FREIGHT AUDIT RECOVERY RATIO

Description: Many auditing firms specialize in comparing the freight bills paid by a company to the standard rate schedules published by their shippers in order to find overbilling situations. If they find any, the auditors earn a percentage of the total amount recovered. Given the amount of funds that can be collected by using freight auditors, it behooves the logistics manager to track their achieved recovery ratio to determine whether they are effective in earning money for the company.

Formula: Divide the total refund received from a company's freight carriers by the total amount of freight billings for the period for which the freight billing audit was conducted. If more than one auditing firm is being used at the same time, then this measure should be calculated separately for each one. Also, the percentage fee received by the freight auditing firm can be deducted from the total refund, to derive the net recovery rate experienced by the company as a result of the auditors' efforts. The basic formula is: