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.
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:
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:
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:
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.
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:
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.
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.
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.