Everybody loves a pleasant surprise, but an unpleasant surprise? Not so much. Carrier back charges fall into the latter category. A shipping back charge is when a carrier bills you an additional amount after you’ve already paid freight for a shipment.
For e-commerce companies, back charges are especially problematic because they typically can’t be passed on to customers. Merchants incur these fees long after a customer has paid for and received his order. You can’t realistically go back and ask the customer for more money. When carriers back-charge you, you're stuck paying those fees.
Read on to discover five common reasons for back charges and how you can improve your warehouse management operations by preventing them.
1. Classify Your Shipments Correctly
One common back charge is a residential surcharge. Shipping to residences rather than businesses usually costs more — roughly $3 per package depending on the carrier and service. If you don’t specify you’re shipping to a residence upfront, you’ll be quoted the cheaper commercial rate and pass that on to your customer. You’ll be back charged for residential surcharges you didn’t pay upfront.
Prevent this by using shipping software capable of flagging residential shipments when customers are inputting their addresses.
2. Verify Addresses
Another common and expensive back charge is a bad-address penalty. Whenever a package is returned as undeliverable, that’s problematic on several levels. First, your customer didn’t get her package. Second, you paid to ship it to an invalid address, and then you pay again to ship it to the correct address. Additionally, carriers will typically charge you a fee of roughly $10 for each undeliverable package.
You can prevent bad addresses by implanting address-validation software into your order flow. Ideally this should be done upstream at order entry (interfaced to your web order screen for example), however it can also be implemented at the time of actual shipping.
3. Check for Remote Addresses
An extended area surcharge is a fee shippers charge when they must deliver to unusually remote areas. For example, there are places in Alaska that can be reached only by dog sleds. Extended area surcharges usually range from $20 to $25. Most extended area situations can be anticipated upfront if your shipping system is configured to flag them.
If you know in advance you’ll incur an extended area surcharge, you can decide if you want to pass that on to your customer.
4. Verify Third-Party Account Numbers
One back charge that’s especially common with business-to-business shipments involves third-party account numbers. If you’re selling to another company, that company will often ask you to bill the freight to their account number. This is so the company can apply any freight discounts it may have to this shipment.
If someone makes an error keying in the number or the shipper provides an invalid number, the shipping company will bill the freight charge to your account — and charge you a fee for providing an invalid account number. Therefore in this case you will incur a freight charge that was not passed on to the customer as well as roughly a $13 per package invalid account fee from the carrier.
You can prevent this issue by verifying third-party account numbers and making sure that any third-party billing is handled by the system interface whenever possible and not manually keyed into the shipping program.
5. Consider Package Size and Dimensional Weight
If a package’s length plus its girth ([width x 2] + [height x 2]) combined exceeds 130 inches, it will be subject to a large package surcharge. If you’re not entering dimensions into your system or your system isn’t programmed to flag large packages, you’ll be back-charged. Seeing as this charge can be as much as $70 it can be a very costly oversight.
A related issue to consider is a package’s dimensional weight. Assume you’re shipping a king-size down comforter. You’ll need a large box, but it won’t weigh much. Shippers base fees on dimensional weight, which is calculated by measuring a box’s length, height and width, then using a formula to come up with “billable weight” (Actual formulas vary based on service and carrier).
Your box may weigh four pounds, but its billable weight may be 12 pounds. The shipper charges you for the greater of those numbers. The billable weight rule isn’t a back charge, but the result is the same: When the carrier bill comes you pay more for a shipment than you expected to.
Preventing carrier back charges may or may not need to be a top priority for your business. If your back charges are sporadic, it may not be cost-effective to invest in software or change procedures to prevent them. If they’re common, however, that new software or procedure change could pay for itself quickly.
The bottom line? Check your carrier bills for back charges. If you discover a recurring problem, take steps to correct it through technology, new procedures, improved employee training, or all of the above.