One reader cannot achieve a fast close, because inbound freight costs make up a significant proportion of total company expenses, and they are too variable to predict on an accrual basis. Consequently, she has to delay closing until the majority of her inbound freight bills arrive. Her company has elected to pay freight directly, rather than have suppliers re-bill this expense to her company.
A possible solution is to request advance shipping notices (ASNs) from suppliers. An ASN is a notice sent from a supplier that is essentially a packing slip containing detailed information about what the supplier is about to ship to the company. The electronic version of the ASN is the electronic data interchange (EDI) transaction 856 (as developed by the American National Standards Institute).
To obtain a reasonably accurate freight expense accrual using advance shipping notices, a company would first have to ensure that a significant majority of its suppliers are providing it with ASNs. Next, it must create an ASN database that adds a standard expected delivery time to the shipment dates listed on the ASNs, in order to determine which deliveries will arrive before the end of the month. This information should be available in the vendor master file. Next, the ASN database must link to the accounting database to determine whether the company has already received a freight billing for a delivery. For all deliveries without a matching freight billing, the database must then link to a file containing the cost per delivery (which should be predictable for full truckloads coming from fixed supplier locations, with less-than truckload haulage rates being more uncertain). The result will be a reasonably accurate freight expense accrual.
Of course, this approach will yield more accurate results if suppliers are located nearby, and will be progressively less accurate for more distant suppliers whose delivery times are more problematic.
An alternative to using advance shipping notices is to rely upon the in-house purchasing system and receiving systems to obtain the same information. However, these systems do not provide the same level of accuracy as ASNs, because the receiving department may be dilatory in entering receiving information into the computer system, while the purchasing department can only estimate supplier delivery dates based on past experience or by contacting them on a daily basis.
This solution is not for everyone, since the freight costs of most companies are too small a proportion of total expenses to be worth such an effort. Also, many companies have such an historically predicable freight expense that they can reasonably predict an expense that will likely be close to the actual level of freight billings received. Thus, only go to the extreme effort noted here if you are paying for inbound freight, and this expense is both substantial and highly variable.