Was the deal you struck, the deal you got?

Each and every day shippers and their freight carriers negotiate pricing agreements and contracts in good faith.  The goal of course is to create a long-term business relationship that benefits both parties.  The shipper receives the services it requires and the freight carrier receives adequate compensation to provide those services and to also generate a profit so they can continue to invest in equipment, technology, and improved services to meet the ever-changing demands of their shipper customers.

But, once the negotiations are finalized, how does a shipper really know it received the rates, discounts and incentives it negotiated?  Well, of course the pricing agreement or contract would contain those rates, discounts and incentives, so there is the proof, right?  Wrong!  While the contract might in fact have all of the correct rates, discounts and incentives the shipper negotiated, absent a comprehensive audit of the actual shipping invoices from the date the new agreement became effective, a shipper really does not know if the new pricing provisions were actually put into the carrier’s billing systems correctly.

In a real life example, one of our clients recently entered into a new contract agreement with its major carriers.  The negotiation was supposed to bring substantial savings to the client however after just a few weeks of the new invoices being submitted by the carrier for payment, the client felt that it was not saving money, but was actually paying more for their “normal” shipping activity.  The client engaged our company to perform a comprehensive Financial Audit to ensure the rates the shipper negotiated were in fact being charged correctly by the carrier.

Our Financial Audit of this client’s actual shipping invoices involved validating that all pricing aspects of the new contract were being charged properly by the carrier.  We re-rated every shipment to validate the accuracy of the carrier’s base rates; that the applicable discounts were correct; and that every accessorial fee was charged correctly.  The Financial Audit we performed also involved re-rating every shipment to validate that the Custom Dimensional Weight Factor the client had just negotiated was correctly applied to each and every eligible shipment.  (To be perfectly honest here, the computer actually re-rated all of the shipments, but I guess you knew that!)

The audit results were quite revealing, because the client’s concerns were in fact validated.  Many of the revised pricing provisions the shipper negotiated were not properly uploaded in the carrier’s electronic invoicing system.  The carrier did not apply many of the newly negotiated surcharge percentages.  Therefore all shipments subject to the revised surcharges were being overcharged.  The audit also provided some very interesting findings that would have gone undetected without the comprehensive audit process having taken place.  You see, the shipper also did not sign away its right to file claims for late delivery refunds, however for some reason the carrier inadvertently marked the account as having signed such a waiver, preventing the client from filing claims for refunds they were in fact entitled to.

Over a 180 day period, this Financial Audit identified over $100,000 in carrier invoicing errors for our client and they are now in the process of receiving a full refund from the carrier for these excessive costs.  Needless to say, our client now knows they actually “got the deal they struck!”