Shipping is one of the fastest-growing expense categories for both B2C and B2B businesses. Between rising costs of materials, fuel surcharges, and annual rate increases from all major carriers, many brands are staring at double-digit shipping rate costs for the upcoming year.
And while some of this might feel like it’s out of your hands, a parcel audit can uncover serious savings for your business.
If you haven’t done a parcel audit in a while (or ever), you’re leaving serious money on the table. Let me explain why.
What Exactly is a Parcel Audit?
Parcel audits involve an in-depth review of all shipping invoices from carriers (FedEx, UPS, USPS, DHL, etc.) to find savings opportunities and more visibility into shipping data.
Parcel auditing services typically involve:
- Identifying overcharges, duplicate charges, and other billing errors.
- Verifying invoices have correct fees.
- Ensuring carriers are actually meeting the services they’re charging you for.
- Correcting errors associated with dimensional weight charges, fuel surcharges, address corrections, and other surcharges.
There are two main goals of every parcel audit.
First, you want to identify potential errors that are costing your business more money than you should be paying on shipping. And second, you want to recover those funds. Either in the form of a refund or credit back to your account, and/or lower rates moving forward.
How Parcel Audit Services Work
Most businesses don’t have the time or resources to perform parcel audits in-house. That’s where parcel auditing services come into play.
Parcel audits are commonly handled by cost reduction consultants. These are third-party firms that analyze your shipping invoices and carrier agreements to handle the auditing process on your behalf.
The biggest advantage of using a parcel audit service is that they have data from other businesses that you don’t have access to.
For example, you might think you’ve negotiated a good rate on your base shipping costs. But you have no baseline to compare it to. If you work with a parcel audit service, your consultant can instantly tell you whether you’re getting a good rate based on how your prices compare to similar businesses.
Beyond the initial audit, the best parcel auditing services will continue to monitor your shipping statements every month.
This ensures that your savings are secured for the long haul. And if any rate increases, additional fees, or incorrect charges pop up on your future invoices, someone will instantly be on top of it to correct the errors and get you refunded.
How Much Do Parcel Auditing Services Cost?
Most parcel auditing services should be performance-based. Meaning you shouldn’t have to pay for anything unless your consultant actually identifies any savings for your business.
This is the best possible pricing model for your business because there’s no upfront cost and if you do end up paying, it’s a good thing (it means you saved money). Since the cost comes out of a percentage of your savings, you’re still ahead of where you were before the audit.
The exact percentage of savings shared with your auditor depends on the consultant you use and your shipping volume. It can range anywhere from 20% to 50%, and it’s something negotiated by both parties up front.
If your parcel auditor is charging you upfront for the audit, they don’t have as much of an incentive to do any real work for you. So you should avoid those types of pricing models.
What to Look for in a Parcel Audit
Whether you’re planning to do a parcel audit on your own or you’re hiring a consultant to handle it for you, these are the most common things you should keep an eye out for when performing the audit:
Billing Errors: Duplicate charges are more common than people realize. During our parcel audits, we tend to find at least a handful of shipments that were incorrectly charged twice on either the same invoice or back-to-back invoices.
Misapplied Service Fees: All carriers charge extra for things like residential deliveries, required signatures, fuel surcharges, oversized packages, and other accessorial services. The problem is that these aren’t always applied correctly. For example, your statement might have oversized package surcharges applied to parcels that simply aren’t oversized. We’ve even found residential delivery fees charged on items delivered to a business address.
Service Failures: There’s a good chance that your carrier offers a guarantee that packages will be delivered on time. Otherwise, you’re entitled to your money back. But these refunds aren’t applied automatically. It’s on you as the shipper to file a claim when your carrier fails to deliver the service they’ve guaranteed.
Discounts Applied: If you’ve negotiated a specific discount with your carrier, you unfortunately can’t assume that your custom rates are being applied. We’ve worked with companies that were incorrectly charged standard shipping rates, even though they had a contract with discounted terms.
Parcel Audit Services vs. Parcel Audit Software
There are some tools on the market advertised to handle parcel auditing automatically. These can really be hit or miss, and they’re often difficult to set up as they require a high level of integration across multiple systems.
One major benefit of using a parcel audit service instead of software is that it’s all hands-off for you.
The consultants you hire to run the audit on your behalf have the appropriate tools at their disposal, and the human element catches things that go beyond basic duplicate charges.
And as previously mentioned, the parcel audit services should be charged based on a percentage of the savings found. Whereas you’ll have to pay a subscription or license fee for audit software.
Another standout perk of using a parcel audit service instead of parcel audit software is the relationship you can build with the company. The best parcel audit firms offer other cost reduction services to help you cut costs on other business expenses (like trash hauling, credit card processing, telecom, and more).
What to do After the Audit
The initial parcel audit is only the first step, as there’s technically no savings involved with simply identifying errors on your invoice.
From there, you need to contact your carrier with a full list of everything you’ve uncovered in the audit to demand a refund for overcharges and claims for service failures.
This should be something that’s offered by whoever is doing your parcel audit service and included in the cost. If you’re just using software, then you’ll be responsible for handling this on your own.
What happens from here is totally dependent on the carrier and who you speak to.
Sometimes they’re receptive, willing to accept fault, and will happily issue refunds where they’re due. But more often than not they can try to make you jump through hoops to get you compensated.
Let your auditor deal with the back and forth during this process. It’s something they’re used to dealing with every day for other clients, so you can just focus on running your business and waiting for credits to be applied to your next statement.
Final Thoughts and Next Steps
Shipping invoices should be straightforward. But you and I both know that they’re not.
What most businesses don’t realize is that these invoices are filled with more errors than you’d expect, and they’re never in your favor.
Going through a complete parcel audit is really the only way to uncover these mistakes to get your money back. Depending on your shipping volume, this could easily result in $10,000 to $20,000 or more in recovered fees every year.
If you landed on this page and made it this far, you’re obviously interested and recognize the importance. So contact our team here at the Cost Guards for a free consultation and parcel audit.