Parcel Auditing: What Is It And How Does It Work?

Parcel auditing is reviewing your business’s shipping bills and invoices to identify possible errors and opportunities for savings. For example, after a detailed review of every data point, you may locate billing inaccuracies such as incorrect dimensional weight charges. In that case, you can get your money back if you were overcharged.

Ideally, a parcel audit involves an extensive cost analysis to uncover shipping inefficiencies and to enable you to renegotiate carrier contracts. Parcel auditing is also known as small parcel auditing or small package auditing. And depending on the volume of carrier invoices to be reviewed, you can do it weekly or biweekly. That said, this article highlights how parcel auditing works:

How Parcel Auditing Works

Parcel auditing can be conducted in the following ways:

Manual Auditing

Invoicing data is manually collected and analyzed to identify errors and other questionable elements in shipping costs. However, because there might be many transactions, a human auditor may be unable to review 100% of the invoices and find all billing errors. 

Therefore, the process may be inaccurate. Also, it might take hours or days to investigate each invoice line by line. Generally, as your company’s shipment volume increases, so does the workload, and using manual processes, in this case, is neither time-saving nor cost-effective.

Software-Assisted Parcel Auditing

With parcel audit software, you can organize, track, and review shipping invoices electronically. It improves efficiency, reduces labor-intensive analysis work, and provides more refund opportunities. 

In light of that, you’d want to invest in an effective software technology like Sifted’s parcel audit solution for small parcel auditing. It enables you to automatically audit your shipping invoices, identify errors, and claim refunds. 

Parcel Auditing Processes

Whether manual or software-assisted, parcel auditing involves the following basic processes: 

Invoice Collection

Invoice collection is the gathering of all records of itemized transactions between you and the carrier service. Therefore, if you don’t have or can’t trace some, you can request detailed invoices from your carrier. Usually, they provide them in portable document format (PDF) or comma-separated values (CSV) format.

Establishing A Timeframe

You should organize the invoices and determine a time frame to audit. For instance, you can review invoices from the past three months or two weeks.

Expense Categorization

Expense categorization entails grouping invoices by type, date, or vendor for easy analysis. Also, it helps to keep claims separate and organized since you can quickly identify the carriers involved.

Looking For Errors

It involves establishing any billing inaccuracies related to your shipments. For example, it will shed light to how your parcel is being overcharged. Notably, thorough parcel auditing can identify errors and locate instances of violations of service standards. 

In this case, various variables come into play to help determine the correct rate of an individual parcel. That includes the parcel’s weight, shipping class, size restrictions, and destinations. Therefore, if any of these elements is not categorized appropriately, there’s more likely to be a billing error per shipment. 

Generally, the following are some of the service failures and charging errors to look for when performing an audit:

• Duplicate charges: A parcel was billed more than once.
• Incorrect surcharges: For example, a parcel billed for an incorrect address correction or one that was previously right. 
• Damaged parcels: Any parcel that arrives damaged is eligible for a claim.
• Wrong rates: The carrier used an incorrect rate for billing. 
• Non-shipments: A parcel was scanned, entered into the carrier’s system, and billed but not loaded into the transporting vehicle or vessel for shipping.  
• Late deliveries: The parcel was delivered past the agreed-upon time and date. For instance, if you paid for an expedited service and your parcel is delivered late, your carrier service should account for the delay.
• Incorrect Saturday charge: Your parcel was to be delivered and picked up on a Saturday but wasn’t. Usually, carriers may charge an additional fee for services provided on weekends. This amount is added to the standard shipping prices for the ordinary work week. Therefore, the extra cost can count as an overcharge if you didn’t receive the package on a Saturday.
• Faulty dimensional weight charges: The carrier measured the parcel incorrectly and provided incorrect weight charges. They might have used the wrong dimensional divisor.  
• Missed discounts: The shipping company didn’t apply the discounts specified in the carrier contract.

Usually, carriers issue refunds for such system failures or surcharges applied incorrectly. It can save you much money, especially when dealing with bigger shipments. Essentially, you can reduce your shipping costs by as much as 5%. 

However, you should submit a refund request to the company within a specified time, usually within two weeks. They’ll process your request, and if applicable, the carrier will credit any overcharge to your account. Therefore, parcel audits are only beneficial if completed quickly and effectively. 

Review Rate

In addition to identifying errors and overcharges, you must review your current billing rate to ensure you’re being charged the correct discount rate as indicated in the contract.

Data Analysis

A review of large volumes of data can also disclose consistent trends in shipping, such as regular address corrections or upward trends in shipping costs. These insights can be helpful when negotiating future carrier contracts. 

Conclusion

Parcel auditing is a fundamental business practice that involves reviewing the invoices from your carrier to analyze what you’ve been charged for and whether it’s correct. The above shows the process of how it works. Altogether, remember to leverage the best software for a detailed audit of every charge and to determine more opportunities for savings.