How to gain confidence in your accessorial charges in freight?

Accessorial charges can be a challenge for shippers and carriers in the modern world of freight and logistics. Most people in logistics are familiar with accessorial charges, but if you come from another industry, these charges are extra fees added to a freight invoice for services beyond the usual pickup and delivery. They cover charges ranging from detention charges when drivers wait longer than their free time at the loading or unloading dock to liftgate usage charges. Depending on the carrier, different charges can be part of known or unknown accessorial charges. Accessorial charges frequently appear on invoices and can significantly increase annual freight expenses for companies. Fuel surcharges, on the other hand, are fees added to cover the fluctuating costs of fuel and are usually separate from other accessorial charges.

Now, three charges on a single invoice might not be a big issue. You need a single person from each company to cross-check these charges, confirm the rates, and approve the invoice. However, most companies have at least tens of invoices, with some going into hundreds and thousands. In this scenario, the rate of error increases exponentially. The current industry solution is thresholds. If the accessorial charges are within a threshold, they are automatically approved and paid. These thresholds increase the freight spend significantly each year.

Moreover, incidental fees like detention, layover, wait time, off-route miles, and special handling charges can lead to misunderstandings and disputes. The industry’s lack of standardization or definition for these extra expenses often results in disparities and misunderstandings about billing. Furthermore, companies lack a method of validating these charges. Because of this lack of transparency, some could inflate these costs or bill for services that were never provided, and get them approved because of the thresholds.

As a result, everyone loses money. Accessorial charges are one of the main reasons for payables delays in the industry impacting the carriers’ cash flow. They damage mutual trust and may result in increased shipping costs on subsequent invoices. Not to mention that exchanging emails to settle disputes over a single invoice costs both parties a lot of time.

Proposed Solutions

So, what can be done? Looking into most of the articles online, you will find several “solutions.” In fact, none of the options are solutions. They only tell you how to better prepare for the accessorial charges by providing detailed information on your BOL, knowing the National Motor Freight Classification (NMFC) number, and expecting the unexpected. For our clients, these so-called solutions can sound strange. With over 1,000 accessorial charges per month for LT and LTL shipments alone for a mid-sized retailer (eComm deliveries can push this number to 10 times that amount), how many would they have needed to add manually and expect the unexpected?

More importantly, these articles don’t look into the complete picture of the accessorial charges, which is the relationship between the parties. In our day-to-day lives, we have multiple browser extensions that tell you if the source is trustworthy and safe. Services online analyze product reviews, checking if they are real, but you must still be vigilant. In logistics, you always have to look out for overcharges, unproved detention charges, high fuel surcharges, and other charges that need to be double-checked or even triple-checked if you don’t want to lose money.

A Single Source of Truth

Imagine if carriers and shippers had a single source of truth, where detention is calculated via IoT and GPS trackers, notifying parties when the truck breaches the geofence, or guard-house timestamps and even in-yard movement provided by more sophisticated IoT enable cameras. Fuel prices are embedded into the system via API, and all accessorial charges are automatically cross-referenced with the pre-approved list and validated with data received from these IoT devices. This minimizes the possibility of human error and malpractice and nearly eliminates disputes between shipper and carrier. This creates a scenario where all parties are transparent, with their teams doing more important things than cross-checking the numbers between stacks of papers.

One way to solve some of the issues with accessorial charges is to request access to the IoT data from the carrier. Although this is possible, it provides data only for one type of accessorial charge, and there are more than 30 different charges that rely on data from multiple sources. Once you start looking for answers on how to unify all of that data in a single place, you come to different TMS solutions. However, a new issue arises: TMS is on one end, but logistics are multiparty. Furthermore, TMS does help with order management, procurement, asset management, and some other aspects of the freight process, but they lack sophistication in their invoicing and payments using TMS.

At KNNX, we created a single source of truth for every party involved in the logistics process. KNNX Freight connects all existing systems and IoT integrations to gather the shipping data and provides as overwatch to your logistics. In-transit data is added directly to our platform, eliminating the uncertainty of the charges in the final invoice. This data is then used to generate a live invoice available to both shipper and carrier, eliminating the manual effort of cross-referencing the charges and streamlining the payment process.

If you are looking for a solution that can enhance your existing TMS system and provide transparency to all of your clients and partners, or if you don’t have a TMS solution and want to learn how KNNX can help you, schedule a demo with one of our team members or learn more over at solutions page.