Boost Your Company’s Profit By Auditing Shipping Bills

Last updated: January 9th, 2018.
make More Profit By Auditing Your Shipping Bills

Regularly reviewing shipping invoices could help correct costly mistakes

This year, businesses will spend upwards of $1.5 trillion on shipping, as reported by the Wall Street Journal.

Most of that money goes toward getting the best products to customers’ front doors as quickly and efficiently as possible. But roughly 2% of that $1.5 trillion is spent on shipping errors.

For a company that brings in $1 million in revenue, that equates to $20,000 in shipping errors. A small business can accomplish a lot with $20,000 (better marketing, product development, etc.) and most certainly can’t afford to throw it away. But spotting and correcting these costly errors requires a monthly step that most businesses skip – auditing shipping bills.

Why auditing shipping invoices is important

Most e-commerce businesses rely on automated billing when it comes to shipping. The assumption is that FedEx, UPS, or USPS is charging your business correctly every month, since your invoices are generated automatically. However, automation still leaves room for mistakes. Some common issues include:

  • Overcharges
  • Late packages (which should result in discounted rates but often don’t)
  • General mistakes (i.e. incorrect flat rates)
  • Address correction charges
  • Unmonitored surcharges (i.e. Saturday delivery, return fees, large packages, etc.)
  • Dimensional (DIM) weight charges – if a package’s DIM weight is larger than the package’s actual weight, you could end up paying extra for technically nonexistent weight.

Some of these errors are the fault of the carrier; others are caused by mistakes on your end. Regardless of who is to blame, a thorough audit can find the problems and steer you towards a solution that helps recoup your funds or avoid expensive mistakes in the future.

The benefits of auditing your shipping invoices are simple:

  • You’ll save money – you could gain back up to 6% of your spend each week, and you could even save enough to negotiate a new contract that’s 10-25% cheaper.
  • You can recoup money you shouldn’t have spent – if your carrier has charged you incorrectly, you can get those funds back.
  • You can fix bad internal processes – for example, if there’s a recurring issue with your shipping costs (i.e. excessive Saturday deliveries), you could adjust your shipping policy to eliminate the expense.
  • You can budget accurately – once you have a clearer understanding of how you’re spending your money, you can build a more effective budget.

Ways To Audit

There are two primary ways you can approach your shipping bill audit – an internal audit or a third-party audit.

With an internal audit, you can use either a micro audit or a macro audit.

In a micro audit, you’ll go over each and every invoice with a fine toothcomb:

  • Look for duplicate invoices: You might see multiple bills with identical totals, identical invoice numbers, or vendors with the exact same business information. Weed these out to avoid paying the same charges multiple times.
  • Check for discounts and correct base rates: If you’ve worked out a special deal with your carrier, make sure it’s accurately reflected on your invoice. If you’re overpaying, you should contact your account manager and get everything straightened out immediately.
  • Doublecheck classifications: Different businesses have different classifications based on size and product category. Make sure your classifications are listed correctly.
  • Ensure extra charges are correct: When your carrier has to deliver packages outside of its “normal” expectations, you’re charged for the effort. You might not be able to avoid a late or weekend delivery, but you can ensure you’ve been charged correctly for it.
  • Make sure you’re billed according to your state’s regulations and appropriate tax laws: Many states have different laws and fees; shipping rates are not one size fits all.
  • Double check the totals: This might seem silly, but make sure everything on the invoice adds up. It’s possible that charges reflected correctly on a bill could still be totaled incorrectly.

A micro audit might be your best bet to catch every single mistake, but it’s tedious, and not many businessowners have the time or resources to be this thorough. A macro audit takes less time and still clues you in to big problems.

Macro Audit

In a macro audit, you’re checking shipping costs on a monthly basis, but you’re taking a different approach. Here, you’ll group each type of shipment together and compare the trends.

For example, let’s say you ship out $100,000 of product every month, which breaks down to the following shipping charges:

  • $30,000 for USPS First Class
  • $20,000 for USPS Priority
  • $30,000 for FedEx Ground
  • $10,000 for FedEx Express
  • $10,000 for FedEx International

This categorization gives you a clear understanding of where your shipping money is going.

Now, imagine a month in which your FedEx International charges jump to $16,000. Without thorough analysis, you might see a $6,000 increase on your bill and shrug it off, thinking it’s so close to your normal spend that it’s not worth looking into. But thanks to your macro audit, you can easily spot where the increased charges are coming from.

This could mean you had a big month of international shipping – or it might be a billing error.

Spotting these types of errors, in both micro and macro audits, gives you a chance to dispute the mistakes and recoup the funds from your carrier.

If these audits seem boring or you can’t spare the resources to conduct them, consider installing auditing software or outsourcing the job to an auditing company. With this method, you have a trained eye that can check for errors, discrepancies, and service failures.

OrderMetrics can help with some of this auditing. If you have connected your shipping provider like Shippo or Shipstation to OrderMetrics, you can review your shipping costs per order as they are shipped. Simply sort your orders by cost of shipping, or by shipping margin, and see the details of your most expensive orders to ship.

Be it a person or AI, you’ve got a fresh set of eyes from someone who knows what to look for and isn’t personally invested in your business. And, you’ll have peace of mind that your audits are being handled with the utmost care.

Summary

Being fiscally responsible isn’t just about budgeting or driving more revenue; it’s about going over expenditures in great detail.

Considering that shipping is one of your biggest expenses, a monthly audit of your shipping bills is well worth the time and money invested.

Want to find even more ways to improve your bottom line?

Order Metrics

OrderMetrics - E-Commerce Profit Dashboard

Check out Order Metrics - A profit management tool for growing ecommerce merchants. The best way to track and measure your e-commerce store performance across multiple storefronts , advertising providers and shipping providers. Customers report increasing their margin by 5-6 percentage points after using Order Metrics.

Try Order Metrics for Free