Understanding Transportation-in And Transportation-out
The accounting requirements are different for each industry, and it depends on the size of the business. For example, the accounting requirements may differ for small businesses as they have less paperwork than large businesses. Transportation is one such industry that attracts lots of invoices, freight bills, receivables, etc. Therefore, one must be careful when handling the accounts for transportation. To understand how accounting happens in a transportation company, one must know what transportation-in and transportation-out are? There are many online accounting services dedicated to calculating the product and inventory costs for the transportation industry.
Transportation-in is the freight charges the buyer has to pay for the delivery of the purchased goods. Such charges include custom duties and freight insurance costs. Transportation-out is the freight charges the seller has to incur to ship their goods to the potential customers. Such costs are calculated as selling expenses in the accounting entries.
Key Elements In Transportation Accounting
Here are the important terms one should understand when it comes to transportation accounting.
- Freight Quote And Cost- Before you start an account for transportation, you need to receive a freight quote directly from the carrier or through your transportation management system. Once you get the quote, you can compare and select the least cost carrier or the one with a faster transit time. After fixing the load and the carrier, you can check for the freight charges.
- Freight Invoice – A Freight invoice is a bill given to a consignee by a freight carrier. It will have the name of the shipper, description of the freight, the weight of the products, number of packages, Route of movement, exact rates assessed, date of shipment, the shipment’s point of origin and destination, transfer points, and the total amount of charges.
- Transportation Invoice Auditing- Once you enter the freight invoices into the accounting system, they will be checked for accuracy. If you are using virtual accounting services, you might need to send the freight invoices to them for auditing purposes. The auditors will then compare the invoices with the entries, and they will verify the bill’s validity, check for duplicate payments, use of correct tariffs, accessorial charges, etc. Once the auditing is completed, the charges will be reconciled, and the bills will be paid. There are many benefits of doing freight audits in a business, such as better data and analytics, reduced expenses, superior integration, time savings, increased visibility, strong business compliance, insightful analysis, customization, etc.
- Freight Payment- The freight payment consists of freight auditing services, freight data analysis, information reporting for logistics, paper freight bills, etc. Four freight payment methods are used in the import and export of goods. They are cash against goods, cash against documents, cash in advance, and letters of credit.
- Freight Invoice Consolidation is important to your company when shipping freight TL, LTL, or small packages. Through freight invoice consolidation, one can combine all the shipments into one streamlined invoice. This can then be merged into your accounting software, and it will then be much easier for you to sort out your shipments by date, carrier, cost, weight, etc. There are many benefits of performing a freight invoice consolidation. They are
- Data Analytics And Reporting- Freight invoice consolidation gives you detailed, clean, and accurate data analytics and reporting data. You can track fuel surcharges, price per pound, frequency to state, etc.
- On-Time Payment- With a perfectly streamlined procedure in place, the freight invoice consolidation can produce a shorter turn-around time when processing payments. This makes sure that the accounting books can be closed on time every month.
- Eliminates Duplicate Payments- When the payments for the consolidated invoices are processed and paid, the accounting software will show you the reference number of the payment, along with the date and time the payment was processed. This procedure helps in reducing duplication and thus saves your money.
Transportation accounting is quite important for a business as it can offer an insight into the company’s spending. There will be areas where one can modify or negotiate the freight cost, which allows you to save money. By tracking the freight costs accurately, your accounting team will identify these areas and help you save money. Continue Reading