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3 Ways to Make your Freight Invoice Work for You Not Against You

freight invoice frustrations

In our first part of our freight invoice and bill of lading series, we talked about what was the difference between the two. We then dug deeper into what was a bill of lading, the importance of the bill of lading, the two different types, what can happen if you don't use a bill of lading or have an inaccurate one, and then some possible solutions to decrease bill of lading errors.

Our last part in our three part series will cover a bit more about the freight invoice. We will explain again what is a freight invoice, and then talk about three freight accounting practices that occur with a freight invoice that can help you better manage freight expenditures so you can make your freight invoice work for you and not against you.

RECAP: What is a Freight Invoice?

A freight invoice, or freight bill, according to Merriam-Webster is:

A bill rendered by a carrier to a consignee of freight and containing an identifying description of the freight, the name of the shipper, the point of origin of the shipment, its weight, and the amount of charges.

freight invoiceA freight invoice however, in more legal terms, according to the Department of Transportation Federal Motor Carrier Safety Administration Title 49 CFR*, which is the Transportation title, under part 373.101 called "Expense bills"  is stated as:

Every motor common carrier shall issue a freight or expense bill for each shipment transported containing the following information:

  1. Names of consignor and consignee (except on a reconsigned shipment, not the name of the original consignor).
  2. Date of shipment.
  3. Origin and destination points (except on a reconsigned shipment, not the original shipping point unless the final consignee pays the charges from that point).
  4. Number of packages.
  5. Description of freight.
  6. Weight, volume, or measurement of freight (if applicable to the rating of the freight).
  7. Exact rate(s) assessed.
  8. Total charges due, including the nature and amount of any charges for special service and the points at which such service was rendered.
  9. Route of movement and name of each carrier participating in the transportation.
  10. Transfer point(s) through which shipment moved.
  11. Address where remittance must be made or address of bill issuer's principal place of business.

The shipper or receiver owing the charges shall be given the original freight or expense bill and the carrier shall keep a copy as prescribed at 49 CFR part 379. If the bill is electronically transmitted (when agreed to by the carrier and payor), a receipted copy shall be given to the payor upon payment.

*(The Code of Federal Regulations (CFR) is the codification of the general and permanent rules and regulations (sometimes called administrative law) published in the Federal Register by the executive departments and agencies of the federal government of the United States. The CFR is divided into 50 titles that represent broad areas subject to Federal regulation.)

How can you make the Freight Invoice work for you?

freight invoice accountingIf you are a controller, or CFO at a manufacturing or distribution company, you handle many a freight invoice in your job. By now you know that freight accounting has good days and bad days. The days are good if there are no claims, the quote the logistics manager received matches the freight invoice, and everything is easy to pay. However, if you want to make sure your freight expindutures are managed well, you need to take advantage of all the things you can use a freight invoice for. Let's dig in and see how you can leverage freight invoice management for the betterment of your transportation/logistics department.

1. Freight Audit and Payment

Freight Audit Services Increasingly Help Mitigate Transportation Costs

Rising freight cost is an emerging area of concern for manufacturers, distributors, and all shippers of freight as seen in recent years. Thus the importance of a freight audit service when it comes to matching what you were quoted at time of shipment versus your actual freight invoice. The cost of freight has been rising due to the increase in oil prices, and all freight cost is highly dependent on the cost of transportation, which relates directly to fuel prices. With high fluctuations of fuel costs, low visibility of the future freight costs, and high complexity of the freight quotes, freight cost verifications are vulnerable to human and process errors, and this requires proper auditing to ensure that the organization does not overpay for services it did not incur.

Freight Audit Benefits

Based on the research of inboundlogistics.com, freight costs can make up 10% of an organization’s expenditure. As a consequence of rising freight costs, an increasing number of organizations have been more proactive in controlling freight cost and have outsourced the freight audit process to freight audit specialists.

Inbound logistics details the freight audit process as follows:

“To begin the auditing process, a third party logistics company receives its clients’ freight bills directly from carriers. When the bills are received, either via electronic data interchange (connect services) or manually, they are entered into the contractor’s system, providing immediate visibility. Once the bills are entered, they are audited for accuracy. Auditors verify the bills’ validity, mileage, duplicate payments, accessorial charges, and use of correct tariffs. After auditing, the charges are coded and reconciled, and the bills are paid.”

Inbound logistics noted that for many companies, outsourcing could be the most economical way to properly audit and process freight invoices. They have also noted that the cost to verify, process and finally pay an internal freight invoice is around $11 and that the cost of outsourcing is around 5 to 10% of the internal cost, which does not include the cost savings from invoice discrepancies. The discrepancies can be as much as 8.8% of the freight invoices.

Freight Payment Services

Freight payment services for your freight invoices have been around since before the deregulation of motor carriers but really exploded as a competitive service post-deregulation. This service provides a great value to shippers.

What is a Freight Payment Service?

A freight payment service usually consists of one or more levels of combined services. They may include freight auditing services, information reporting for logistics and freight data analysis, work with a combination of both Electronic Data Interchange or Connect Services, and paper freight bills.

The model consists of  carriers redirecting your freight invoices to your third party logistics company. Through a freight audit, details such as origin and destination, bill of lading matching, obtaining a signed proof of delivery, and more are confirmed.

If you audit your freight invoices against your contract pricing with the carrier, that is a good start, and you are ahead of most companies. However, that should be only part of the freight payment audit process. You also need to compare shipment details. Does the bill of lading data match the invoice data? If you use an outside freight payment service, how are you supplying the freight payment firm with that data?

There are also post-audit freight payment services many shippers employ rather than a freight payment house. This type of service is a second look at freight invoices after shipment to correct errors that slipped through the pre-auditing of freight invoices. A post-freight invoice audit helps you recover some of the costs, but it typically only catches 50% of errors. Post-auditing of freight invoices also does not allow you to eliminate future errors. A post-audit firm has ZERO incentive to review your process, or the carrier’s process, to eliminate future errors. That action reduces their income.

2. Freight Invoice Consolidation Through a Provider

Freight invoice consolidation is vital to your company’s bottom line when you ship freight LTL, TL, or small package. Think of all the freight invoices your company pays in any given week. Imagine being able to receive one consolidated freight invoice per week instead of dozens or hundreds. If you are working with a third party logistics provider, consolidating all your invoices into one freight invoice is quite efficient and a time saver for your accounting team.

What are the advantages of Freight Invoice Consolidation?
  • Eliminates accounts payable paperwork, providing a single, electronic invoice each week that details every shipment.
  • Mitigates fraud and risk while enabling document retrieval and detailed reporting to comply with even the most complex regulations.
  • Reduces paperwork while also saving time and money on accounts payable processing.
  • 24/7 on-demand access to your weekly freight invoice, containing all of your weekly freight shipments, no matter the mode

3. Freight Analysis Leads to Data Gold and Better Freight Decisions

Extracting data at the most granular level from freight invoices and supporting documents, shipment files and other records creates a powerful source of visibility into a company’s freight spend. For transportation and logistics managers, this data becomes the basis of informed decision making, targeted cost control measures, and process improvement initiatives.

For example, you can easily look at factors such as your freight classifications, total costs, and benchmark carriers pricing so you can make better carrier choices in the future. If you would like a freight invoice analysis to run through the Cerasis system, schedule a free logistics consultation today.

By employing proper freight accounting, through freight payment, auditing, and consolidation services, according to Inbound Logistics a shipper can go from paying $11 per freight invoice, all the way down toonly 5 to 10% of the $11.  Additionally, by using Cerasis freight accounting services, a company cansave 2 percent to 5 percent of their total freight bill by catching inaccurate charges or duplicate payments.

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Adam Robinson
Adam Robinson oversees the overall marketing strategy for Cerasis including website development, social media and content marketing, trade show marketing, email campaigns, and webinar marketing. Mr. Robinson works with the business development department to create messaging that attracts the right decision makers, gaining inbound leads and increasing brand awareness all while shortening sales cycles, the time it takes to gain sales appointments and set proper sales and execution expectations.
Adam Robinson
Adam Robinson
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