It’s too easy for freight brokers to get stuck in a payments and invoicing nightmare, leaving them with little time to focus on their core competency and passion: creating relationships and moving freight.
Sound like you? We’re here to help. This guide is designed to walk through the ins and outs of freight invoices and provide some helpful tips on how to manage them more efficiently.
What Is a Freight Invoice?
A freight invoice, also known as a freight bill, is a document issued by a carrier to a shipper that summarizes the costs of transportation services for a freight shipment. It typically includes details of the freight, shipper information, and any applicable charges.
When a logistics company or freight broker acts as the middleman in the carrier-shipper relationship, freight invoices are run by them before reaching the shipper. That way, they can bill carriers and shippers appropriately for their respective services and ensure all parties are paid fairly and on time.
What Are the Key Components of a Freight Invoice?
Each carrier’s freight invoices will look a little different, as they all use slightly different templates and include somewhat different information. However, there is a list of specific elements that every freight invoice is required to include, per the Department of Transportation’s federal motor carrier safety regulations.
- Name of consignor and consignee (i.e. shipper and carrier, sender and receiver)
- Date of shipment
- Shipment origin and destination
- Number of packages
- Description of freight
- Weight, volume, or measurement of freight
- Exact rate(s) assessed
- Total charges due (including any charges for special services and where they took place)
- Route of transportation and the name of each carrier participating in the transportation
- Any transfer point(s) through which the freight passed
- Address where the payment must be made or the address of the bill issuer’s primary place of business
What Factors Affect Freight Invoice Pricing?
Initially, freight invoices seem pretty straightforward. However, things can start to get complicated when looking at pricing rates and the various factors that can affect them. Freight invoice pricing varies depending on many factors that impact carrier operations, including (but often not limited to) those listed below.
Supply and Demand
The first factor that affects freight rates is the simple concept of supply and demand. When a larger volume of goods needs to be shipped and demand is at its highest for carriers, carriers can increase their rates. When shipment volumes are lower, carrier rates will typically decrease.
Often, shippers commit to a freight contract, which can help combat the ebbs and flows in cost and offer some consistency. While this can certainly pay off in high-demand situations, it can also result in shippers paying more when demand and rates are low. There’s less flexibility to switch and save when the opportunity arises.
Fuel costs are constantly changing, and their fluctuations have a significant impact on freight invoice pricing. Depending on fuel costs at the time of shipment, the cost of different shipments from the same location can be drastically different. This makes it extremely difficult for shippers, carriers, and brokers alike to accurately predict future expenses.
One tool that shippers, carriers, and brokers use to accurately price freight loads is the freight classification system. The National Motor Freight Traffic Association has a list of freight classes that help carriers identify and choose from different types of freight. There are currently 18 different freight classifications ranging from 50 (low) to 500 (high).
Some factors that can help designate a freight’s class include a shipment’s:
- Volume and density (lower volume and density = higher freight class)
- Ease of handling (easier to handle = higher freight class)
- Liability (lower liability = higher freight class)
- Stowability (more stowability = higher freight class)
Accessorial charges are additional fees charged by carriers for any services that go above and beyond the standard pickup and delivery process. In one freight invoice, you could see any or all of the following freight charges:
- Driver loading and unloading
- Layover time for loading and unloading
- Direct or residential delivery
- Metro pickup or delivery
- Additional delivery attempts if receiver is unable at first delivery
- Storage if delivery is unable to be made
- Hazardous materials transportation
- Re-consignment after a shipment destination is changed after pickup
5 Tips & Tricks to Process Freight Invoices With Ease
Processing freight invoices is a necessary process in the transportation of goods. However, without the right systems and procedures in place, it can also be an incredibly time-consuming and often frustrating one.
As a freight broker, you need ways to streamline the process, so you can ensure time for other essential responsibilities like building and managing shipper-carrier relationships and growing your brokerage. Here are our top tips and tricks to help.
1. Standardize Your Freight Invoice Management Procedure
Depending on the size of your brokerage, you either have a small or large team of multiple freight brokers responsible for maintaining shipper-carrier relationships every day. Regardless of how many of you there are, standardizing the invoice processing procedure is a great first step in helping everyone be more efficient. The process should include actionable steps, tools to use, personnel involved, and templates to follow.
Creating a standardized process that everyone follows can ensure greater accuracy, reduce confusion, and help your team and your clients get paid more quickly. Once decided upon, you should also share your process with your shippers and carriers so they are aware of how you operate and how it can make their relationship with you more valuable.
2. Utilize Online Freight Data & Resources
Surprisingly, the freight industry has a large online presence. There are many databases, tools, and organizations on the internet with valuable data and resources to learn from. For example, the U.S. Energy Information Administration releases weekly updates on gasoline and diesel fuel prices that you can reference to predict fuel costs and ensure invoice charges are accurate and fair to all parties involved.
3. Conduct Shipper Credit Checks
It’s critical to conduct a thorough credit check on a shipper prior to working with them and matching their loads to a trusted carrier. Freight fraud and missed payments occur far too often in the transportation industry, which can leave your carrier clients unhappy.
If a shipper’s credit history is less than sufficient, they may not be reliable enough to pay invoices on time, leaving you to deal with the consequences and chase after owed debts. This can put incredible strain on the invoice processing process. You can eliminate this hassle by ensuring a shipper’s credit is good beforehand.
4. Keep Your Focus on Continuous Improvement
The freight industry is subject to ongoing change. From fluctuating costs to new inventions in transportation technology rising demands in the number of shipped goods, and more, anyone in the industry is required to keep up with new trends and be ready to adapt. There are a couple of methods of doing so that we recommend:
- Read industry publications or use social media platforms like LinkedIn to keep up with trends.
- Do competitor analyses of other brokerages.
- Analyze past invoices to identify trends specific to your brokerage and clients.
- Converse with your clients and other industry professionals to learn about what they’re doing, and why.
5. Invest in an Automated Freight Financing Solution
You could implement any of the tips above independently, or you could take an all-in-one approach to them by investing in automated freight financing and factoring software. This software can significantly reduce the amount of time you spend doing tedious tasks like processing freight invoices.
These softwares have tools to help you do one or more of the following:
- Match loads to carriers
- Complete invoicing processes
- Run shipper and carrier credit checks
- Pay all parties quickly, often without hours after delivery
All in all, you’ll find it much easier to accomplish your freight invoicing along with many other day-to-day tasks you’d like to streamline — allowing you to focus on your ultimate goal of scaling your brokerage.
For Simpler Freight Financing, Choose ComFreight.
Looking for a better way to manage freight invoices? Join thousands of brokers nationwide in choosing ComFreight’s automated freight factoring and payment solutions. We’re a leading digital payment and finance solution, and our tools are proven to help you smooth out the financial rough spots inhibiting your job satisfaction and company growth.
Get in touch with our team to learn more about how we can support you.