be assured the additional incentive meets and hopefully exceeds the refunds the parcel shipper previously received.
  • Profit leaks also come about when shippers fail to properly describe their freight on a bill of lading, especially when the freight classifications are dependent on value or density ratings. Oftentimes when the proper density or value of the goods are not stated properly on the bill of lading, the shipper will be charged the highest rate for that freight classification category.
  • Shippers also suffer profit leaks when they fail to negotiate increased discounts and incentives on a fairly regular basis, especially since almost all freight carriers increase their rates annually. Profit leaks also occur when shippers fail to benchmark the rates they are paying against other shippers with like shipping characteristics.  And, if the shipper does not have the resources in house tom perform those benchmark studies, Third Party Logistics Consultants can provide those resources.
  • Shippers also endure profit leaks when they double insure their shipments by paying the carriers for added insurance while at the same time carrying a corporate transportation liability policy. You would be amazed at how often this actually occurs
  • Shippers that fail to “test the market” through the use of Competitive Bid Processes are also subject to significant profit leaks. And, very often those profit leaks represent substantial lost freight dollars.

Finally, shippers should always entertain outsourcing their transportation and logistics invoice auditing to Third Parties that specialize in providing these services.  Both Pre-Audit and Post-Payment audits are available.  Pre-Audit fees are typically based on a small transaction charge per invoice, while Post-Payment audit fees are almost always provided on a shared contingency basis, so there are no fees if no refunds are received.  It’s a great way to ensure a company never overpays for shipping again.

parcel auditing service how it works at ICC Logistics

The Three Biggest Mistakes Parcel Shippers Make!

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Several key factors in today’s fast-paced business world are driving the explosive growth of online shopping.  These factors, such as millennials, (and others for that matter),desire to shop on line, rather than in physical stores; the growth of entrepreneurs starting new businesses to sell just about anything online; and manufacturers needing to sell at the wholesale as well as at the retail level.

The net result of these factors and others, is more and more companies are utilizing parcel carriers to deliver their products to the ultimate consumer.  With this growth comes a need and responsibility to clearly and thoroughly understand all of the rules, regulations, rates, shipping options and legal ramifications of dealing with the parcel industry as a whole.  Today, we’d like to explain what we believe are the Three Biggest Mistakes Parcel Shippers Make.

  1. Not Benchmarking Competing Carrier’s Rates and Services– The first mistake we believe parcel shipper’s make is not understanding all of the options available to them from the ever-growing list of parcel carrier service providers.  Time and time again we witness shippers who never step outside their comfort zone to interview, review and analyze various competing carrier services to benchmark whether they have a good deal or not.  The reality is, if a shipper does not continually benchmark their services and rates they are paying, by default, they accept the status quo and oftentimes that means paying much more for transportation services than they really need to.

Yes, we thoroughly understand that switching volumes of business from a long time preferred parcel carrier may come with some implementation pain.  However, if a parcel shipper does not test the competitive waters they may be boxing themselves into paying higher rates year after year.  Another key point to take into consideration is service level comparisons.  Oftentimes, regional parcel carriers can deliver products faster in certain lanes compared to some national carriers.  What about USPS as an alternative?  This is not your father’s Post Office any longer.

Some additional food for thought; do cable companies, home alarm companies, mobile phone service providers, and other service companies charge their longtime customers more for services than they charge their new customers?  You bet they do and unless a parcel shipper analyzes all of the options available to them on an on-going basis, they will probably pay more year after year as well.  If a parcel carrier feels they have a “lock” on a shippers business, (primarily because the shipper has never utilized a bid process to evaluate the benefits of competing carriers), what incentive would that carrier have to publish lower rates?  That’s correct, absolutely none.  The fact is the incumbent carrier may turn out to be the best choice for a particular shipper, but unless that shipper benchmarks services and rates of competing carriers, they will never ever really be sure.

  1. Read The Fine Print, and More– Most parcel carriers provide their shipper customers with a pricing agreement or contract which outlines the various services to be provided and the associated rates and charges they have agreed to assess for those services.  Warning to parcel shippers!  Don’t just sign the agreement without reading it thoroughly to make sure all of the terms and conditions are EXACTLY as you and the carrier agreed to.  Here are several questions we would ask every parcel shipper who has recently negotiated a new pricing agreement or re-negotiated a contract with a parcel carrier.
  • Did you agree to a Guaranteed Service Refund Waiver with your parcel carrier sales representative?  No, then why is it now in your contract?
  • What Dimensional Weight Divisor did you and the parcel carrier agree would be published?  Is that the Divisor that is now published in your new contract?
  • Do you understand that many parcel carriers make their contracts subject to provisions of a service guide that is not a physical part of the transportation contract you are signing?
  • Do you know the parcel carriers can change the provisions of those service guides at will and do not need to specifically notify each and every one of the customers when they do?
  • Parcel carriers typically provide differing pricing incentives for various service levels, are you sure all of the discounts and incentives have in fact been published exactly as you and the parcel carrier agreed to in your negotiation sessions

Why ask these questions?  Precisely because for some parcel shippers these exact issues have arisen and many of these companies never identified them until it was too late; so our advice to all parcel and freight shippers for that matter is; Caveat Emptor, let the buyer beware!

And, one final point, a very important point; we strongly recommend that each and every parcel carrier contract, or any transportation or logistics services contract for that matter, should be reviewed by a                 qualified Transportation Attorney, before any of those contracts are signed.

  1. Continually Audit Parcel Carrier Invoices– Once the contract has been signed, all parcel shippers should ensure they have a qualified third party audit firm auditing each and every invoice to make sure the rates being charged are the rates the shipper agreed to in its pricing agreement or contract.  The auditors will also be able to file for refunds for Guaranteed Late Delivered packages, as long as the shipper has not waived their right to file such claims.

Parcel Audit firms also provide on-line access to their client’s pertinent shipping data and can even report results based on specific Key Performance Indicators (KPI’s) their shipper customers agree to.  They also provide continuous and meaningful reports on a variety of different metrics so the parcel shipper always has their finger on the pulse of what’s going on with their parcel shipping expenses.  We’ve all heard the statement, “you can’t manage what you can’t measure” and unless your firm has the technical expertise to generate this critical shipping data in-house, outsourced parcel audit firms have all the reporting power a parcel shipper would ever need.

How to Increase Profits Instantly Without Sales

How to Increase Profits without Selling a Single Product

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