Freight Audit and Payment Trend Report 2016
ControlPay Global Freight Audit takes you along for a ride around this years freight Audit & Payment trends. What is changing in the Transportation Industry? And how are companies using Transportation payment as a function that drives enterprise excellence?
Freight Audit anno 2016: A short Introduction
Freight Audit & Payment is, for many large shippers ( over $ 1 billion revenue), not merely a core function for just the finance department, but a key enabler for getting a clear picture of the Supply Chain. As such, large companies outsource the freight audit & payment function in many cases, just like other critical logistics or transportation functions.
Turning the tables, it comes as no surprise that small- and medium-sized shippers, and third-Party Logistics (3PLs) have a different approach towards Freight Audit & Payment.
A recent study reveals that 42% more large organizations see the auditing as a vital part of the payment process than smal and mid-sized shippers. The reasons for this are varied, but easy to identify:
- Less FTE involved
- Smaller Budgets
- Auditing is often not a core task
Freight Audit: 3 facts of 2016
- 1. Freight invoice handling costs
According to the results of the annual Transportation Payment study, conducted by American Shipper, companies using a Freight Auditing System are likely to pay less for their freight invoice handling. This can be considered a fundamental conclusion, as respondents using a systems-based approach are around 25% more likely to pay $10 or less per invoice to audit and pay their domestic or international freight bills, and 42% more likely to be paying less than $3 per domestic invoice (United States).
- 2. Auditing and Responsibility
Another statistic is separating the large shippers from the rest. When looking at the responsibility of freight invoice handling, more than 75% of larger firms consider freight audit and payment a responsibility of the Transportation / Logistics department. Larger shippers approach freight payment in a different way, compared to other forms of payables. Smaller companies are more likely to handle freight invoices in a centralized process, with the Finance department playing a significant larger role.
3. The use of Technology
As earlier stated, the size of a company has almost a direct influence on the approach towards Freight audit & Payment. Because Technology is an utter relevant part it makes sense to highlight how best in class companies diverse from laggards. Less than 25% of the involved professionals in the survey indicated the use of a pure manual process (no usage technology at all for Transportation Payment).
Breaking down the remainder of technology users, there are some notable results. So are 3PL's making more use of an embedded freight audit and pay function inside their transportation management system (TMS) than shippers. Moreover, 3PLs are more likely to contract FAP that is not a bank.
Looking to the other side, shippers often turn to 3PLs or managed transportation service providers. 16% indicated to use their ERP. 15% of the companies are using an outsourced FAP.
Many shippers are paying too much for auditing and payment of their freight invoices. In fact, these costs can be brought down by outsourcing to a third-party provider, or switch systems. According to the report, a handling cost of $20 or more per freight invoice is far too much. By outsourcing this function to a solid audit and payment firm, this number can decrease significantly. Companies that are already using an audit and pay system (in-house or outsourced) and that still spend over $10 per invoice, are advised to look for alternative solutions.
As a global Freight Audit and Pay provider, we advise companies to focus on technology in the search for a freight audit and payment solution. Technology should be the solid ground to start the process from, in order to optimise flows, automation level and to gain structural savings (focus on logistics data!). To offer an helping hand, we have gathered 4 pieces of guiding content to help logistics and transportation professionals in the search for the ideal freight audit solution. The first, is the most recent blog of our Global Business Development Manager. Freight Audit: Understood or underestimated is to give you a brighter understanding of the latest developments in the FAP industry. The second is an infographic we released earlier this year, indicating the growing value of a strategic Freight Audit approach. The third is also an infographic, showing the road towards this strategic approach. For more tips ands tricks, you can see our 10 Best Practices just below here.
Freight Audit and Payment: Best practices
Companies are nowadays heading into a more strategic stream towards Freight Bill auditing. Nevertheless, Transportation Payment is anno 2016 still often seen as a daunting duty instead of a strategic process from which to extract value (logistics data). Here are 10 best practices for small, mid-size and large companies!
About American Shipper
Since 2009, American Shipper has been analyzing the state of the freight payment industry. The results are annually published in The Transportation Payment benchmark Study. This years report was published in partnership with the Transportation Intermediaries Association (TIA), the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA).
During the survey, 208 freight payment professionals, both shippers as3PLs, interviewed about how they handle their freight invoice processing and freight payment practices and the systems they are using to do so.
ControlPay Global Freight Audit and Payment is the largest freight auditor in Europe. For over 13 years, ControlPay delivers a business process outsourcing solution to multinational shippers in- and outside of Europe, for managing administration around transport orders.
ControlPay acts as a trusted third party between shipper and carrier, and is completely independent, focusing on the administrative settlement only.
ControlPay has experience with small, mid size and large carriers in Europe as well as in Asia and in the United States.