What is Freight Invoicing & it’s Important to an
Organization?
Freight generally refers to goods or products that are transported in bulk from one place to
another by various modes of transportation. It includes transportation via ships, aircrafts,
trains, trucks, etc. The party who dispatches the shipment is known as the shipper, the deliverer
is referred to as the carrier and the receiver or consignee is the one who receives the shipment.
Freight billing or invoicing is a vital element of the shipping process. It lays out the specifics for
the delivery of goods and helps protect all the parties involved in the shipping process like the
carrier, receiver, shipper and logistics providers.
A freight invoice can be defined as a bill or invoice issued by a carrier to the shipper or the
consignee of a freight. It includes various pieces of information about the shipment made. Basic
details that are included in the freight invoice include:
Description or contents of the freight,
Bill of lading (BOL) number,
Type of freight mode used,
Total cost of shipment
Total weight,
Applicable freight charges and taxes,
Payment information and methods,
Due dates,
Name of the shipper and receiver,
Point of origin and delivery for the shipment,
Tracking number,
Applicable discounts, etc.
The original freight bill is given to the receiver or the shipper while a copy is kept with the
carrier. Increase in freight cost is a concern for various businesses. Considering its importance
to business, many companies opt to hire auditing companies to provide assistance with the
entire process and help in freight auditing. Freight auditing refers to the process by which a
company’s freight bills are studied and examined. The freight bills are verified for accuracy and
adjusted, if required, during the audit process. Auditors help to assess or verify the validity of
bills, ensure the use of correct tariffs, monitor duplicate payments, etc.
Invoices can also be automated in order to achieve faster processing and to minimize errors,
reduce costs, prevent invoice duplications and achieve greater accuracy.
Various intermediary service providers like third party logistic (3PL) providers act as an
intermediary between the shipper and carrier. They perform various functions like receiving,
processing and payment of invoices. The main advantages of outsourcing freight operations are
opportunity costs, cost savings and access to enhanced features. Other benefits include a
centralized system for freight invoice processing, uniform processes, real-time insights,
elimination of multiple systems, better visibility, etc. It is especially required by larger
businesses where the number of shipments and bill payments increase, making the entire
process much more complex. Though it may lead to increased costs, it is one of the most
efficient ways to process, audit and manage freight invoices. In the long run, it can also prove to
be much more economical.
IMPORTANCE:
Well planned freight management controls must be put into place in order to increase the
efficiency of the freight invoicing process and to reduce the chances for errors and fraud. Such
controls may include authorization systems, periodic internal audits, separation of duties, etc.
Efficient freight invoicing and auditing processes are crucial for the smooth running of an
organization. Efficient practices of freight invoicing help in:
Reduction of freight costs,
Timely payments for carriers,
Reduction in quantity of invoices,
Consolidated reporting,
Providing various information to a company like geographical activity, order behaviors,
carrier activity, benchmarking, etc.
Improved customer service levels,
Freight invoices are used as supporting documentation by accounting personnel,
Outsourcing freight operations to third party providers frees the shipper from all related
tasks, thus enabling them to focus better on their core issues.
