Today we continue our series on freight and transportation accounting by now talking about what is a freight bill and what to expect in the way of line item charges on a freight bill. You may ask yourself when reading this series, “This is a pretty straightforward subject, right? Why such care and attention on it?” Well, that is true, you get a freight bill, you pay it, you account for it, you report it. Sounds pretty simple, but unfortunately, if you simplify it that much, you might lack the understanding of the importance of proper freight accounting management and using all the best practices you can and knowledge you can to ensure you have, from an accounting stand point, the best logistics and transportation department possible. Just like in your personal finances, the closer eye and great attention to detail you pay to the nuances of freight and transportation accounting, the more you can drive value from studying and managing freight accounting better so that you can make better decisions to stay more profitable and sustain your overall costs. After all freight and transportation costs can account for anywhere from 4 to 15% of all revenue for a company.
This post will not only cover what is a freight bill, but will also show you what to expect on a freight bill, as well as automation features you should expect from a service provider and what are the benefits of employing best practices in freight bill management.
Fortunately for Cerasis shippers they have available to them at the click of a button through our reporting center within the Cerasis Rater (our proprietary transportation management system) to pull some great reports such as shipment activity which breaks out the line items related to your freight bill so that you may better understand how to change the inputs of those details in order to drive out future costs by making better choices, such as what carriers to select. Such transportation metrics can then come together to create an analysis or something like a carrier scorecard where you can then create reports that join together freight bill line items with other details such as on time delivery and damage free shipments. The more data you have, but more importantly, the more you understand the details driving such data, the more you can make those targeted smart decisions which allow you to continuously improve and stay ahead of your competition who may lack such golden data.
What is a Freight Bill?
Ok, first things first, let’s make sure everyone is on the same page with what is a freight bill. A freight bill (which is different than a bill of lading) is also called a freight invoice. According to the Council of Supply Chain Management Glossary, the define a freight bill as:
The carrier’s invoice for transportation charges applicable to a freight shipment.
Again, pretty basic concept. Now, if you are working with a third party logistics company or provider who handles your payments, you will get an invoice from the service provider. The service provider’s freight payment services then will pay the original freight bill on your behalf to the carrier then bill you. Below you will see a sample invoice from Cerasis to one of our customers, which will allow us to then let you know what you should expect to see on a freight bill. The following items are included on a freight bill or invoice:
- An invoice number to reference
- Your name and address as the To field
- A Pro Number
- A Bill of Lading Number
- The Date of the shipment
- The type of freight mode used, such as LTL, Truckload, Small Package, etc.
- The Shipper and Consignee information
- The weight and quantity details of the shipment
- The cost of the shipment
- A total cost of all shipments
If you were to receive an invoice with multiple shipments, you will have a line item containing the information for each shipment. The total cost of all shipments is the amount you would pay the logistics provider.
Freight Bill Example from a Third Party Logistics Provider
What are the Automation Features around the Freight Bill I Should Expect from a Third Party Logistics Provider?
When organizations partner with a third party logistics or logistics service provider for freight bill management, they replace chaos, administrative burdens and a lack of visibility with clarity, automation and control. From ensuring your carrier freight bill requirements are met, to paying those invoices electronically and at the right time, expert freight bill management services provide excellence every step of the way.
Due to their complexity and high incidence of mistakes, freight bills necessitate an automated and complex workflow. Most organizations that lack a highly automated and customized system for freight payment have substantial opportunity for process improvement.
The Automation Possibilities for For Freight Bill management include the following:
- Receive all invoices, working with carriers to use the most efficient method possible (goal = EDI)
- Digitize paper invoices that are then accessible online 24/7
- Audit all charges for contract compliance, identify duplicates
- Advanced capabilities for processing more difficult invoices such as balance dues, separately billed accessorials, and corrected invoices
- Interface with carriers for dispute resolution
- Allocate expenses
- Electronic freight payment to carriers
- Provide visibility to freight invoice, audit and payment information, as well as shipment activity through robust reports
What are the Process Improvement Benefits a Shipper Can Realize through Automation and Expert Freight Bill Management?
- Eliminate paper handling, routing and filing
- Review exception invoices only
- Centralize all freight invoice processing functions, eliminating non-uniform processes and multiple systems
- Real-time visibility to invoices (view as either EDI templates or digitized documents)
- Long-term electronic archival of invoice documents
- When using a 3PL, offload disputes of freight bills with carriers to the 3PL, allowing the shipper to have time for more important issues
- Maximize cash flow with invoices paid at the optimal time
- Receive detailed, correct cost allocation and accrual files, directly into your system
- Gain near real-time visibility into invoice status, payment information and operational metrics
Freight Bill Data Becomes Business Intelligence
Extracting data at the most granular level from freight bills and supporting documents, shipment files and other records creates a powerful source of visibility into a company’s freight spend as well as into carrier performance. For transportation and logistics managers, this data becomes the basis of informed decision making, targeted cost control measures, and process improvement initiatives.
Continuous Process Improvement through Better Freight Bill Management
Superior execution in freight bill management will lower your overhead costs, minimize exception processing, and produce the most accurate and detailed business intelligence. For these reasons, we encourage you as an organization to put a strong focus on continuous improvement to the freight bill management process by following our series here on freight and transportation accounting or reaching out to us to schedule a consultation with on of our Account Executives.