Shipping freight can often feel like a maze of paperwork. Between the bill of lading, freight bill, freight invoice, and other documents, it’s easy to get confused about what each one is for.
In this guide, we’ll break down the key differences between freight bills and invoices, what information each document contains, and why both are vital components of the freight payment process.
Freight Bills: The Basics
A freight bill is a document that the carrier provides to the shipper once a shipment has been delivered. It contains all the basic information about the shipment and the charges owed to the carrier.
Here are some key details typically shown on a freight bill:
- Shipper and consignee name and address
- Dates of pickup and delivery
- Origin and destination points
- Equipment type used (van, flatbed, etc.)
- Freight class of goods shipped
- Total weight and number of handling units (pallets, drums, etc.)
- Mileage and routes traveled
- Line-haul charges based on mileage, weight, and class
- Fuel surcharge based on mileage
- Accessorial charges like detention, driver assistance, etc.
- Total freight charges due
Freight bills may come in paper or electronic format. The former is more common for LTL shipments, while the latter is the norm for full truckloads. In both cases, however, the freight bill contains the same essential information.
The main purpose of the freight bill is to notify the shipper of the total charges they owe the carrier. It provides visibility into the details of a shipment after delivery so the shipper can reconcile the freight bill with their internal records from the shipment. Shippers ultimately use the freight bill to process payment to the carrier.
Freight Invoices: What’s the Difference?
While they sound similar, freight invoices serve a very different function from freight bills in the freight payment process. Think of the freight invoice as the shipper’s version of the freight bill.
Here’s a quick rundown of how freight invoices differ:
- Created by the shipper, not the carrier – Whereas the carrier generates the freight bill, the shipper produces the freight invoice.
- Issued before shipment – Freight invoices go out at the time of shipping, not after delivery like freight bills.
- Reflects shipper’s costs – The freight invoice shows the shipping charges the shipper will owe based on the carrier agreement and shipment specifics.
- Used for shipper accounting – Freight invoices allow shippers to properly classify outgoing freight spend before receiving the carrier’s freight bill.
Freight invoices serve an important accounting purpose for shippers. They provide a way to record the freight costs at the time of shipping and integrate this data with their TMS and accounting software.
When the carrier’s freight bill eventually comes in, the shipper can match it back to the original freight invoice for the shipment. This facilitates easier freight bill auditing, cost allocation, and accrual reporting.
What Information Goes on a Freight Invoice?
While the exact contents can vary by company, here are some typical details included on a freight invoice:
- Invoice number and date
- Shipper and consignee information
- Origin and destination
- Projected shipment weight
- Freight class
- Line-haul rate and accessorial charges
- Mileage-based fuel surcharge
- Total freight costs
- Reference numbers (BOL, PO, etc.)
- GL coding
Including shipment reference numbers on the freight invoice makes it easy to reconcile later with the actual freight bill. Linking the proper GL codes also simplifies freight spend categorization in the shipper’s accounting system.
Who Creates the Freight Invoice?
Freight invoices are generated by the shipping department of the company that is sending the freight. In most organizations, this responsibility falls on the transportation coordinator, logistics analyst, or traffic manager.
They create freight invoices by pulling shipment details from the TMS prior to pickup, such as weight, density, and origin/destination. Combining this data with the pricing agreements in their carrier contracts allows them to project the cost and produce the invoice.
3PLs can produce freight invoices on behalf of shippers as well. The 3PL generates the invoices in their TMS using the same process and forwards them to the shipper’s accounting department.
Electronic freight invoice creation has become more common with the growth of TMS systems. However, some shippers still create them manually using spreadsheet templates or even paper forms.
Key Components of an Effective Freight Invoice
To maximize the benefits of freight invoicing, shippers should ensure their process includes these best practices:
Precise Shipment Information
Having accurate shipment weight, dimensions, freight class, and origin/destination on the freight invoice improves accuracy in cost projections. It also makes reconciliation with freight bills faster.
Coding for Accounting
Proper coding for general ledger distribution allows accounting to easily categorize costs and tie them back to business units or customers.
Itemization of All Charges
Breaking out the components including base rate, fuel, and accessorials provides better visibility for spend analysis.
Clearly Noted References
Links to associated docs like BOL number, PO number, and agent invoice ensure easy matching to the freight bill.
Sending freight invoices as close to shipment as possible results in better Freight Accrual estimates.
Standard Location and Format
Storing freight invoices digitally in a consistent format and network location streamlines retrieval for reconciliation tasks.
Freight Invoice vs. Pro Forma Invoice
At first glance, freight invoices may seem to serve a similar purpose to pro forma invoices. But subtle differences exist between the two.
A pro forma invoice goes to the buyer before shipment to provide details on the price and terms of the sale. It allows the buyer to confirm the costs before the actual commercial invoice comes later with the shipment.
Freight invoices, on the other hand, go to the shipper’s own accounting department strictly for recording costs they will owe the carrier. The flow and purpose are different from a pro forma invoice sent to a buyer.
That said, some organizations choose to combine the two documents into one. Having both freight cost projections and sales terms upfront can suit certain business models.
But strictly speaking, freight and pro forma invoices contain distinct information even if their upfront timing is similar.
The Freight Invoice-Freight Bill Workflow
Now that we’ve covered the key differences, let’s walk through the typical flow between freight invoices and freight bills:
1. Logistics teams prepare shipment details – As orders come in, logistics planners build shipments in the TMS, confirm routing and carriers, and solidify details like weight and freight class.
2. Freight invoice generated – Using the pending shipment info, freight invoices are created in the TMS prior to pickup that estimates the freight costs.
3. Invoices sent to accounting – The freight invoice is forwarded to the shipper’s accounting team for recording in the GL.
4. Carrier picks up shipment – On the scheduled date, the carrier arrives onsite, verifies the freight invoice details, and takes possession of the load.
5. Shipment delivered – Once delivered, the carrier documents any changes between the projected and actual details of the shipment.
6. Carrier issues freight bill – Using shipment records and rates in their billing system, the carrier produces the freight bill for the full charges owed.
7. Shipper receives freight bill – The shipper’s payment processing team receives the freight bill either physically or via EDI.
8. Freight bill reconciled to invoice – By matching the original freight invoice, the freight bill can be audited for accuracy.
9. Discrepancies flagged – If weight, class, or rates differ, the shipment is flagged for further investigation of the variance.
10. Approved bills paid – Clean bills are approved and remitted to the carrier based on the payment terms.
This full cycle ensures the shipper has strong visibility and control over freight costs from the time of estimating through to payment. Maintaining well-defined workflows around freight invoices and freight bills is crucial for smooth operations.
Streamlining Workflows with Automation
Advances in freight payment automation are making it easier than ever for shippers to implement structured workflows for freight invoices and bills.
In particular, automated freight audit solutions significantly expedite the reconciliation tasks around these documents. Rather than manually comparing freight bills to invoices and other docs, the right software can do this automatically.
These systems ingest electronic freight invoices from the shipper’s TMS. Then when the carrier’s EDI freight bill comes in, powerful algorithms instantly compare the two and flag any discrepancies. Some advanced solutions can even audit freight invoices pre-payment against carrier contract terms to detect billing errors upfront.
Reporting dashboards give shippers visibility into matching rates, variance trends, and opportunities to improve freight invoice accuracy. Automated freight payment platforms process and pay righteous freight bills on the shipper’s behalf while holding problem bills for further review.
Together, automated freight invoice creation and freight bill auditing form an end-to-end payment solution that maximizes control and visibility into transportation spend. Leveraging the latest innovations can significantly optimize workflows around these critical documents.
Bringing It All Together
While they sound similar, freight bills and freight invoices play distinct but complementary roles in the freight payment process.
Freight bills present the formal carrier charges after delivery, while freight invoices allow shippers to record estimated costs prior to shipment.
Reconciling these documents ensures shippers have full visibility into freight expenses from the time they’re projected right through to payment. Establishing efficient workflows around freight invoices and bills provides the foundation for successful freight payment operations.
Sunil Vaishnav, at just 25 years old, is a remarkable author at Apkdragon, where he shares his profound insights into the complex world of shipping, logistics, freight, and supply chain management. With five years of industry experience under his belt.