DETAILS

some added statistics on the importance of freight invoice auditing, and then finally cover some of the reports you could run through your transportation management system to get the data you need to show to your c-suite or finance department that will aid in budgeting and financial transportation decision making.

Transportation Accounting

There are 6 key components when it comes to understanding freight and transportation accounting. We will define each fairly quickly here, but know we will do a deep dive into each subject.

Freight Quote and Freight Cost: Of course before you can account for anything, you have to receive a freight quote from a carrier directly or through the rates served up in your transportation management system. You can at this point consider if the least cost carrier is the best choice or if another carrier with faster transit time is the best choice. Then, once you book the load and decide the carrier, on the bill-of-lading you will see the freight costs. There are several ways to lower freight costs (even beyond the rate), so view our two part series on how to reduce freight costs with part 1 here and part 2 here.

Freight Invoice: A bill rendered by a carrier to a consignee of freight and containing an identifying description of the freight, the name of the shipper, the point of origin of the shipment, its weight, and the amount of charges. Freight bills or freight invoices are different from bills of lading in that they do not serve as a key piece of "evidence" in any dispute. While freight bills should match up closely to their bills of lading counterparts, they can also include additional charges (such as accessorials), information, or stipulations that serve to clarify the information on the bill of lading document.

Freight and Transportation Invoice Auditing: Once freight invoices are entered into your accounting system, they are audited for accuracy. Auditors verify the bills' validity, mileage, duplicate payments, accessorial charges, and use of correct tariffs. After auditing, the charges are coded and reconciled, and the bills are paid.

Freight Payment: Freight payment is a collection of processes that can be thought of in general terms as an accounts payable service for transportation invoices.

Freight Invoice Consolidation: Freight Invoice Consolidation is vital to your company's bottom line when you ship freight LTL, TL, or small package. Think of all the freight invoices your company pays in any given week. Imagine being able to receive one consolidated freight invoice per week instead of dozens or hundreds. A logistics service provider can assist in cutting down the amount of paper work by providing a weekly consolidated invoice. Because they are doing the freight payment, they take all your carriers freight invoices, pay them for you, and send you just the one with all the details. Often, these are also accessible electronically through the providers transportation management system.

Understanding Freight or Transportation-In & Freight or Transportation-Out: Freight-in, also called transportation-in, as it pertains to freight and transportation accounting, is the shipping cost to be paid by the buyer of merchandise purchased when the terms are FOB shipping point. Freight-in is considered to be part of the cost of the merchandise and should be included in inventory if the merchandise has not been sold. Freight-out is the delivery expense to be paid by the seller when its merchandise is sold with terms of FOB destination. This is an operating expense and is not included in the cost of merchandise.

Transportation-in or freight-in costs are part of the cost of goods purchased. The cost of goods (or any asset) includes all costs necessary to get an asset in place and ready for use. Transportation-in costs are allocated to the products purchased and will "cling" to the products. Those products in inventory (items not yet sold) will include their share of the transportation-in costs (as part of the inventory cost). The products that have been sold, will include their share of the transportation-in costs (as part of the cost of goods sold).

Transportation-in or freight-in costs are part of the cost of goods purchased. The cost of goods (or any asset) includes all costs necessary to get an asset in place and ready for use. Transportation-in costs are allocated to the products purchased and will "cling" to the products. Those products in inventory (items not yet sold) will include their share of the transportation-in costs (as part of the inventory cost). The products that have been sold, will include their share of the transportation-in costs (as part of the cost of goods sold).

Transportation-out or freight-out costs are not product costs and are not inventoriable. Transportation-out costs are costs of selling the products and will appear as a selling expense (perhaps as Delivery Expense) in the period in which they occur.