The Freight Audit and Payment
Providers of freight bill audit and payment services can be divided into four categories:
- Large companies with staffs of over 200 employees that process several billions of dollars of freight invoices and employ some level of technology in auditing and paying bills.
- Medium-size companies that have less than 200 employees and process between several hundred million and billions of dollars of freight invoices. They may use new technologies to efficiently conduct business.
- Small “mom & pop” firms that represent a majority of the freight audit/pay providers and the majority of freight dollars paid to carriers. Often, smaller firms have one or two large customers and perform the same services for several other smaller shippers. Or, they may use the audit and payment services to supplement other services they may offer. These firms typically have less than 10 associates (often one or two) and may employ some level of technology in auditing freight invoices. Often they provide other services like freight negotiation and logistics consulting. These companies are often third logistics providers.
- Specialty firms that concentrate on one or two modes of transportation, mostly small parcel or express. These firms capitalize on service guarantee failures or unique tariffs like household goods. There is much competition in this group, but only a few provide extensive invoice audits.
Today, automation is driving change in this industry. But only some providers are leveraging available technology in ways that benefit the shipper. A buyer of freight audit and payment services might be told by a service provider, “We are able to transmit data in XML and flat files and in real time,” when in reality most of the transportation industry is still using EDI and is slow to update records in real time. Just because the auditing firm can send XML, a shipper won’t get the information any faster from carriers that are still using EDI. Firms that understand this reality might say, “We can transmit data in many formats, and we use the latest version of EDI.” Invoice files from carriers need to be translated into data that audit and payment firms can import into their systems. Carriers update or change these files, which requires the auditing firms to modify their programs to translate the file. The reality is that auditing firms do not always change their translation programs to keep up with carrier changes. It costs money and resources. As a result, carriers send many versions of invoice files to auditing firms. New invoice files tend to contain more detail than older files, therefore, auditing firms with older translations provide less detail on shipment transactions.