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Freight Billing 101: What It Is + 7 Costly Mistakes to Avoid

Freight Bill vs. Bill of Lading (BOL)

A freight bill is a legal document or contract between a shipper and a carrier. It is used as a reference tool for the shipper throughout the entire shipping process.

A bill of lading is very similar to a freight bill, but it’s generally more formalized, which makes it a legally binding service agreement. The BOL details weight, value, and description of each item on the shipment, as well as where, when, and how it is to be received. It’s the bill of lading that can act as evidence if an issue arises between the shipper and carrier.

By comparison, the freight bill is more of a detailed invoice to more thoroughly explain the shipment. Details can be added for clarification, and it’s this less formal structure that makes the document essential — but not legally binding like the BOL.

How to Create a Freight Bill

The information included in a freight bill helps guide the carrier through the delivery process while also protecting the shipper from lost money by stating their expectations.

For example, if a shipper entrusts a crate of fresh produce to a carrier with a due date of 6/12, and it gets delivered three days late, the receiver will open up a package of rotten fruit on 6/15. The information on the freight bill proves that the failure was on the part of the carrier, not the shipper, and that refunds are due as a result.

When creating a freight bill, always include:

  • Names of shipper and receiver
  • Contact information of shipper and receiver
  • Description of goods, including quantity
  • Signatures of shipper and carrier
  • Time of pickup
  • Due date

The shipper will typically sign the contract upon agreement, while the receiver will wait until the goods are loaded to confirm their side of the agreement.

Due dates from the shipper are not always used, but they are especially important when dealing with perishable goods, like produce.

Freight Billing Process

Each company has a system for freight billing, but generally, each company’s process should include the following basic steps.

  1. Both shipper and carrier agree to the contract.
  2. When the goods are delivered, the carrier issues an invoice to the shipper.
  3. The invoice is then validated to make sure it has not been paid previously.
  4. Data is retained from the invoice for analysis.
  5. The payment amount is audited against the services for verification.
  6. A ledger code is added for accounting purposes.
  7. The invoice is paid and stored for records.

The above steps help the billing process run effectively. However, many errors can and do occur in billing. The most common discrepancies, including incorrect fuel pricing documentation and failure to remove waived charges, are due to human error.

Optimize Your Freight Billing

Freight billing is essential to the shipping process since it protects all parties involved and lays out specifics for delivery.

Due to the importance of freight billing, in the past, most companies, had found it was worth the extra money to hire an auditing company to help with the process. In the past, outsourcing billing to one of those auditing companies was the only option to ensure freight billing was done well.

In recent years, as most industries have gone digital, many logistics companies have found success and improved efficiency by employing certain types of freight auditing software. Not only does auditing software safe time and money while decreasing errors, but it can even help locate logistical issues.

For more information on freight billing— including common challenges and seven common scenarios that waste time and money — use the short form on the right to download Freight Building 101: A Guide.

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