Virtual Transportation Management, Inc.
Everything You Need to Know About Freight Payment
Freight payment is a critical aspect of logistics, ensuring timely, accurate payment for transportation services, including in depth data collection and reporting. This guide helps shippers understand how freight payment nuances can streamline operations, reduce costs, assist decision making and improve relationships with carriers and suppliers.

What is Freight Payment?
Freight payment is the process of approving and paying invoices for the transportation of goods. It involves a series of steps to warrant that carriers are paid accurately and timely for their services. Key components of freight payment include the generation of shipping documents, receipt and verification of invoices, and execution of payment.
Why is Freight Payment Important?
Freight payment plays a critical role in the logistics and supply chain management process. Here is why it is important:
- Financial Implications: Accurate freight payment ensures that shippers do not overpay for transportation services, which can significantly impact their bottom line.
- Logistics Management: Timely and accurate payments help maintain smooth logistics operations by knowing carriers are compensated for their services, leading to fewer disruptions and disputes.
- Carrier Relationships: Consistent and accurate payments help build and maintain healthy relationships with carriers, which are essential for negotiating better rates and reliable services.
The Freight Payment Process
The freight payment process involves several key steps:
- Shipment Booking: The shipper books the shipment with the carrier and arranges the necessary transportation service and equipment.
- Bill of Lading (BOL) Generation: A BOL is generated, detailing the shipment’s contents, description, origin, and destination.
- Invoice Receipt from the Carrier: After the shipment is delivered, the carrier sends an invoice to the shipper.
- Verification of Invoice Details: The shipper verifies the invoice details against the BOL and shipment records to ensure accuracy.
- Payment Approval: Cost center coding is verified; the invoice is approved for payment.
- Payment Execution: The payment is processed and sent to the carrier using one of the common methods of freight payment.
Common methods of freight payment include:
- Electronic Funds Transfer (EFT): A direct transfer of funds from the shipper’s bank account to the carrier’s bank account.
- Shipper’s Check and Detailed Remittance Advice
- Credit Card Payments: Payments made using a credit card for added convenience.
- Automated Clearing House (ACH) Payments: An electronic network for financial transactions, provided by the shipper’s bank.
Common Challenges in Freight Payment
Despite its importance, freight payment can present several challenges:
- Inaccurate Invoicing: Invoice errors can lead to overpayments, duplicate payments, payments of other shipper bills.
- Discrepancies in Shipment Details: Mismatched details between the Bill of Lading and invoice can cause delays in payment and erroneous shipment data added to your database.
- Delays in Payment Processing: Inefficient and inaccurate payment processes can result in overdue payments, straining carrier relationships and producing second notices and balance due billings.
Introduction to Freight Bill Audit
A freight bill audit is a process that ensures freight invoices are accurate and free of errors before payment. It involves reviewing and verifying the charges on freight invoices to ensure they match the services provided and correspond to the tariff that covers the billing of each shipment.
How Freight Payment and Freight Bill Audit are Related
Freight bill audit and freight payment are closely related processes. The audit ensures that the charges on the freight bill are accurate, which is a critical step before approving the invoice for payment. Here is how the audit process works:
- Receipt of the Invoice: The invoice is received from the carrier.
- Verification of Charges: The charges on the invoice are verified against the BOL and shipment records. Freight charges are allocated to the proper shipper cost center.
- Dispute Resolution: Shipper notifies Carrier of error and may ask for a corrected invoice or correct the charges per the tariff in effect and short pay the Carrier, noting the tariff authority and reason for reduced payment.
- Approval of the Accurate Bill for Payment: Once verified and any disputes resolved, the bill is approved for payment. Billings are checked for previous, duplicate payment as part of the check writing process.
Benefits of Implementing Freight Bill Audit
Implementing a freight bill audit offers several benefits:
- Cost Savings: Eliminate shipper labor costs related to receipt, approval, audit, payment, and reporting of data related to freight spend.
- Error Reduction: Erroneous payments can be eliminated through prepayment review of shipment classification, weight, discount, tariff, and service level.
- Improved Financial Controls: Know that Carriers are paid accurately, within agreed upon credit terms. Utilize accurate paid transportation billing data for budgeting, planning and future carrier negotiations.
- Enhanced Carrier Relationships: Transparent and accurate billing fosters better relationships with carriers. Cut down research both for you and your Carriers.
Tools and Solutions for Freight Payment and Auditing
There are several tools and solutions available to streamline freight payment and auditing. Many software solutions offer integrated freight payment and auditing features, automating much of the process.
Benefits of Using Automated Systems:
- Increased Efficiency: Automation reduces your manual effort and speeds up the process.
- Error Reduction: Automated systems are less prone to human error. Experienced freight auditors and their expert systems reduce overall freight spend.
- Better Record Keeping: Comprehensive Digital records are easier to manage and retrieve. Utilize customized reports that help you understand your freight spend.
Key Features to Look for in Freight Payment and Auditing Software:
- Invoice Matching: Automatically matches invoices with BOLs and shipment records.
- Audit all modes of transportation billings.
- Dispute Resolution: Tools and staff to manage and resolve disputes with carriers.
- Reporting and Analytics: Provides insights into payment trends and potential issues.
Effective Freight Bill Audit and Payment should include:
To ensure efficient freight audit and payment, consider the following best practices:
- Pre-Payment Audit of Freight Bills: Experienced, customized audits eliminate and correct errors before your funds are disbursed.
- Clear Communication with Carriers: Maintain open lines of communication to resolve issues quickly.
- Keeping Detailed Records: Detailed records help in verifying charges and resolving disputes.
- Staying Updated with Industry Standards and Regulations: Ensure compliance with the latest standards and regulations.
Virtual Transportation Management (VTM)
VTM Freight Payment Best Practices
To fully leverage the benefits of freight rating and stay ahead of the curve, implementing best practices is essential. At VTM, we have developed a comprehensive approach to deliver unparalleled accuracy and efficiency.
VTM Freight Bill Pre-payment Audit
- All modes of carrier billings are audited.
- We maintain your complete, up to date tariff library.
- We record any audit changes and share those with your carriers during the payment process.
- We compare your bill of lading information to your carrier’s billing information.
- We status your bills for payment to meet your negotiated carrier credit terms.

Freight Bill Payment
- VTM will check for previous payment.
- We will request funds from you in coordination with your negotiated carrier credit terms.
- We will notify your carriers via our remittance information of any corrections we made during the audit process.
- We will communicate and speak with your carriers should they have payment questions.

VTM-TRANSWARE™ REPORTING
- Our TRANSWARE platform is the hub for your connection to VTM process and information.
- All data is stored and available for standard and customized reporting.
- Any hardcopy billings or support documents are scanned, and these images are linked to the corresponding data record.
- Model and compare your current spend to your budget numbers.
- Analyze how carrier changes or substitutions would affect future freight spend.

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