Is your freight invoice accurate? A new study claims it might not be.
Shipping freight across the world is a complex matter. But what is even more complicated is freight billing and handling freight payments: what a cargo owner is initially quoted is often different from what he later is asked to pay. A recent study claims that as much as 20% of invoices are incorrect, making billing accuracy a significant industry problem. But there is a solution on the horizon: to go digital and automate the freight billing process to save costs and ensure accurate freight payments
Billions of dollars are thrown overboard every year
Billing inaccuracy and payment challenges are massive problems in the logistics industry. It’s not uncommon that the final freight invoice differs significantly from the number initially quoted. A 2021 Cargo Owners and freight forwarders survey, confirms this. It claims that as much as 20% freight invoices may be inaccurate – 1 in 5 is significant !
This means that cargo owners need to spend considerable time, money and resources reviewing and double-checking freight invoices to ensure they are billed correctly. Another study from the Dreary Report from 2018, states that inefficiencies, pain points and lack of automation in the maritime industry result in costs adding up to a staggering $34.4 billion.
Too much paperwork, too many manual audits
But what is the reason behind these costly inefficiencies and billing inaccuracies?
While some cargo owners may claim that suppliers overbill on purpose, such considerable numbers, suggests that there is more to it than a few suppliers padding invoices. First of all, for cargo owners, international transport and shipping can be complicated operations involving multiple stakeholders and several suppliers and contacts for a single shipment. Numerous suppliers means intricate freight billing and leads to extended freight invoice processing. The manual administration of reviewing freight invoices is both time-consuming and prone to error. Even when freight invoices are from a single freight forwarder, the individual line items, ranging from customs clearance to the actual shipping, may not be described in detail. It can also be unclear which supplier charged what. Furthermore when invoices often arrive in various formats adds more . If you’re lucky enough to avoid paper and get invoices using EDI, the freight billing process could still have problems when different interfaces don’t integrate seamlessly with the internal payment system.
Lack of trust
It is clear that complex, manual payment processes are critical sources of costly mistakes and over billing. But there’s more to it: the lack of trust and close working relationships between supply chain stakeholders means all sides spend a massive amount of time manually verifying and checking paper invoices and shipping documents.
A global pandemic adds new fees and complications.
As if this wasn’t enough, 2021 has added its own set of complexities. Container shortages, port closures, and changed routes have created new freight billing problems. Soaring container shipping rates that change weekly as well as new, out-of-the-ordinary surcharges and costs for detention and demurrage mean that cargo owners are often in the dark about the final price. Furthermore, many cargo owners need to divert part of their supply chain to the spot market, with non-contractual rates and pre-payment.
Invoices from new suppliers risk being held up in audit resulting in late payment, which could strain client-supplier relationships and missed delivery penalties.
Save time, money and resources by going digital
Luckily there’s a solution to these supply chain challenges: information technology and automation. Modern technology can quickly eliminate mundane, manual processes, and streamline quotations, booking requests, and confirmations and integrate them with the freight billing process.
Automation speeds up activities, increases efficiency and makes sure everyone is doing the right thing at the right time. Working on a digital platform enables cargo owners and transport suppliers to communicate and collaborate directly, without intermediaries. Stakeholders can build trust by establishing close, long-term working relationships.
Digital tools and applications also mean more freight transparency and visibility and a sense of control. The added real-time visibility on a digital platform helps cargo owners avoid redundant charges and prevents costly and time-consuming disputes.
Furthermore, when booking an international shipment through a digital platform, there are no extra or hidden costs to be added; in terms of invoicing and billing, what you see is what you get. Exact fees are available at a cargo owner’s fingertips, and only mouse clicks away, as prices are fixed and agreed upon before shipment pick-up.
But the most important benefit we get from automated may be the wealth of information and data you get from working in a digital system. Cargo owners and transport suppliers can extract data that can help mitigate problems and assist in decision-making. Critical supply chain information enables analysis and insight to help forecasting, pricing, procurement, sourcing, and supply chain optimisation. It assists an organisation in understanding not only what the costs are but also what they may be in the future.
Limited supply chain visibility and insight are, more than ever, massive pain points, but with an automated system, many of these issues are solvable – or can be avoided altogether.
Many options available
The traditionally conservative logistics industry is quickly evolving. Log tech companies are now driving advancements in the transport field, offering multiple functionalities, services, and applications to digitalize the supply chain. Facilitating freight payments and ensuring billing accuracy may be one of the most significant enhancements.
Today there’s no reason to spend unnecessary time and resources using a manual process when digital systems and applications are readily available. Shifting to an automated process not only facilitates and improves freight billing processes; it also offers increased freight visibility and control and the possibility of unbundling. Digitalisation is the future of shipping: direct collaboration, easy freight payments, and accurate billing – and what we recently considered to be the future, is already here.
Adnavem is a log tech scale up helping customers to gain control of their global supply chain. The Adnavem digital transport platform offers cargo owners and logistics providers the opportunity to connect and collaborate directly, without intermediaries. In addition to increasing visibility and control and cutting unnecessary paperwork, the automated platform also makes it possible to specify line-item costs, and such specifics ensure that what you’re quoted is what you pay.