Top Mistakes Exporters Make When Managing Freight Bills

Managing freight bills is an important aspect of the export operation process that can have consequences on an exporter’s cash flow, compliance, and profitability. Many exporters make mistakes when it comes to managing freight bills that can delay shipments and damage their relationship with their logistics partners. This comprehensive article will detail the common freight bill management mistakes exporters make and best practices for avoiding them. It also provides freight bill auditing and reconciliation insights specifically relevant for exporters managing complex ocean and air freight shipments.

Common Freight Bill Management Mistakes Exporters Make

The accuracy of freight bill handling is complicated by international shipping, different billing structures, and multi-party coordination. Exporters need to know what the common mistakes are to invoice accurately, which will improve operational efficiency. Key freight bill management mistakes include:

Inadequate Verification of Freight Bill Accuracy

Exporters frequently do not closely check freight invoices before proceeding to pay them. They do not:

• Check freight premium amounts against executed rates or terms of service.
• Validation of specifics related to shipping events, weights, volumes, commodity codes, freight class, etc.
• Perform a reconciliation of discrepancies noted on the freight invoice against the ship documents (bill of Lading, commercial invoice, etc.).

Fragmented and Siloed Processes Across Departments

Management of exporter freight bills is often distributed across multiple departments, including procurement, finance, and logistics, and is done without ensuring that collaboration exists. This often results in:

• Delays in periods between receipt of freight invoices and final approval for payment of invoices.
• An absence of a unified view of freight costs or payment status across the departments.
• Increased likelihood of delayed verification of the freight bill invoice due to failure to detect issues prior to payment, which leads to increased costs in overpayments.

Communication and integrated workflows between departments will reduce costs and time associated with these delays and inefficiencies.

Overlooking or Mismanaging Disputed Charges

Exporter freight bills often contain charges that are disputed based on the carrier’s error or discrepancies in the contract terms of service. Common charge types that are not thought through include:

• Unfounded storage fee charges or late return of container charges.
• Improper application of currency exchange rates or taxes.
• Improper dimensional weight/freight classes calculations.

Exporters sometimes delay or avoid dispute resolution due to a lack of documentation or unclear processes, resulting in unnecessary financial losses.

Absence of Regular Freight Bill Audits and Reconciliations

One of the significant common freight billing errors is not routinely implementing robust freight bill audit programs to validate all invoices. Companies often: 

• Rely on sampling invoices randomly instead of reviewing all invoices full-time.
• Lacks the tools to automate the reconciliation of freight invoices against contract costs or shipment accuracy.
• Miss patterns of overcharging or charges that were incurred without authorization.

Regular and comprehensive audits supported by technology will significantly reduce your freight costs. 

Ignoring the Impact of Manual and Paper-Based Processes

Most companies are limited to processing freight bills manually, allowing for human errors, lag time in approvals, lost documents, and slow scalability. Manual and paper-based workflow does not allow for: 

• Real-time tracking of shipments and management of exception notices. 
• Automated reconciliation against contracts and purchase orders.
• Digital audit trails are necessary for regulatory compliance and claims management.

Digital freight audit payment (FAP) platforms decrease error rates, speed up the process cycle time, and improve visibility. 

Failure to Align Freight Billing Policies with Contractual Terms

Most exporter Freight bills do not have updated policies aligned with their negotiated contracts, and frequently: 

• Reference the schedule of surcharge fees that are grossly outdated and lead to erroneous charges due to increasing freight costs. 
• Do not clearly define the allowed costs of accessories and associated penalties.

Consistent contract adherence removes or significantly reduces the risk of unnecessary charges and the legal exposure that potentially exists.

Insufficient Training and Knowledge on Freight Billing Nuances

Another common freight billing error is that personnel responsible for freight bills often do not have sufficient training on: 

• Freight classification and the factors that drive charges. 
• International laws that influence freight bills. 
• Dispute resolution process and audit procedures. 

Continuous investment in education increases awareness surrounding billing accuracy and funds management. 

Best Practices for The Auditing and  Reconciliation of Freight Bill

The sound freight billing reconciliation best practices are essential for exporters to properly account for shipping expenses, avoid overpayment, and reduce supply chain costs. Here are the best practices for freight audit and reconciliation: 

• Collect a Full Set of Documentation Before Auditing:

Collect all freight invoices, bills of lading, shipping contracts, agreements on rate, and shipment tracking information. Having all the documentation ensures that every charge is, in fact, charged accurately and is legitimate.

• Utilize a Robust Audit Checklist:

You should be looking at each freight invoice line by line and consider as part of your checklist: 

• Verifying the freight rates and any agreed-upon surcharges and discounts.
• Confirming shipment weights and dimensions, freight classification, and destination.
• Identify duplicate or missing invoices.
• Review additional charges for detention and demurrage, fuel surcharges, and terminal handling charges.
• Confirm currency exchange rates and taxes meet regulatory requirements.

• Use Technology to Streamline and Automate the  Audit Process:

Utilize freight audit software with AI to automate the process of accuracy when reconciling invoices with the rate contracts, identify discrepancies, and raise exceptions quickly. Using technology will help reduce errors associated with manual processes, will significantly speed the audit process, and provide greater deal of control.

• Conduct Regular and Systematic Audits:

Undertake frequent invoice checks (every week or every other week) to identify freight bill management mistakes at an early stage. Also, do a complete monthly reconciliation to ascertain that the bills match shipment records and payment records. Review carrier performance and billing accuracy at least quarterly to assist with renegotiation.

• Establish Clear Freight Billing Policies and Education:

Create policies that align with contracts for reviewing freight invoices, auditing, approving, and disputing freight bills. Educate staff regularly on freight bill components, including billing cycles, shipment documentation, and inevitable costs through audits, and billing dispute procedures to make them more accountable and limit errors associated with billing processes. 

Enhance Your Export Freight Billing with Confidence

Accurate Freight invoice billing is key to exporting performance and profits. Exporters who perform strict auditing and comparisons of the least cost options are more consistent in regulating freight charges. Partnering with an internal accounting team to match freight postage invoices is a way to generalize freight costs and proactively reduce operational headaches. Exporters seeking additional financial support in tandem with freight bill efficiency can take advantage of tailored freight finance solutions from Credlix. Regardless of which, partnering with Credlix provides an additional layer of financial assurance with their export freight billing process.

Frequently Asked Questions

1. What leads to freight billing errors?

Complicated shipping logistics, carrier billing variations, and the use of manual invoice processing significantly raise the odds of errors in the freight billing process.

2. What common hidden charges should exporters watch for in freight bills?

Demurrage and detention fees, terminal handling charges, currency conversion fees, and possibly undocumented surcharges are all common types of hidden fees.

3. How does interdepartmental collaboration improve freight bill management?

Cross-functional collaboration with finance, logistics, and operations would result in improved accuracy, speed in execution, dispute resolution, and cash visibility and management of the export process.