Rigorously Review Freight Invoices: Avoid Unnecessary Expenses

Introduction: Every Invoice is a Cost Optimization Opportunity
In international logistics, freight invoices are extremely complex and specialized, riddled with industry jargon, abbreviations, and potential for double and incorrect billing. Statistics show that 3%-8% of international logistics invoices contain errors. For a company with annual freight expenses exceeding tens of millions of yuan, this could mean hundreds of thousands of yuan in unnecessary expenses each year. A rigorous invoice review is more than a simple check by the finance department; it is a proactive cost control activity requiring specialized knowledge.

I. Core Principle: Why Pay?
Before reviewing each expense, ask three questions:

Should I pay? Was this expense actually incurred? Is there a contract or reservation?

How much should I pay? Are the rates and calculation methods correct? Are they in compliance with industry practices?

Should I pay? Based on the selected trade terms (Incoterms), should I be responsible for this expense?

II. Establishing an Audit Process: A Four-Step Approach

Step 1: Pre-Audit – Laying the Groundwork

This is the most important step, occurring during the shipping and even quotation stages.

Clarify Incoterms: Clearly specify the Incoterms version in the contract (e.g., FOB Shanghai, CFR Los Angeles). This is the fundamental method for aligning costs and responsibilities between the buyer and seller. For example, under FOB terms, you only bear all costs until the goods are loaded on board; port charges are irrelevant.

Obtain and save a standard quote: Request a detailed all-in quote from the freight forwarder, clearly outlining all possible fees, rates, and calculation basis. Use this quote as the “baseline document” for subsequent audits.

Confirm all changes in writing: Require the freight forwarder to provide written notification and confirm the costs of any unplanned changes (e.g., port of destination changes, vessel changes, or additional waiting time) in advance to avoid surprises later.

Step 2: Initial Review – Identify the Key Points

Upon receiving the invoice, conduct a comprehensive review.

Matching the Invoice, Booking Note, and Bill of Lading: Verify that key information on the invoice, booking note, and bill of lading is consistent:

Shipper, Consignee, Notify Party

Vessel/Voyage Name

Container Number, Seal Number

Port of Departure, Port of Destination

Cargo Description, Container Type, Container Quantity

Check for Duplicate Billing: Quickly review the invoice to check if the same item appears twice.

Step 3: Line-by-Line Review

This is the most critical and time-consuming step, requiring a detailed review against the quotation and pre-agreed agreements.

Ocean Freight:

Compare the quotation to verify that the base ocean freight and various surcharges (BAF/FAF, CAF, EBS, PSS, etc.) are calculated and calculated correctly. Pay particular attention to whether the effective date of the surcharge matches your shipping schedule.

Origin Local Charges:

THC (Terminal Handling Charge): Standard charges. Verify the amount is consistent with the official website or agreed terms.

Booking Fee/Document Fee: Usually charged per ticket. Check to see if there are any overcharges.

VGM Declaration Fee: Verify that it is included in other fees.

Customs Declaration Fee: Check the rate.

Loading/Trucking Fee: Verify the pickup address, container type, and distance are correct. Are there any overnight charges or waiting fees? These should be agreed upon in advance.

Destination Local Charges: (This should be reviewed specifically for DDP/DAP terms.)

Destination THC/DDC (Delivered at Destination): Verify the amount.

Demurrage & Detention:

Demurrage: Fees incurred when a container remains at the terminal beyond the free detention period.

Detention: Fees incurred for containers that remain outside the terminal for an extended period of free use.

Key Audit Points: Verify the appropriateness of the free time and the accuracy of the calculated overdue days. This area is prone to errors and disputes.

LCL Handling Charge: For LCL cargo, verify that the rate is consistent with the agreed-upon agreement.

Storage: Verify the free time and overdue rate.

Other Fees:

Telex Release Fee: Is it necessary? Is the original bill of lading fee charged after the telex release?

Insurance: Verify the insurance coverage and rate.

Amendment Fee: Confirm whether the fee was incurred due to our fault.

Step 4: Dispute & Payment

Query List: List all fee items with doubts, including the reason for the doubt and supporting documentation (e.g., quotation, email confirmation).

Formal Dispute: Submit a formal dispute to the freight forwarder’s account manager via email, requesting an explanation or proof (such as a demurrage invoice from the terminal or proof of waiting by the fleet).

Negotiation: Most disputes can be resolved through friendly negotiation. Maintain a good working relationship, but adhere to principles.

Approve Payment: Authorize financial payments only after all expense items have been verified. For disputed items, request a corrected invoice (credit note) from the freight forwarder before payment.

3. Tool Empowerment: Increase Efficiency and Accuracy
   Tranche Management System (TMS): This is the optimal tool. A TMS can:

Automatic Matching: Automatically match invoices with the original booking quote, highlighting any discrepancies.

Rule-Based Auditing: Built-in rate tables and business rules (such as free period rules) automatically flag unusual charges.

Process Management: Digitize the approval process, leaving a complete audit trail.

Excel Templates: If you don’t have a TMS, you can create your own audit templates to consolidate commonly used rates and rules for improved efficiency.

IV. Common Pitfalls and Solutions
Common Problems Description Solution
Phantom Charges: Charges for services that never occurred. Insist on supporting documentation, such as terminal receipts or fleet bills.
Duplicate Billing: Charges for the same service twice, possibly with slightly different names. Carefully review each line and use TMS tools for automated screening.
Calculation Errors: Quantity, rate, or currency conversion errors. Recalculate all extended amounts and totals.
Unauthorized Services: Services provided without your prior consent (such as additional insurance or special packaging). Refuse payment based on email records unless you can prove they were necessary.
Demurrage and Demurrage Disputes: Demurrage and Demurrage (D&D) Disputes: Demurrage and Demurrage (D&D) disputes occur due to uncontrollable reasons such as terminal congestion or customs inspections. 1. Arrange with the freight forwarder in advance who will bear the responsibility for D&D charges incurred due to reasons beyond our control (such as port congestion or inspections).

2. Request the freight forwarder to provide an official bill from the terminal/shipping company. 3. Require freight forwarders to actively apply for tax exemptions from shipping companies.
   Conclusion: Transforming Auditing into a Core Competency
   Rigorous freight bill auditing is an investment with a high return on investment. It requires companies to develop internal professional capabilities, establish standardized processes, and be adept at leveraging digital tools.

Making this process a regular and institutionalized process will not only directly recover losses and reduce costs, but also send a clear signal to your logistics service providers: you are a professional and rigorous customer. This will encourage them to be more standardized in their quotations and services, reducing errors at the source. Ultimately, this creates a virtuous cycle and builds a solid cost control defense.