Increase profitability with parcel auditing software

Companies know all too well the ever changing environment for parcel shipping. Anything from cyber attacks to geopolitical dynamics impact the cost and reliability of parcel shipping.

Now, more than ever, companies must focus on understanding their costs down to the product level. So they can leverage that knowledge upstream on product pricing, network investments, and how to ultimately improve profitability and de-risk operations.

One of the techniques companies have historically used to monitor costs are manual audits. These rigid and error-prone processes do not meet the needs of modern parcel shippers and the supply chain. Legacy parcel audit providers cannot handle the complexities and fluctuations of modern shipping. They fall short because their offering does not provide high-quality data, accurate line-item costs, and dynamic scenario planning.

Manual audits may pass the CFO or 3rd party accounting firms sample tests but they don’t set the company up for a secure and profitable supply chain. The real audit should be, how secure and tech enabled are my financial processes within logistics?

Logistics is a decentralized business by nature. Imagine how a company with fragmented parcel data from various carriers, modes, systems and formats is supposed to excel when it’s relying on humans to pull this all together. To build a resilient and successful parcel network, teams must be able to analyze each carrier, lane, service level, transit days, costs and SKU in one view. Collecting all supply chain and spend data into one unified system might seem like a monumental task, but logistics-focused SaaS technology is built to solve your data extraction and aggregation problem. Using technology, not people,  reduces costs, improves efficiency, enhances decision quality, and, ultimately, transforms your employees from processors to analysts.

Keep reading to learn how parcel auditing software helps you unlock profit trapped in your supply chain.

What is a parcel audit?

A parcel audit is two fold. First is a comparison of invoices and contracts to see if the billed amount aligns with the expected contractual amount. Second is a review of GSR’s, Guaranteed Service Refunds, to make sure these refunds have been processed. Over time, many shippers have waved their ability to recover GSR’s in exchange for a better discount in the negotiation process so these may not apply to all companies.  

Collecting Documentation

The first step of a parcel audit is collecting the documents you need for reconciliation, typically it’s just the invoice and carrier contract. Parcel invoices come in a few different formats (EDI,  PDF, paper, spreadsheets, or in carrier specific portals) and are often bundled together so teams need to parse them out to make them legible.

Validate Invoices

First, teams must validate that the invoice is legitimate by scanning the bill to account numbers, consignee address, sales order numbers, etc. Then they must confirm that the billed package was also delivered.

The billing will change depending on the carrier and service-level. For example, FedEx Air services bill once a package is delivered but FedEx Ground bills when a package is manifested. If a package gets manifested but not shipped for FedEx that will still show up on a shipper invoice.

To prevent this, teams must manually search a tracking number to see status of the shipment and file a claim if it was billed and not shipped. Once teams validate that the invoice and shipment are valid, the detail of invoice line items and the complexity of contracts starts.

Audit Line-Items

Due to the vast amount of transactional data, manual audits of bundled invoices and line-items are error prone and time-consuming. Teams must ensure the invoice reflects their shipment details (weight, dimensions, destination) and any special handling fees. The need to scrutinize all charges (shipping fees, fuel surcharges, accessorials) against agreed rates or published tariffs, looking for duplicate charges, missing discounts, or calculation errors.

Worst of all, findings are difficult to aggregate from a spreadsheet so teams never get a complete view of their supply chain and spend data. It’s hard to manually track and consolidate all of the data about your product,carrier agreements, service levels, shipping lanes, etc. As a result, errors inevitably slip through the cracks and insights are lost.

Without a central repository for your data, teams cannot access self-serve analytics or uncover network insights. An effective audit detects workflow at every defect, a great audit workflow tracks all of the data to better forecast future costs and needs as well as identify trends within the data.

In short, manual auditing is a tedious, error-prone task, but this type of work is where software shines.  

What is parcel auditing software?

Software automates the entire data management and parcel auditing process. Loop uses logistics-AI to unify supply chain and spend data, transform documents of varying quality into a digital record, and create configured rate engines. This translates to 99% of parcel invoices can be reviewed with no human touch in the audit.

When there is a discrepancy, the platform explains why the error occurred. This minimizes back and forths with carriers and streamlines resolution. Best of all, transportation managers can access self-serve analytics to identify new savings opportunities, monitor performance trends, and get a real-time view of how well the logistics network is serving customers.

Parcel auditing software isn’t to be confused with auditing service providers. Most legacy providers still have real people running manual audits behind the scenes, even if they provide digital audit results. Outsourcing to these service providers is both expensive and error-prone. Worst of all, it leaves your data with a third party, preventing you from understanding your performance at an invoice, contract, and network level.

Parcel auditing software eliminates manual errors, improves accuracy, and surfaces network-wide insights and keeps the data and process within your control.

Why do parcel shippers need parcel auditing software?

Modern supply chains and carrier networks are more complex than ever. Yet, legacy providers still rely on rigid processes that can’t handle today’s shifting landscape. This prevents them from gathering and providing high-quality data. Without great supply chain and spend data, companies cannot ensure financial compliance and identify savings opportunities.

Intelligent software centralizes all your data so that you can automate workflows and run detailed cost analysis to boost margins.

Unify your shipment and spend data

In most cases, you receive invoices via EDI, email, and carrier portals. Your contracts are stored as PDFs. Depending on your document types, you will need to collect and extract your data. Perhaps you have a  cloud-based data warehouse like Amazon Redshift that is managed by a data scientist to aggregate all your data. Your parcel auditing software will still need a system to collect all of your different document types to then feed a standardized record into your data warehouse. With Loop, all you have to do is forward emails or connect your EDIs/APIs and Loop translates all of this data into information.

Whether it’s extracting data from a paper contract or making sense of a cluttered EDI feed, you need to pull data off these different formats to unify it. Your data must be cleaned (identify spelling errors, duplicate references, etc.) and stored in one system.

The process becomes more complex when you have to standardize your data across all your carriers to get a comprehensive network view. For example, UPS and FedEx offer similar products such as UPS Next Day Air and FedEx Priority Overnight. Standardization is key so can analyze that same service-level across carriers.

A platform with flexible ingestion and unified data management allows you to understand the context of your data. This allows the software to assign meaning and map it to the right general ledger code, business unit, carrier, etc. It’s also crucial that your parcel auditing software can automate cost allocation to assign cost at a line-item level. If it can’t, you might be stuck manually inputting your GL codes to ensure financial compliance.

Pro tip: Pay attention to the specific technology auditing software uses to intake and manage your data. Many use spreadsheets, which are rigid and quickly become outdated as networks change. Tools like Loop use logistics-AI to extract, clean, and standardize convoluted data to unlock a premium data set. Think of how far your mobile device has come with managing your email and being able to predict what you will write in your email. Is your logistics invoicing solution prescribing you actions today? Change starts today.

Get a holistic view of your parcel spend

Unified, accurate supply chain and spend data provides an accurate, holistic view into your teams’ and carriers’ performance. It’s filled with insights across lanes, volumes, regions, service types, and more.

Parcel auditing software enables you to analyze every attribute of a shipment and its associated costs. You should be able to monitor for dimensional weight, check actual weight, and even see if you’re being charged every time a carrier uses straps to secure your parcels on a pallet. All so that you can improve your packaging and transportation decisions to reduce claims and poor customer satisfaction.

This sets important baselines so you can spot anomalies and monitor trends. Without a foundation of accurate data, locating outliers in duplicate charges, packages billed but never shipped, and undelivered packages during parcel invoice audits turns into a guessing game.

Boost accuracy and efficiency

Automating your parcel audit has three core benefits:

1. Boost efficiency. It streamlines the time it takes to compare the invoice against the contract. Now, instead of taking days or weeks, your audits can be done in four hours. Platforms like Loop can approve 95% of invoices with no touch. This means you’ll only need manual intervention on 5% where discrepancies triggered exception management So your team can focus on what really matters - creating happy customers and building great carrier relationships.
2. Increases invoice and forecasting accuracy. Software, and specifically AI, thrives on comparing datasets and understanding the differences. If you invest in getting quality data into your platform, you can ensure you only approve accurate invoices. Your platform should identify if there is no delivery confirmation for that tracking ID and not pay the invoice.  If one of your warehouses forgets to use your negotiated discounts, you end up paying full price.
3. Uncovering insights. Now that technology is doing the heavy lifting in data management for your team, your team will transform from processors to analysts. This transformation is what companies have been dreaming about with digital transformation. Instead of spending time number crunching, they can examine audit data with self-serve analytics to find ways to  increase your network resilience, improve your packaging to reduce claims, and focus on customer delivery performance to boost sales.

Having all the data in one place enables you to automate your audits and gives you all the data you need to quickly resolve disputes.

Show the work behind audit disputes

At the end of the auditing process, an invoice is either paid out or disputed. If you need to dispute an invoice, understanding why there is a discrepancy and collecting the necessary collateral to prove your case can take time. This is why having great document management and root-cause analysis built into your auditing platform is crucial to expedite claims resolution. Without these, you run the risk of late fees or in the worst case, a hold on your account.

Loop explains the reason behind every error it finds. Being armed with this proof reduces the amount of back and forth between you and the carrier while working out the discrepancy. When you avoid approving inaccurate invoices, you boost your working capital and create reliability in your budget forecasts.

Uncover hidden savings opportunities

Clean data is the foundation for effective parcel audits but more importantly it unlocks analytics and insights that drive meaningful cost-savings.Think of it as pulling back the curtain on your operations so you can spot expensive inefficiencies fast.

For example, ask yourself the following questions:

• Has our carrier network evolved as our business has grown?
• Are we operating at the right service level for our specific shipment?
• Are we paying the correct published or discounted rates?
• Have we deployed zone skipping in high volume regions?
• Are we using the carrier best suited for each leg of the shipment’s journey?
• Are we paying extra for faster transit days when the delivery times for that carrier make it so you don’t have to?

Huge savings can live in the most unsuspecting places. Nuances in which carrier you’re using for each leg of a parcel’s journey can be the difference between hitting your financial goals or not. Manual processes more often result in disconnected datasets and no insights. Technology allows you to track your product-level profitability so you can make every decision based on cost.

5 ways Loop’s parcel auditing software boosts profitability

1. Stop overpaying on carrier invoices

It’s difficult to know how much you’re overpaying on carrier invoices if you don’t have a holistic view of your parcel spend. Our responsibility as logistics technicians is to set up the “how” so the "why" and "what" become an automated answer, not human driven.

For instance, if you notice a spike in parcels that were created but never scanned, you know there might be a control issue with the shipping location or the carrier. If the data tells you the carrier picked up the pallet but never scanned it, you have the numbers to approach the carrier to prove the error.

All of these details stack up and become expensive. If they don’t match contract terms, it strengthens your case when requesting refunds or disputing invoices. When it’s time for contract negotiations or resolving disputes, you’re armed with the data to get the best deal possible.

Pro tip: Leverage your network insights to introduce a backup carrier in specific regions to minimize risk of disruptions or rate hikes.

2. Unlock premium parcel data

Clean and organized data is crucial to making good decisions. If you’re stuck trying to pull in data from different carrier dashboards by hand or toggling between tools to see it all, you’re bound to miss something.

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Loop’s software organizes your parcel spend and audit data. It standardizes language and details to mitigate spelling errors, duplicate references, and makes carriers’ codes readable, i.e. turning UPS’s service level EDI code “SG” into UPS GROUND.  

Once you’ve structured and organized the data, you  establish your carriers’ and teams’ performance baseline.

High-quality, actionable decisions come from comprehensive, usable data.

3. Pay invoices on time to maximize working capital

Paying invoices too early and too late both have downsides, which is why it’s necessary to hit your payment terms. Today’s rising interest rates make it even more difficult to keep money in your pocket. The rates squeeze your profit margins, decreasing your overall profitability.

Plus, each carrier also has individual payment terms determining how and when you pay invoices. You can use your parcel data to avoid paying late fees and accurately age contracts to hold onto your money longer. One carrier may use Net 30 while another you negotiated Net 60. A regional carrier might use Net 15. You need to have the financial controls and compliance necessary to pay each individual invoice according to its contracted terms.

Companies with more working capital build a reputation of being trustworthy and financially secure. It shows carriers you’re skilled at handling your money and have methods in place to ensure you pay invoices on time. Paying on time, every time helps you become a shipper of choice so that carriers want to work with you.

What should you do with more working capital on hand?

• With more liquidity, you have sufficient funds for infrastructure improvements, investing in 3rd party deployment facilities, etc.
• Since you’ll be relying less on external financing, you can cover accounts receivable expenses, invest in company growth opportunities, or purchase inventory.
• Working capital sets you up for success to weather unexpected events like natural disasters, supply chain disruptions, customer demand fluctuations, or economic downturns. You can adapt to a changing market without risking financial stability.

Loop diligently tracks the right payment terms and preferred payment type for each carrier and ties it to an invoice to ensure accurate, timely payments. You can lean on Loop’s automated payments for:

• Payment orchestration: Automatically age invoices to due dates and approve payments to be sent via ACH or opt for manual review.
• Financial compliance: Make sure you’re paying the right amount and reducing your overall risk by avoiding paper checks.
• Flexible integration: Easily share your parcel audit data with an ERP or TMS system.
• Payment status: Track the status of a payment and instantly recognize when a payment doesn’t go through.

4. Uncover and address the most common accessorials

Once you’ve run the audit and collected the data, you can use it to identify your most common accessorials for individual carriers and across your network.

To find ways to lower your accessorial costs, you first need to understand which have the highest cumulative cost. The most expensive accessorial on one invoice a week isn’t necessarily doing the most damage. For example, FedEx lists $140 as the maximum C.O.D charge per shipment for 2024, but that doesn’t account for the hundreds of smaller $5 fees that can stack up.

By consolidating all of your supply chain and spend data, Loop identifies the accessorials that present the most significant cost to you. The only way to get this bird’s-eye view is through aggregate data.

What are some of the most common and potentially costly accessorials?

• Address corrections
• Collect on delivery (COD)
• Delivery confirmation
• Fuel surcharge
• Signature required
• Weekend delivery
• Additional handling
• Residential surcharge

Use this information to negotiate better contracts with carriers and find where you could be more efficient in your internal processes.

5. Accurately plan for future scenarios

While it’s impossible to predict the future, accurate data can get you pretty close. Carrier strikes, delays, and other unforeseen events can be costly and impact your customer experience. Shippers should arm themselves by tracking industry trends to best prepare for potential future disruptions, and understand their exposure when events occur, to remain financially secure.

Data you get from a platform like Loop delivers:

• Inform your diversification decisions. Transportation managers know too well the importance of carrier diversification to avoid paying steep carrier-published rates and to decrease risk in the event of industry disruption. Data from your parcel audit helps inform your diversification decisions. Loop can help you divide your carrier contracts to take advantage of discounts without relying too heavily on a single carrier.
• Test different action plans for a disruption. What’s your backup plan if your primary carrier goes on strike? How do you minimize your financial risk if supply chain issues result in significant delays for your parcel shipments? By trialing potential solutions to disruptions, you can ensure you’re set up to minimize risk and keep operations moving along as smoothly as possible.

Unlock premium data and keep more money in your pocket with Loop

Loop’s  self-serve and customizable analytics places actionable insights directly at your fingertips. It’s a platform, not a point solution, so you won’t pay per seat or per report generated. Everyone has access to the data in Loop – all the time.

Discover how Loop's auditing software can revolutionize your parcel management and drive bottom-line growth.