Does your business use a shipping carrier like FedEx, UPS, or DHL to deliver products to customers? If your answer is “yes,” have you ever thought about whether you’re getting the deal you deserve?
Most shipping carriers guarantee refunds if deliveries are delayed because of errors on their part. Some, like UPS and FedEx, promise refunds even if the delay is only a minute. But carriers make it hard, very hard, to get those refunds. How, you ask?
They make their claim forms hard to fill out, and they provide a limited window of time within which claims must be filed. “I can handle that,” you say? Well, then consider this.
Do you only ship a few packages every once in a while, or do you ship regularly to your customers? If you answered, like most people, that you ship regularly to your customers, you may be having a problem on your hands.
You’re probably missing out on a bunch of refund money because you’re not auditing your shipments and carrier invoices. Let that sink in.
You are letting someone else keep YOUR MONEY because you aren’t keeping track of where they mess up. And boy, do shipping carriers mess up! So, consider this your guide on auditing your shipping invoices to ensure you never lose a cent again.
What is a Shipping Audit?
Shipping audit refers to the process of examining and reviewing your shipping invoices to confirm the payments due are justified and aligned with your contract with the carrier. It involves checking your invoices and shipping operations to identify discrepancies in billed amount, package weight, distance traveled, and other ancillary charges.
The purpose of a shipping audit is to facilitate transparency in shipping transactions. To answer questions like- what is charged and why?
Types of Shipping Audits
The types of shipping audits differ based on how the audit is conducted. Here are three ways you can conduct a shipping audit:
1. Manual Shipping Audit
This involves gathering and examining your invoice data manually to identify errors and discrepancies in shipping fees, the label creation process (shipping classes, weight, etc.), and accessorial charges. Since it involves combing through complex invoice data and a significant amount of back and forth to confirm details—all done manually. This process can not only be labor-intensive for your e-commerce business but also highly prone to errors. Because of these notable shortcomings, manual shipping audits are not recommended for growing e-commerce businesses that audit large amounts of invoices regularly.
2. Parcel Audit Software
This involves onboarding a purchase audit software like the one offered by LateShipment.com to automate the entire process of shipping audits. This advanced solution leverages technology to analyze vast amounts of invoices at a fraction of the time it would take humans to do the same—while ensuring accuracy and reliability.
E-commerce businesses that integrate this solution to meet their shipping audit needs benefit from lower costs, greater savings, and an efficient auditing process.
3. Outsourced Parcel Audit
The last way to facilitate a shipping audit is to engage a third-party parcel audit service provider for the task. These companies undertake an independent shipping audit exercise, leveraging tools, automation, software, and reporting technology to examine your shipping invoices and processes.
This can be risky if you deal with sensitive information, as this option requires sharing your shipping invoices with a third party.
Key Areas to Cover in a Shipping Audit
We’ve been saying that a shipping audit refers to examining your shipping invoices to identify discrepancies. But what are these discrepancies? And what should your shipping audit process absolutely cover, apart from the aspects that might be unique to your auditing goals?
Well, here’s your checklist:
- Accessorial Fees
This refers to the additional fees that carriers can levy for extra services. These fees can, at times, be ambiguous and complex, differing from carrier to carrier. This can make them challenging to track and calculate. Examples of accessorial fees include charges for after-hour pick-up/delivery, hazardous material delivery, package storage, etc.
- Duplicate Charges
Anyone can make a mistake, and your carrier is anyone. They can make an error while counting your shipments for invoicing and charge you twice for the same shipment. Your shipping audit process must examine invoices to identify and flag duplicate charges. Some signs of such errors include identical invoice numbers, vendor numbers, transaction IDs, and expense amounts.
- Delayed Deliveries
Delayed shipments are a common issue with e-commerce delivery. However, the brunt of it shouldn’t have to be borne by you. When a package is delivered late, you can claim a discount, if not a refund, from your carrier as compensation, depending on your contract. Be sure to track late deliveries and flag them with your carrier.
- Discounts
Next, your shipment audit process must comb through invoices to confirm you receive the discounts, offers, and special deals promised by your carrier during contract discussions.
- Shipment Classification
The cost of shipping packages can differ based on their classification. Check your invoices to confirm that the carrier has categorized your packages correctly and priced them appropriately. In case of any errors, inform the carrier of the resulting overcharges.
- Taxes
Finally, monitor the taxes that are applied to your packages to confirm that the resulting charges are aligned with the correct tax regulations and laws. Tax provisions are subject to change, so carriers can make mistakes when calculating these, especially between tax regimes.
How to Conduct a Shipping Audit
A shipping audit can quickly get out of hand if you don’t have a plan to stick to. To help you hit the ground running, here’s a succinct step-by-step guide on how to conduct a robust shipping audit:
1. Collect Relevant Documentation
The first step in conducting a shipping audit is to gather all concerned documents, such as invoices, contracts, rate cards, package details, customer orders, etc., in one place. The last thing you want is to commence auditing only to realize you don’t have everything. Hitting pause to then source necessary documents slows you down and can cause you to overlook errors as well.
2. Facilitate Invoice Examination
Invoice verification is an essential aspect of a shipping audit that involves confirming that the details mentioned in the invoice are correct and that the due amount is justified. Typically speaking, invoice verification involves co-relating information mentioned in the invoice with your internal records and carrier contract to ensure you’re billed correctly.
3. Undertake Accessorial Charges Audit
As we previously discussed, accessorial charges are fees levied for additional services rendered by the carrier, such as after-hours delivery, stop charges and package storage. etc. Since these can vary both in definition and amounts across carriers, ensuring they’re correct and as per your agreement with the carrier is vital. Be sure to tally this against your internal records to confirm they’re justified.
4. Identify and Flag Discrepancies
Next, analyze the invoice for any other discrepancies that don’t align with your internal records and carrier agreement. After this, all you need to do is inform the carrier to sort it out and resolve disputes.
Irrespective of whether the errors stem from clerical mistakes or shipment identification issues, you and your carrier must strive to facilitate transparency and smooth communication for a quick and effective resolution.
5. Process Payments
Once all disputes are addressed, you can go ahead and inform your finance team to clear payments due to the carrier. Timely payment will help foster a positive professional relationship with your carriers.
Benefits of Conducting Shipping Audits
Now that we’ve discussed what shipping audit is, its types, the key areas to focus on during one, and how to go about it, let’s discuss the ‘why’ behind it all. Here is what a shipping audit brings to the table:
Drives Savings
Conducting a shipping audit enables you to identify contract errors, anomalies, and discrepancies that could have created a serious dent in your bottom line. It affords you an opportunity to examine your invoices to understand if you’re paying more than what’s due and systematically address discrepancies with your carrier.
Facilitates In-depth Analysis
As part of the shipping audit process, e-commerce businesses collect and track a vast amount of data, which can, if organized well, help them gain insight into shipping practices and trends and even help them plan and prepare accurately for future shipping needs.
Additionally, it can help you recognize bottlenecks and areas of improvement to help you streamline your shipping operations optimally.
Facilitate Accurate and Timely Shipping Payments
By allowing you to examine and confirm due payments, shipping audits help you clear payments accurately and timely with your carriers. It also eliminates the chance that you might have to contact the carrier to request a refund if you realize discrepancies post payments. By doing your due diligence and clearing payments timely, you also foster a positive professional relationship with your carrier.
Common Challenges in Shipping Audits
Shipping audits are non-negotiable for e-commerce businesses today. They’re a must. While they have their benefits, understanding shipping audits thoroughly also means discussing the challenges that can come in the way of facilitating an efficient shipping audit.
Shipping Invoice Complexity
Shipping invoices can be complex and include verbiage that would make you scratch your head and ask, ‘Huh?’. To minimize such instances, consider standardizing your invoices to ensure nothing gets lost in translation between you and your carrier.
Keeping Up with Fluctuating Shipping Rates
Shipping rates can fluctuate often, making it hard to keep up with them and ascertain whether your carrier charges you fairly. The only way to tackle this is to keep yourself in the know whenever shipping rates change and update your agreements to ensure your audit is based on updated rates.
Data Integration
Accurate data is the foundation of an efficient shipping audit. Had you been working with a single system for all your business needs, maintaining data consistency wouldn’t be a task. But alas, you are. As a result, facilitating data consistency across Customer Relationship Management (CRM) systems, financial tools, and carrier management platforms becomes a prerequisite for smooth data flow and, consequently, efficient shipping audit.
Best Practices for Effective Shipping Audits
You have the previously discussed step-by-step guide to help you facilitate a shipping audit. But if you want to ensure you get the maximum out of the process, here are some best practices you need to inculcate into your shipping audit workflow:
Integrate Shipping Audits into Regular Operations
Yes, shipping audits can be a lengthy process. No, these cannot be done once in a while. Shipping audits must be a regular practice and be conducted periodically—weekly, monthly, or quarterly. The frequency depends on your shipping volumes and invoice generation practices.
Streamline and Standardize the Shipping Audit Process
Consider standardizing your shipping audit approach. Irrespective of whether you’re undertaking it manually or leveraging automation, your shipping audit process must follow a streamlined and consistent framework that clearly mentions a checklist and necessary directions every step of the way.
Maintain Open Communication with Your Carriers
Keep communication lines open and active with your carriers for quick and efficient issue resolution. You see, if errors and discrepancies pop-up, which they will, you can raise the issue with your carriers instantly and resolve problems quickly.
Track Carrier Performance with KPIs
Shipping audits give you a chance to examine how your carriers perform and set reasonable and accurate performance benchmarks as well. You can track metrics related to lost packages, late deliveries, and invoice discrepancies and leverage them during contract negotiations with carriers.
Leverage Automation to Optimize the Shipping Audit Process
Lastly, consider automating your shipping audit process with LateShipment.com’s Parcel Audit and Shipping Refunds software. This tool doesn’t just take shipping audits off your hands but also integrates seamlessly with your business systems to ensure smooth data transfer and even smoother operations.
Conclusion
Manually tracking and auditing shipments is a process that has been performed for a long time. So why reinvent the wheel and go in for an automated service? Here’s why.
Manually tracking/auditing multiple shipments at the same time is difficult work. On a large scale, it requires an in-house or external team of shipping auditors. Both can be expensive.
Also, delays aren’t the only possible failure. There are over 50 ways in which shipping carriers can let you down. For example, your products could be damaged in transit or even not be shipped at all! Your team of auditors will have to audit for all these possibilities, which can lead to them being overwhelmed.
After all the effort, there’s still the aspect of human error to consider.
Our Parcel Audit and Shipping Refunds software automates the entire process of shipping refund claims, identifying over 50 service failures instantly, saving over 20% on shipping. It achieves this through automated invoice audit, expert claims redressal, automated refund recovery, and automated claims documentation, all while collecting data for seamless cross-carrier performance, spend analysis, etc.
