06 Oct What is Parcel Auditing?
What is Parcel Auditing – The Basics
Parcel auditing is pretty simple actually. It’s the act of going through all your shipping bills and analyzing what you have been charged for. It’s a basic business practice. When we talk about small parcel auditing, we refine the focus to packages that are handled individually instead of on pallets.
Here’s the succinct version care of Wikipedia:
Parcel audit (also referred to as small package auditing or small parcel auditing) is the process of reviewing shipping invoices for invalid charges and other billing inaccuracies. Each shipment tendered to a major parcel carrier like UPS and FedEx come with service guarantees outlined within each carrier’s tariff or service guide. An increasing number of businesses contract third-party companies to perform these services because they have the technology necessary to automate the otherwise time consuming process.
Why Should I Audit my Shipping Bills?
In a word (or a few), you can save thousands or even hundreds of thousands of dollars depending on your shipping volumes.
Parcel Auditing is such a huge industry because there is so much money to be found. Unlike most industries, you have just a couple of common carriers and they’ve devised a system that really stacks the cards against you. Because of how fees have developed over time, the carriers want you to worry about the base shipping cost so that you don’t notice all the fees.
Perhaps even trickier is that they carriers make guarantees about when they’ll get your packages to their destination. Do they miss these promises? Yes! About 3% of the time, they miss their promise. So you’re entitled to you money back, right? Right. So they just issue you a refund, right? Wrong!
This is where it gets interesting. The carriers know that they didn’t keep their promise to you and they guarantee delivery in that window or your money back, but they don’t process the refunds automatically. In fact, if you do believe you’re entitled to a refund, they make you jump through a lot of hoops to get it. Read our step-by-step guide to filing Guaranteed Service Refunds.
What is a Parcel Auditing Company?
Not only do they make requesting your refund pretty difficult, they make finding the shipments that they failed to deliver almost impossible. So businesses – called parcel auditors – have sprung up to help do this for you. They usually combine some element of basic bill scanning with a lot of cheap labor and they find some of the savings for you.
These businesses were very useful for the past twenty years or so and if you are an enterprise-level shipper, you should probably have a contract with one of them. If you’re a bit smaller, they may not want your business or they may not do a very good job. You’ll understand why after you read our next section on how they get paid.
How much does Parcel Auditing Cost?
The traditional way that parcel auditors get paid is the split the savings with you. Let’s present a basic example. You shipped 1000 packages last month with an average base shipping cost of $13 (not counting all those extra accessorial fees). You could expect your parcel auditing company to find that about 3% failed to meet the guaranteed delivery window – that’s 30 packages. If you’re entitled to all that money back, that would be 30 packages times $13 or $390. In most contracts, the company handles all the work and they take half the money.
Seems like a win win, doesn’t it? Well, it can be. If you’re big enough that all that work is worth their effort and you don’t have the ability to do it yourself, it beats losing that money all together. And that’s the way the companies pitch it to you. “You weren’t going to be able to find and apply for those refunds yourself, so its just found money.” For the most part that was true for a long time. You can also easily see that if you’re only shipping $25k a month, it may not be enough money for the company to really thoroughly audit your shipments and certainly not enough money to give any guidance to how to reduce overall shipping costs. It can also help you determine which shipper is the most cost-efficient for your business or whether a Regional Parcel Carrier is best.
We’re a little biased of course, but we figured out that it’s not 1980 and software can be developed that any size shipper can use. And furthermore, why not be able to keep all the money to yourself. That’s why we built Franklin Parcel. If you’re interested in keeping all your refund money, why not sign up for our free trial?