Before You Audit the Charge, Audit the Evidence

Why Document Verification Is Becoming Essential in Ocean Freight

For years, freight audit has focused primarily on the numbers. Was the correct rate applied? Was the fuel surcharge calculated properly? Does the accessorial match the contract? Was the invoice duplicated? Did the transportation provider bill the correct amount?

Those questions remain essential. But recent developments in ocean shipping are reinforcing another question that may be just as important:

Is the documentation there to support the charge in the first place? Recent gCaptaincoverage of detention and demurrage disputes has illustrated just how important that question can become.

In September, a Federal Maritime Commission administrative law judge rejected Peloton Interactive’s attempt to recover $33.7 million in detention, demurrage and related charges from Flexport. One issue highlighted in the decision was whether the evidence provided enough detail to establish what caused delays associated with individual containers and charges. The judge found that consolidated invoice information did not provide sufficient detail in key areas. (gCaptain)

Another recent gCaptain article examining changes surrounding FMC charge complaints specifically noted advice that shippers and NVOCCs maintain thorough invoice and bill-of-lading records in order to preserve potential claims. (gCaptain)

These cases concern specific legal disputes, but they illustrate a much broader transportationmanagement issue. An invoice without the right supporting evidence can create financial exposure long after the shipment has been delivered.

The invoice is only part of the transaction

Ocean transportation can generate an enormous documentation trail. An invoice may arrive alongside a bill of lading, proof of delivery, delivery receipt, customs documentation, rate support, equipment information, terminal records, accessorial documentation and other shipment-related materials.

Historically, much of this information has been treated as supporting paperwork. That description increasingly understates its importance. The documents surrounding an invoice may establish why a charge occurred, whether a contractual requirement was satisfied, when cargo or equipment was available, whether delivery was completed, who was responsible for a particular event and whether a charge should ultimately be approved.

In other words, the invoice tells you what someone is asking you to pay.

The supporting documentation helps explain whether you should pay it. That distinction becomes particularly important with detention, demurrage, storage and other exception related charges.

The FMC’s detention and demurrage billing requirements have also increased the importance of invoice information and documentation. The Commission’s rules prescribe information that must be included in detention and demurrage invoices and establish requirements surrounding billing and disputes. (gCaptain)

The financial control process therefore cannot begin and end with validating an amount. It has to validate the evidence surrounding the amount.

Having documents is not the same as having the right documents

This is where the problem becomes more complicated. Most organizations do not operate under one universal documentation rule. Requirements can vary based on the transportation provider, origin, destination, lane, service type, product, shipment scenario, charge type or customer-specific business requirement.

One shipment might require a signed delivery receipt before payment. Another might require a bill of lading and proof of delivery. A specific accessorial may require additional documentation.An international move may require documentation that would never apply to a domestic shipment.

That creates a much harder question than: “Were documents submitted with this invoice?”

The more valuable question is: “Were the correct documents submitted for this specific transaction?”

And answering that question at scale has traditionally required substantial manual effort.

Someone has to open the submission, determine what each document is, understand the shipment circumstances, know the customer’s requirements, identify what is missing and decide what should happen next.

Multiply that process across thousands or millions of transportation transactions and document verification quickly becomes a significant operational challenge.

AI is changing what happens at invoice intake

This is one area where artificial intelligence can have a much more practical role in transportation than simply generating another dashboard or summary. The first generation of document automation largely focused on recognition.

OCR asked: What characters are on this page?

More advanced data capture asked: What information can be extracted from this document?

Document intelligence takes the process further: What type of document is this?

But the more important evolution is contextual: What documents should exist for this particular transaction, and are they actually present?

That requires connecting document identification with transportation information and configurable business rules.

At nVision Global, this is one of the areas being addressed through nSure AI. The technology can identify individual supporting documents submitted with an invoice and evaluate them against customer-defined requirements that can vary by transportation provider, lane, destination, shipment scenario or other business conditions.

The significance is not simply that AI can recognize a bill of lading or delivery receipt. It is that the system can determine whether that document should have been present for that particular transaction.

If required documentation is missing, the invoice can be handled accordingly, whether that means returning it for additional documentation, routing it for review, withholding approval or applying another customer-defined business rule.

That moves document verification much closer to the beginning of the financial process.

Prevention is more valuable than reconstruction

This matters because transportation organizations often discover documentation problems far too late. The invoice has already been processed. The payment has already been made.

Someone questions a charge months later. A dispute begins. Then the organization starts reconstructing what happened.

Teams search email archives, transportation systems, shared drives, transportation provider portals and historical records attempting to find documents that may or may not exist.

Recent detention and demurrage disputes demonstrate how consequential that reconstruction can become when individual charges, containers and events must be supported with specific evidence. 

A better approach is to identify documentation gaps when the transaction first enters the financial process.

Before the audit.
Before approval.
Before payment.
Before the evidence becomes difficult to reconstruct.

From document processing to financial governance

Ocean freight audit is evolving beyond checking whether the mathematics on an invoice is correct. Organizations increasingly need to understand whether the information supporting that invoice is complete, whether required documentation exists, whether the charge can be validated against contractual and business requirements, and whether the resulting transportation information can support future analysis or disputes.

That is part of a larger evolution in freight financial management. The invoice is not merely an accounts payable document. It is a financial record of what happened during transportation.

But that record is only as useful as the information supporting it.

Transportation Financial Intelligence begins with validated, normalized and complete transportation information. And increasingly, that means understanding not only the numbers contained in an invoice, but also the evidence behind them.

Because the next question in freight audit may not simply be: “Is this charge correct?”

It may be: “Can you prove it?”

Ready to move document verification upstream and strengthen the financial controls behind your transportation operation? Explore how nVision Global and nSure AI can help.