Is Freight Invoice Audit Necessary for Ocean Shipments?

Is Freight Invoice Audit Necessary for Ocean Shipments?

Ocean freight invoice audit is a function that shippers and freight forwarders must do to ensure their freight invoices have been billed correctly. This sounds obvious enough, so it may be surprising to know that many companies don’t audit freight bills. In this post we’ll discuss the reasons why and make suggestions on what to do about it.

At a conference in 2013, Mr. Soren Skou, CEO of the world’s largest shipping company, Maersk Line, announced that nearly 12% of container industry invoices are inaccurate and are considered a significant customer service challenge for the company. Maersk is not alone. This issue costs shipping lines, forwarders, NVOCCs, and shippers a lot of money.

Looking across the global logistics market, ocean freight accounts for a substantial percentage of the cost of moving goods. To see an interesting infographic with data on the ocean shipping industry, click here. The importance of ocean freight invoice audit becomes all the more obvious when you consider the total tonnage of cargo shipped in containers worldwide, with each having an average freight invoice amount of over $1,720.

Yet, auditing invoices is difficult. Contract management – and therefore auditing invoices – for ocean shipping is notoriously complicated. Rates and surcharges are constantly in flux, and keeping carrier contracts up to date is almost impossible without resources and technology to track the constant carrier updates.

Adding to that, an average of nine surcharges (such as Bunker Adjustment Factor (BAF), Emission Surcharges, Security Surcharges, etc.) appear on every FCL (Full Container Load) freight invoice. LCL (Less than Container Load) can be even more complicated, having the potential for additional charges with the frequent need for cargo to be reworked or consolidated. These fees are often variable and adjust with seasonality, port congestion, and many other factors that often seem to be at the discretion of the carrier. The reality is the carriers make it impossible for the average forwarder or shipper to keep up with the constant surcharge updates and GRIs.

The approach by some is to throw a lot of people resources at the problem and attempt to manually audit the freight invoices. This takes a lot of time and is still never perfect. Others do nothing, and view invoicing errors as simply a cost of doing business. For any company managing high volumes of ocean freight, neither is a good option. The bottom line is a company must have the ability to access their own tariffs and calculate their all in rates efficiently to audit invoices.  

The solution lies in leveraging technology that provides the ability to automatically track and update carrier surcharge updates and GRIs. Having this information accurately updated for each of your carrier contracts is the only way to be sure you can calculate your own rates correctly. With this ability, ocean invoice audit becomes a much simpler process of accessing and comparing your rates to the billed amount.

Catapult provides a seamless freight invoice audit and reconciliation process that overcomes the challenges of invoice audit. To learn more – click here.