Are you looking for a better way to organize your freight invoices or to keep track of the amount of money your company spends on them? General ledger (GL) coding may be the solution. A general ledger (GL) code is a pre-determined string of alphanumeric characters assigned to each financial entry in a business’ ledger. With general ledger coding, financial reporting is much more precise. And, it is particularly useful for properly categorizing the many components that comprise freight invoices.

GL Codes – The Great Identifiers

Companies of all sizes use GL coding of freight invoices, but it is especially useful for mid-size to large businesses or those with over a $100 million in annual revenue. Start the GL coding process by looking more deeply into how freight costs are associated with the different departments and functions within the company. To do this effectively, you should work closely with the accounts payable department and the transportation group to identify the business rules and logic to use for coding shipments. These are unique to every business.

GL codes can become quite complex strings, but they help to allocate shipping expenses correctly because of the many different components identified. They not only categorize items correctly, but they also determine the proper department to bill. Some freight invoices can have four to five GL codes associated with them. Below are just a few examples of the key parameters that can be identified with GL codes:

– Freight Type
Freight can be classified as outbound or inbound. Proper GL coding can help to identify if inbound freight should be assigned to inventory or production. While outbound freight can be classified as a finished good or as being sent to a third party.

– VAT
VAT or valued-added tax is defined as a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to point of sale. The VAT amount paid by the user is on the cost of the product minus any material costs used in the product that have already been taxed. VAT is a reimbursable expense. It is important to properly identify VAT because there are tax implications.

– Duty
Duty is a tax levied on imports (and sometimes on exports) by the customs authorities of a country. A customs duty is based generally on the value of goods or upon the weight, dimensions or some other item criteria. Unlike VAT, duty is a tax-deductible expense. And, there are different duty implications depending upon the stage in the customer lifecycle.

– Warranty
Warranty is another item that can be tracked with GL coding. It is critical to track warranty parts because it affects duty implications. For example, a company cannot charge duty for the return of defective merchandise that is to be repaired and sent back to the customer.

Benefits of GL Coding

General ledger coding can become quite complex, and it is ever changing as companies build on logic in order to accommodate future shipments and/or new vendors, etc. However, GL coding also offers many benefits as demonstrated below:

– Time Savings
Tremendous efficiencies can be experienced by GL coding, especially as it relates to data analysis and reporting. By simply searching for a GL code, you can determine the number of warranty items, the amount of inbound freight that is attributed to production and other information as defined by your company rules.

– Accuracy
The many different parameters that GL codes include can lead to an invaluable level of accuracy. You can determine exactly which departments should be charged back or how profitability is being impacted. GL codes can even help a company determine its cost of goods sold (COGS) much more easily and accurately, which leads to much better-informed company decision making.

– Proper Tax
Reporting By using GL codes, you can be more confident about your tax reporting. For example, GL codes can properly classify VAT vs. duty to help prevent any tax reporting issues. With GL codes, your company can be placed in the most favorable tax position.

Looking to Outsource Your GL Coding?

GL coding does offer many benefits, but if your company does not have the proper resources to allocate to this task, AllGreen can help. By outsourcing GL coding to AllGreen, one client recently saved over 1,200 hours of valuable management and accounts payable staff time. We will work directly with different internal departments to ensure we identify and define the rules and logic that best address your GL coding needs. As your company experiences changes, AllGreen will update your database of rules for proper classification. And, with our proven system, you will be assured inaccuracies caused by employees’ manual input will become a problem of the past. To learn more, contact AllGreen today at info@ag-sc.com or 847-531-2209

Is Your Company Leaving Money on the Table?  Learn How to Properly Audit Your Freight Invoices

Freight invoice auditing may be one of the most cumbersome, but also one of the most crucial tasks that should be conducted on a regular basis, especially if your business ships thousands or even hundreds of packages per week.  Based on AllGreen’s experience working with shippers and carriers, we have identified the top reasons why successfully auditing freight invoices can be so difficult:

• The employee assigned to auditing freight invoices often has many other responsibilities that seem to be much more important or he/she is not well-trained on the auditing process.
• The carriers do not make freight invoice audits easy either. Data is sent in a PDF, along with unformatted excel documents, containing lines and lines of shipment records.
• An employee must scroll through this list and enter tracking numbers one by one into the carrier’s website.
• There is a limited window of opportunity to file a claim.
• Staff must be knowledgeable about shipping guidelines in order to determine if a legitimate claim can be made, including guaranteed times, fluctuations in commitments from carriers, and monitoring credits and exceptions.

However, with proper knowledge and resources, you can avoid leaving money on the table.

Turn Your Next Freight Invoice Audit into a Financial Win

According to market research up to 30 percent of all freight invoices are incorrect. To help ensure you are not missing incorrectly billed freight invoices, below are a few guidelines to keep top of mind when conducting your next freight invoice audit:

Time is of the Essence

Major carriers, such as UPS and FedEx, offer a service guarantee that if a package does not arrive on time, the business receives a refund.  However, in order to receive this credit, the shipper must be proactive and request it.  And, that refund request must be made within 15 days of the scheduled delivery date.  Unfortunately, these carriers only issue invoices weekly so several days may be lost before the late shipment is discovered; therefore, it is critical to conduct freight invoice audits promptly.

Legitimate Reasons for Delayed Deliveries

Approximately, 98 percent of FedEx and UPS shipments are delivered on time.  However, the remaining two percent, which are delivered late do not necessarily result in a refund even if the correct process is followed in a timely manner.  On average only about 1.5 percent of late deliveries are credited.  You may ask what are the legitimate reasons for delayed deliveries that result in a denial?  Weather is most often blamed for late deliveries, and unfortunately, it cannot be used to obtain a refund.  Other legitimate reasons that result in rejected claims are Acts of God, civil commotion, war and terrorism.

However, some reasons for rejection are open to interpretation.  For example, mechanical breakdown may be cited as the cause for a late delivery.  With this reason, you can argue that if the equipment had been maintained properly or a contingency plan was in place then the delay would been prevented.

Residential vs Commercial Classification

There are different shipping rates for residential vs commercial destinations.  These rates are different because residences have a much lower delivery density.  It may take four to five minutes to deliver a single package to a residence while it may only take two minutes to deliver a package to a commercial property, such as a mall or office building.  Multiple packages are often dropped off at one commercial location at a given time, making it a much easier and quicker delivery.  Home businesses still are billed at the residential rate, but properties, such as churches often fall into a gray area.  It is critical to know how shipments are being classified.  Shipments to residences often cost three to four dollars more than those sent to commercial properties.  This can really add up if your company is shipping thousands of packages per week.

Address Corrections can be Costly

It is imperative that the correct shipping address is used.  Unfortunately, even a little variation can result in a disproportionate extra charge to the tune of $16.40 per package.  And, this fee is expected to increase again next year.  The charge can be contested, but unfortunately, the recovery rate is only about 15 percent.

Save Time and Money with AllGreen

 Auditing freight invoices can be more expensive than you may think if your staff is not properly trained and the process is just considered another burden on the company.  With our proven system, AllGreen can be the perfect resource to turn this burdensome task into bottom line savings for your company.  Recently, we worked with a client who spent $500K per year on international air and domestic air shipments with the two major carriers.  However, many of their shipments were delivered late.  With our audit process, we were able to recover $14,000 in refunds to their account.

AllGreen will work with you to acquire the necessary carrier data, which we then analyze through our comprehensive digital solution.  If any questionable deliveries are discovered, we will work directly with the carriers to ensure your company is issued a refund.  Any credit is sent directly to your company.  Your savings can be reported to you as often as you would like in weekly, monthly or quarterly reports.  Don’t lose another dollar to incorrect freight invoices, contact us today at info@ag-sc.com or 847-531-2209.