How Freight Billing Works. Freight Billing is complex. If you have shipped before, you know how important it is to understand how freight billing works allowing you to avoid costly shipping mistakes and gives you more time to run your business. Freight bill auditing is an unavoidable part of the process for every shipper.
How the Freight Billing Process Works
Let’s start with the terminology. Critical steps in the freight billing process are properly getting a shipment’s rate, choosing transit, and an agreement between the shipper and the carrier. After This, an agreement is put in contract form and known as “customer-specific pricing.”.
All details are on the freight bill. A description of the cargo, its quantity, weight, and even the estimated times of pickups and delivery deadlines are presented, along with payment method information and associated shipping fees and taxes.
Upon completion of a shipment’s delivery, an invoice is issued to the shipper to be paid. Invoices contain information that needs to be validated, extracted, and analyzed to increase supply chain efficiency and effectiveness. But this can get tricky for the average shipper or small business that doesn’t have a third-party logistics company (3PL) partner.
This information includes:
- Consignor and consignee names.
- Shipment date.
- Pickup and Dropoff locations.
- Shipment description (quantity, weight, dimensions, etc.).
- Summary of charges and rates.
This validation creates a vital step in the freight billing process: the freight billing audit.
The Freight Billing Audit
The most important part of the freight billing process is auditing and validating. Doing this can help prevent and ensure it’s no duplicate invoices. Invoices also need to be verified that they are the correct invoice for the right shipper and that all the proper documentation is correct, including information from the original Bill of Lading (BOL).
It’s not uncommon for a shipper to receive an invoice after a shipment’s delivery that doesn’t line up directly with the original quoted freight rate or the BOL. This is where a freight bill audit comes in handy. A freight bill audit identifies discrepancies in your invoice. These discrepancies arise for any number of reasons, namely:
- Fluctuations in freight rates due to market factors
- Clerical errors
- Quotes vs. invoices
- Incorrect product classifications
- Mistaken accessorial charges
- Duplicate payments
- Damaged shipments
The freight billing audit is time-consuming and complex. Because of this, If you don’t work with an industry expert, you risk making potentially costly mistakes. That’s why many small and medium-sized businesses work with a 3PL.
A 3PL has the means and expertise to audit a freight bill. There are significant benefits to partnering with a company specializing in freight billing, validating information, and keeping you in the loop when something shipping-related could impact your invoice. Partnering with a 3PL will give you more time to run your business, and it won’t add to your bottom line.