Freight Accounting in the Digital Era

What is Freight Accounting – in Simple Words!

Freight accounting is all about carefully tracking and managing the money spent on moving goods. It includes everything from setting up carrier arrangements and contract terms to managing rates, penalties, and extra charges, and handling payments and invoices. Essentially, it ensures that every financial aspect of your logistics operations is transparent, accurate, and efficient.

The Risks of Sticking with Manual Freight Accounting 

Traditionally, and specifically in an Indian context, freight accounting has been a manual and time-consuming process, prone to errors and delays. The challenges include invoice discrepancies, data entry errors, and the complexity of managing multiple carriers and sometimes varied contract terms and conditions along with it.

• The process of bill submission and settlements is decentralized and hence, often lacks transparency.
• Due to resource skill gaps at the Transporters’ side and manual preparation of invoices along with backups, typically 15%~20% of bills are submitted with error.
• The accounts team needs to be extra vigilant to spot the bills with errors and hence, they need extra effort in scrutinization; also disputed bills often take 3X time for settlements.
• Manual validation of critical data points such as verification of Proof of Delivery, Delivery Order Number, Lorry Receipt Number, and Vehicle detail etc. is a time-consuming process and human efficiency dependent.
• Limited visibility exists in terms of the overall process, status, and exceptions.
• Delays in receiving credit/debit for duplicate invoices and GST invoices.
• Reconciliation challenges frequently arise in disputes over rates between transporters and Logistics Teams.
• Documentation, including invoices, receipts, and permits, poses significant challenges for freighters and transporters. Managing and organizing these documents to meet audit requirements is time-consuming.

Unlocking the Benefits of Digitalization

In this digital age, the need to streamline and automate these processes has become imperative due to the scale of operations and time pressure. Digitalizing freight accounting brings several advantages, such as:

Transform Your Freight Accounting Process:

Reducing costs in freight accounting involves a combination of strategic planning, leveraging technology, and continuous process improvement. Here are some best practices to consider:

How a Chemical Fortune 500 Company Transformed its Freight Accounting

At SuperProcure, we had the privilege of collaborating with a leading Indian chemical giant on their digital transformation journey. This organization managed multiple product segments on a large scale and operated several business divisions, resulting in extensive fleet operations and a laborious manual process for handling incoming freight bills.

By introducing the Integrated Logistics Management System (ILMS), we simplified truck indenting, provided in-transit visibility, digitized LRs and PODs, and enabled live KPI monitoring. Once the operational part stabilized, our goal was to transform the Freight Accounting process with the following objectives:

– Reduce workload on Accounts & Payable

– Create complete visibility for transport partners

– Eliminate the effort required to correct billing errors

– Ensure faster payment turnaround times without the need for follow-ups

After implementing Digital Freight Accounting, both external users (transport partners) and internal users (accounts and payable) quickly recognized its potential to simplify and accelerate daily tasks. This led to adoption reaching nearly 100% within a couple of months, and the team observed significant improvements in major freight accounting KPIs shortly after implementation.

Conclusion

Now that you’ve reached this point, you likely understand how crucial effective freight accounting is for your business’s success. Digital solutions such as TMS streamline freight accounting by automating tasks, reducing human error, and speeding up processing times, freeing you to focus on strategic decisions instead of repetitive tasks.

With real-time tracking and live KPI monitoring, you gain comprehensive insights into your freight operations. This visibility allows you to make informed decisions quickly and address any issues promptly. In conclusion, digitization drives efficiency, enhances visibility, and delivers substantial cost savings, positioning companies for long-term success!