Freight Audit
A freight audit is the systematic process of examining, verifying, and analyzing freight invoices to ensure accuracy, validate charges, and identify billing errors or overcharges. This comprehensive review examines shipping bills against original quotes, contracts, delivery receipts, and rate agreements to confirm that shippers are billed correctly for transportation services rendered.
Freight audits serve as a critical financial control mechanism for organizations that ship goods, helping companies recover overpayments, streamline payment processes, and maintain carrier accountability. The process can be conducted manually or through automated freight audit software platforms that use advanced algorithms and machine learning to detect discrepancies.
The freight audit process typically follows these key steps:
Freight invoices are received from carriers via EDI (Electronic Data Interchange), email, or physical mail. Modern freight audit systems automatically extract data using optical character recognition (OCR) technology and machine learning to digitize invoice information.
Each invoice is validated against multiple data sources:
Discrepancies are flagged for review, categorized by type (rate errors, duplicate charges, invalid accessorials, tax miscalculations), and routed for resolution with carriers.
Identified overcharges are documented, disputed with carriers, and recovered. Approved invoices are processed for payment, often through integrated payment systems.
Comprehensive reporting provides visibility into shipping spend, carrier performance, compliance rates, and opportunities for cost optimization.
Invoices are audited before payment is issued to carriers, preventing cash outflows for incorrect charges. This is the most common approach for enterprise shippers.
Invoices are audited after payment, with recovery efforts focused on obtaining refunds for identified overcharges. Often used for smaller shipping volumes or as a secondary review layer.
The shipper generates the invoice based on actual shipment data, which the carrier validates rather than billing proactively.
| Error Type | Description | Typical Impact | |------------|-------------|----------------| | Rate Mismatches | Charged rate differs from contracted rate | 2-8% of invoice value | | Weight Discrepancies | Billed weight exceeds actual or quoted weight | 5-15% cost inflation | | Duplicate Billing | Same shipment invoiced multiple times | 100% overpayment | | Invalid Accessorials | Charges for services not requested or provided | $50-500 per occurrence | | Incorrect Classification | Wrong freight class applied (NMFC errors) | 10-40% rate differences | | Fuel Surcharge Errors | Incorrect FSC calculation or outdated index | 1-3% of invoice value | | Tax and Duty Errors | Miscalculated taxes, especially international | Variable | | Currency Conversion Errors | Incorrect exchange rates applied | 2-5% variance |
Large shippers with significant freight volumes may develop internal audit teams and systems, providing maximum control but requiring substantial technology investment and headcount.
Many 3PLs include freight audit services as part of their transportation management offerings, integrating audit with broader logistics operations.
Dedicated freight payment and audit firms (often called Freight Payment Companies or Freight Bill Processors) provide technology platforms, carrier relationships, and expertise specifically focused on invoice auditing and payment.
Modern freight audit solutions leverage AI, machine learning, and cloud computing to automate complex validation rules, learn from historical patterns, and provide predictive analytics for transportation spend management.
Freight audit systems often integrate with:
Freight auditing is an essential financial discipline for modern supply chain management, transforming freight payment from a cost center into a strategic source of savings, visibility, and carrier accountability. Whether managed internally or outsourced to specialized providers, a robust freight audit program delivers measurable ROI while providing the data foundation for strategic transportation decisions.
