10 Reasons Your Company Must Outsource Freight Bill Reconcilation

Posted by George Muha on Jan 5, 2016 12:19:08 PM

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I have the vantage point of helping companies identify the areas where they can either get better at or outsource to a more qualified service provider. One of the areas that every company should outsource is freight bill reconciliation. To help you understand why your company NEEDS to outsource this area of your business, I've put together ten fact based reasons.

10 Reasons Your Company Must Outsource Freight Bill Reconciliation

1. A freight audit and payment company can do it cheaper than you.

There have been loads of studies done the cost of processing invoices. Aberdeen Group regularly publishes studies on this topic. They say it costs best in breed companies about $3.30 to process an invoice. That's for companies that are receiving invoices via EDI, electronically matching them, auto paying the bill, etc.If you're not doing any of that, it's costing you a lot more than $3.30! Aberdeen suggests it costs 80% of the companies at least $10.00 to process an invoice. Most freight audit & payment companies will do this function for a fraction of that. So the math proves it makes economic sense to outsource.

2. A freight audit and payment company won’t rubber stamp an invoice for payment.

Based on my own experience, more companies than not are rubber stamping most of their freight bills for payment. In other words, they do not match the invoice to the quoted rate or a freight tariff. They might thumb through invoices to look for major anomalies, but they are not matching every single invoice. An audit company will bump each invoice to rate logic and actually match it to bill of lading to ensure what was invoiced by the freight provider matches what actually was shipped.

3. Most of the total invoices you receive are freight bills.

For every bill of lading you fill out, a freight carrier sends an invoice. So let’s say you do fifty shipments a day. Then that’s fifty invoices a day you will receive. That translates to 13,000 invoices a year! At $10.00 to process, it is costing you $130,000.00 to process your freight bills. Someone’s going to process these for cheaper and better than you and you are not going to do it? 

4. Freight audit companies will provide reporting capabilities.

Since these freight bill processing companies are keying all the invoices or receiving them electronically from the freight carriers, they are able to data warehouse all of your freight information. Most good freight bill processing providers will provide dash board reporting that opens up a whole world of business intelligence you never new existed.

5. The smartest supply chain minds in the industry are doing it.

This week I got off the phone with a gentleman from a supply chain consulting firm who works specifically helps private equity companies find hidden profits within their portfolio companies. He said, “The very first thing we do to affect the supply chain (when we engage a company) is insert a freight audit and payment company.” He went on to say, “We don’t do it so much for the audit and payment function, although valuable. We do it because it gives us visibility to a ton of stuff through reports.”

6. Where else are you going to get analytics?

I have one or two conversations a week with supply chain studs and studettes who find me on social media. We always compare notes about the cool supply chain related things we are doing. Recently I was speaking with a former Vice President of Supply Chain of one of the largest soft drink conglomerates in the country. He was just hired at a $100m company. His first order of business? Hiring a freight audit & payment company. “I need data if I am going to make changes. Because this company is so small and doesn't have the kind of resources I had at (soft drink conglomerate), there is no way for me to get analytics of distribution. So I am outsourcing the freight bill reconciliation function mainly for the reporting capabilities.”

7. You need to admit you are being stubborn.

As stated above, processing freight invoices is incredibly manual, costly and complex. If there are outside firms that can handle this for you cheaper and better than you and you are not doing it, perhaps you need to do a personal inventory on what’s holding you back. There are likely other parts of your business that you are needlessly holding onto as well. At the end of the day, you are really good at your core business. Allow the experts do what they do best so you can focus more on your expertise.

8. It will open the door to all sorts of other savings opportunities.

Through the analytics that comes with most freight audit and payment companies, you may uncover a ton of low hanging fruit. Some of the common quick wins you be around consolidating and optimizing shipping lanes. After that, you can start to have fun building pool distribution channels, zone skipping lanes, unbundling inbound programs and a ton of other ways you can increase profitability at your company.

9. You will be able to collaborate with customers better.

Having data at your finger tips can arm you with the ability to entrench yourselves at your customers better. Being able to quickly identify shipping patterns, can allow you to offer discounts on freight if your customers can accommodate your production schedule better.

10. It’s a no brainer.

Processing freight bills internally is like hiring a CFO to mow the lawn. There are certainly firms you can hire to do this task a lot better and at a better price than you can. Please do not over think this one. If your company is manually processing freight bills right now, make it a priority to outsource this function.

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Topics: Freight audit & pay, freight bill reconcilation

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