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Issue 6 2014 - Freight Business Journal


Time to give freight audit and pay services a fair hearing?

Until a few years ago, few people in the European freight industry had heard of freight audit and pay services – unless they’d spent time working in the US. But recent financial scandals such as Enron have given the concept impetus on this side of the Atlantic.

Freight audit and pay services could soon become an important feature of the European logistics landscape in future, mirroring their development in the US. Today around 90% of US

Gaining ground in Europe EnVista makes bold move into Europe

firms now use a freight audit and pay service and the idea is now gathering pace in Europe and the UK.

Freight audit and pay services

have their origins in the highly regulated system of tariff filing in the US. This made it relatively straightforward to check invoices for freight services – initially domestic trucking and rail but later international seafreight and airfreight – and a large number of firms sprung up to provide this service. The concept grew in popularity to the point where most, though not all, major US firms were auditing their freight invoices. Initially, the bills that were

audited were paper ones, but electronics has taken the audit process to a new level, although paper hasn’t

been entirely

eliminated from the process. Essentially, freight audit and

pay (FA&P) companies receive shippers’ freight invoices, audit them and then tell the company what is owed and to which freight provider. Under another variation, some FA&P companies receive the money from the shipper and make the payment themselves on behalf of the shipper. Audit and pay services do

exist in other area, such as electricity, gas or telephones, but the complex and oſten little-understood nature of the freight

business lends itself

to independent auditing. The concept has become prevalent because many companies’

policy has been to reduce their ‘grey hairs’, to use the American expression – in other words, whereas previously they may have had an in-house shipping or logistics manager with the skill and knowledge to audit a freight bill, this expertise no longer exists in many companies. At the same time, freight and

shipping bills have become more complex, with the host of bunker and currency factors, war risk surcharges and the like. Some shipping lines might even have deliberately made their bills more complex and hard to understand, and many in the industry acknowledge that billing accuracy is not as high as it might be – 95% accuracy is apparently considered a good performance and indeed some shipping lines privately acknowledge that they themselves sometimes have trouble keeping track of the billing process. Even some freight forwarders use FA&P services. While some company

managements may question why they should pay an FA&P firm to do something they can carry ourselves, it does cost money to process invoices. US figures suggest that, taking all factors into account, including receiving and auditing, data entry, postage and so on, it can around $11.00 to pay a typical invoice. Freight is in many respects major, ‘hidden’

a company industry

accounting for billions of pounds worth of


every year and wherever there are large sums of money involved that are not properly audited, there is always the danger of manipulation by the ill- intentioned. While the concept of auditing freight and transport payments

in the US dates back for the best part of a century, the concept in its modern form dates got a major boost from the Enron scandal in the US, which led the US authorities to drastically tighten up

all companies’ financial

accounting through the US ‘MOD’ and Sarbanes Oxley acts. The MOD Act dates back to

1993 and, strangely, has its origins in the US bombing of Libya. The US

Government wasn’t

happy that Gadaffi was able to rebuild much of his wrecked infrastructure within weeks of the US raids, much of it with equipment supplied by European subsidiaries of US companies. This spurred Washington to enact legislation allowing it to take a much closer control of the actions of foreign subsidiaries of US firms abroad and has been the trigger for the development of FA&P services in Europe. Likewise, the Sarbanes Oxley

(SOX) act, which came in the wake of the Enron scandal, tightened up accounting and reporting standards. As far as the freight industry was concerned, it required audit trails for the oſten myriad number of transactions and for companies to keep proper tabs on the funds being moved in and out of their accounts for such purposes. There has been a surge in FA&P

companies in the US, many of them small firms or even one- person enterprises, but growth in Europe and the UK has been much more measured with around a dozen or so players entering the market so far. There has been not been the same legislative impulse and companies in Europe are much more used to auditing freight bills themselves.

Freight audit and payment

provider enVista has set up a Europe, Middle East and Africa office at Ellesmere Port, near Liverpool by taking over the EMEA representative office formerly operated by rival company nVision. Indianpolis-headquartered

enVista has bought nVision Ltd, which was a separate stand- alone company, rebranded it and is now offering the full range of enVista services, which include sophisticated integrated warehouse and transport management suites, as well as traditional freight audit and pay services. All staff at the Ellesmere Port

office will be offered positions under TUPE terms and former nVision Ltd owner Dominic McGough will become managing partner in the new company, bringing over 20 years of experience in the freight invoice audit and payment and will run enVista’s EMEA operations, including its 20-person multi- lingual staff. Freight Audit and Pay is a

relatively young industry and, unlike freight forwarding, it is not possible to recruit fully trained staff from rival companies. Any new recruits would,

to some

extent at least, have to be trained and brought up to speed. However, graduate trainee programmes are already in place and McGough said he was confident that the staff strength could be increased as and when required. nVision Ltd terminated its to represent

agreement its US-

based parent company on 31 August but immediately opened a new European full service

processing center in Masstricht, Netherlands. It will be managed by Dennis Mengham, who comes to nVision Global from NCR Corporation with over 15 years of Global Freight Audit & Payment experience. The Masstricht office, said an

nVisison spokesman, “will be the perfect compliment to nVision Global’s three other corporate owned, full service processing centers in Atlanta,, San Jose, Costa Rica and Ningbo in The People’s Republic of China.

In addition

to these full service processing centers, nVision Global also maintains a number of support centres throughout Europe and Asia that allow nVision Global to provide a one-stop, single source solution with a single, global data warehouse to better manage their global supply chains.” Meanwhile at enVista,

McGough told FBJ: “We are pretty excited that we are going to market with this offering – it’s giving us the range of services we’ve been asking for.” He added that while he had been approached by enVista in the past, it was his increasing discontent with nVision’s business practices and the potential financial implications had prompted him to accept the offer and switch. “Things took a dramatic change in the past six months he said.” McGough said he wanted

more transparency of how its customers’ monies were being used. “We have a corporate policy of no comingling funds and giving clients visibility of those accounts –

total transparency of clients’

money.” He said that he also found the fact that enVista put heavy

emphasis on added value services such as warehouse and transport management reassuring and that it would ultimately offer more opportunities to increase the business. There was also a good fit

between his company an enVista’s

geographical spread.

He said he expected operations in Benelux and “probably” Eastern Europe to start within the next six months. This would help complete enVista’s global network. As well as North America, the company is already strong in Asia. enVista president and CEO

Jim Barnes said, “We are very excited to expand our global presence and improve our ability to serve companies worldwide with global freight invoice audit and transportation spend management requirements. enVista has some of the deepest freight invoice audit and payment expertise in the industry.” enVista’s

managing partner,

transportation solutions, Stephen Craig, added: “enVista is heavily investing in expanding not only our presence to serve the market worldwide but also in our myShipINFO global freight audit and payment solution, which includes multi- language translations, as well as currency and units of measure conversions... enVista is now able to audit and pay freight bills for any mode to and from any location on earth, in any currency or language, and turn that information into actionable intelligence for clients to improve end-to-end operations.”

supply chain

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