Close the Books Cleanly: Your Guide to Year-End Freight Accruals
- Evan Baschko
- Nov 4
- 4 min read
As the fiscal year winds down, the accuracy of freight accruals can make or break the credibility of a company’s financial close. Freight spending is often one of the largest variable expenses in the supply chain, yet many finance teams find themselves in a rush to reconcile late invoices, open shipments, and unresolved disputes weeks after closing the books.
The key to avoiding those post-close surprises lies in leveraging freight audit outputs, which are the structured data and exception insights already available from your audit process. Finance teams need to use this information to inform and support accrual estimates.
Getting to that point doesn't necessarily have to be difficult, but it does require them to keep a few key things in mind along the way.
Why Do Year-End Freight Accruals Go Wrong?
One of the major reasons why year-end freight accruals can go wrong is late carrier invoices. Carriers frequently submit invoices weeks after shipments deliver, especially around holidays or capacity crunches. This delay leaves finance teams blind to costs that should be accrued.
Another common issue is shipments that are still in transit. Loads that are still on the road or water at year-end create ambiguity. Without a clear cutoff, it’s difficult to determine what’s been earned versus what remains in transit.
Unresolved disputes also create significant year-end freight accrual challenges. When charges are being reviewed for rate discrepancies, accessorials, or duplicates, it’s not always clear whether they should be accrued, reversed, or ignored.
Cutoff timing and documentation gaps are another problem that many run into, often not realizing it until it's too late. Logistics and accounts payable teams may not share a consistent cutoff date or documentation format, leading to missed entries or redundant accruals.
Finally, nonstandard processes are a major cause for year-end freight accrual issues that should be addressed at all costs. Different business units or regions may follow their own procedures for estimating and recording freight accruals, making consolidation difficult.
What Can Audit Outputs Tell You?
Thankfully, audit results can offer valuable insight into the situation by identifying exceptions and their causes, such as late bills, rates or accessorial variances, and even duplicate invoices that may have gone unnoticed.
Other issues that audit outputs can shed light on include aging for unbilled shipments and invoices (meaning exposure sizing), unexpected recoveries in terms of disputes or credit queues, and even trends by lane, carrier and accessorial. The latter being particularly important, as it can help you better understand things like seasonality and peaks so that you can make more informed choices moving forward.
How Should You Handle In-Transit and Late Bills?
For in-transit and late bills, it’s important to build or open the shipments’ view to estimate the amounts that are likely to bill after the close has come and gone.
You should also apply contracted rates and typical accessorials. Compare them to when the invoices arrive to see exactly what you're dealing with.
How Do You Account for Disputes and Credits in Process?
When dealing with repeated instances of disputes and credits in process, be sure to maintain a specific "credits in process" ledger with the amount and profitability. At the very least, it’s important to have more visibility into the situation. Finance teams can accrue the expected value, then adjust the resolution once the matter has been settled.
How Can You Improve Estimation Accuracy Without Guesswork?
To have improved estimation accuracy without all the guesswork, the first thing to do is use historical actuals as a guide. Compare that with your current budgets and contract data to at least get a strong sense of what the eventual resolution will look like.
Also, be sure to require brief documentation for material estimates at all times. This is commonly referred to as an audit trail, and it will provide a significant amount of insight into what the actual situation will look like.
What Lightweight Controls Reduce Post-Close Noise?
Above all else, remember that strong controls don't have to be a burden or require a lot of manpower. Following just a few straightforward, repeatable steps can dramatically reduce the amount of work you have to do at the end of the year.
Whenever possible, include a month-end checklist to avoid dealing with the entire situation at the end of the year. Assign owners, deadlines, and review points for each step of the accrual process.
The segregation of duties is also critically important during this process. Ensure the people preparing documents, and the people reviewing them for that matter, are distinct, so estimates receive a second look before posting.
Finally, perform a late-invoice sweep. After accounts payable cutoff, identify and capture any invoices received within a defined window to true-up accruals promptly.
What KPIs Signal a Cleaner Close?
As is true with other areas of your business, the KPIs being monitored should fall in line with your specific goals. There is no "one size fits all" approach to knowing what to monitor. It's heavily dependent on what a team is trying to improve.
Having said that, there are a few metrics that will be helpful to pay attention to, including but not limited to ones like:
Post-close adjustments (both in terms of count and dollars)
Accrual versus actual variance
Late-bill rate
Dispute cycle time
Starting the New Year Right with Freight Bill Auditing
Closing your books at the end of the year and closing your books cleanly are often two different things. Fortunately, it doesn't take much more than the right proactive approach to get from the former to the latter.
Always use freight audit outputs to size in-transit and late-bill exposure. This is key, because you don't know what you don't know. The less that falls into that category when it comes to the financial health and wellness of a business, the better.
During this time of year, always recognize "credits in process" with documented assumptions and standardize estimates and approvals to cut down on variance. Once a system is in place, track a few important KPIs to make sure meaningful improvements are being made month-to-month. This helps ensure everything isn’t just headed in the right direction, but that it stays that way.
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