In our recent post, we proposed the idea that businesses should evaluate outsourcing certain services especially during this current Covid-19 Pandemic. The main reason for considering outsourcing services is to ensure your business is ready to operate from a strong financial footing when the business gets back to normal. And yes, there will be many different definitions of what is “normal” that’s for sure.
So what in-house services should a company be looking to outsource anyway? The most basic one and the one that makes the most sense from a cost and ROI standpoint, is the pre-audit and payment of a company’s freight invoices. Why you ask; because if companies are truly honest with themselves their in-house accounts payable departments simply cannot provide the same value that an outsourced solution can provide. And, they certainly cannot provide the myriad of services these firms provide for just a few pennies per invoice which is what these outsourced services actually cost.
First and foremost, the costs for outsourcing these services will be a fraction of the cost a company will actually spend if they continue to provide the services internally. This fact will be well documented if the company assesses ALL of the costs associated with in-house invoice processing, including receiving invoices, matching invoices to source documents to validate their validity, following the corporate approval process, entering relevant fields of data into a corporate payables system, preparing and mailing checks, or scheduling electronic payments. And finally, there is the reconciliation process that must also be adhered to.
Secondly, the comprehensive audit benefit received from outsourcing these services will provide a 100% invoice validation process by trained audit staffs that fully understand all carrier pricing and rate structures. Has the invoice been rated correctly based on the actual commodity shipped and according to the carriers contracted rates? What about associated fees and charges, such as fuel surcharges, are they being calculated correctly? And then there’s the carriers assessment of numerous ancillary charges, are all of these charges applicable to the specific freight movement?
And Finally, the outsourced invoice processing service will provide a whole host of reports based on the data it captures as part of the audit process. Most company’s in-house accounts payable departments do not have the ability to provide any detailed reporting other than perhaps a simple payable file. Businesses need timely and accurate data to make intelligent business decisions. By outsourcing the freight audit and payment function to a qualified third party, the value of the data alone will far exceed the cost of providing the service. Add that to the value of the audit savings achieved as a result of the audit service provided which also typically far exceeds the cost to provide the audit service and you have a true winning combination.
But, don’t stop there! After the company has their freight invoices audited and paid in a timely fashion, it’s time to “audit the auditor.” This involves sending the actual paid freight bills, or electronic invoice files to a post audit firm that will audit each and every invoice a second time to see if the primary auditor left any money on the table. These firms almost always work on a contingency fee of 50% of the “actual” recoveries they achieve as a result of the audit service provided. So there is no risk on the firm submitting the invoices for audit, that risk is totally assumed by the post audit firm. Talk about a no-brainer!
And to bring this point home loud and clear, one of our long time business associates that operates a very successful post audit firm told us that the largest overcharge they recovered for a multi-national company was in excess of $9 Million! Talk about a return on investment. Can your firm afford to continue to be left in the dark, we hope not.
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