In the world of shipping and logistics, shipment documentation is extremely important. Millions of packages, parcels, pallets and shipping containers are moved across the globe by thousands of different trucks, ships and aircraft. The sheer volume of goods makes it all rather mind boggling.
A single error or missing document can cause problems for multiple shipments containing thousands of individual items. The potential for financial loss is significant. Although with the right technology and outsourced invoice audits, accurate documentation becomes far easier. The end result is a more profitable, efficient shipping and logistics operation.
The Bill of Lading (BOL) is one area where this can all be put into practice. Shipping companies can create freight bills from a bill of lading, using third-party service providers to perform invoice audits. The end result is clean, accurate documentation that can ensure prompt billing.
The Role of a Bill of Lading in the Shipping and Invoicing Process
When creating an invoice, a freight carrier will use the Bill of Lading as the basis. The BOL contains critical information about a shipment. In fact, you can think of it as a shipment travel log that is continually updated with expenses as the shipment moves from stop to stop, from origin to destination.
The Bill of Lading is actually considered a formal legal document, so it is more formal than other paperwork that one might encounter in the shipping and logistics industry. The information contained on the BOL usually includes the following.
- The type of goods in the shipment.
- The quantity of each type of item in the shipment.
- The final destination of the shipment.
- The costs incurred at the location or along the most recent leg of the transport.
The Bill of Lading document will travel with the shipment and at each stop, an appointed individual will review and sign the BOL on behalf of the shipper, carrier and recipient. This results in a fairly “messy” document that passes through many hands over the course of a shipment’s travels. It is also not uncommon for the BOL to travel with multiple related or supporting documents — a fact that makes it even more challenging to sort everything once the shipment reaches the end of the line.
Incurred costs represent a key piece of information that is documented on the Bill of Lading at each stop in a freight transport process. It is imperative that these in-travel costs are carefully reviewed and noted on the final invoice — an invoice that will ultimately be submitted to the shipper.
If the in-transit costs are not documented or are documented inaccurately, you risk a situation where the final invoice submitted to the shipper is inaccurate. The result: the shipper could be overcharged and/or the carrier(s) could be undercharged. These costs are not insignificant which means that you could see a loss of thousands of dollars on a single shipment. Over time and across multiple shipments, these errors can cut deeply into a company’s profit margins.
Creating a Freight Bill From a Bill of Lading — Improving the Process
When compared to the Bill of Lading, a shipping invoice is a relatively simple document. The BOL is essentially distilled down to create an invoice that focuses on costs that were incurred over the course of the transport.
Creating a freight bill or invoice from a Bill of Lading can be a challenge due to the fact that it has passed through many hands and there are few universal standards among carriers. Each freight carrier maintains their own unique process and standards for capturing and documenting this critical information. Subsequently, it is not uncommon to find errors and inconsistencies that could potentially be transferred over to the final invoice.
The solution: many shipping companies will hire a third-party service provider to outsource the invoice audits and reviews. Invoice auditing can be extremely time-intensive and detail-oriented due to the lack of uniformity and the propensity for error. For a shipper, this tedious task can be difficult to handle in-house due to the time and attention to detail that is required to get the job done right.
When outsourcing to an experienced auditor, you have the advantage of working with someone who has the right technology and experience to identify errors. In the case of large shipping companies, it is not uncommon for these businesses to maintain contracts with freight carriers that allow for negotiated discounts and other cost-containing caps. These must also be considered as freight bills and invoices are audited and examined. Third-party service providers who specialize in this area will have the software and the knowledge required to ensure that all of these factors are taken into consideration during the audit and review.
To compound matters, the financial loss from a single documentation error can be significant. Multiply that over multiple freight loads and the impact on a shipper’s bottom line can be tremendous. This underscores the importance of hiring an experienced third-party service provider who is experienced in freight bill and invoice auditing. Outsourcing this task also frees your in-house staff to focus on the many other aspects of the business that require their attention.
The shipping and logistics industry is filled with complexities and challenges, but with the right technology and outsourcing partners, you will be better-positioned to maximize your profit margins and operational efficiency. That is exactly where the team at iTech Data Services can assist. We invite you to reach out today to discuss your operations and we will work to help find a solution that improves productivity, accuracy and ultimately, your bottom line.