What You Need to Know About Freight Prepaid vs. Collect
Freight prepaid and collect are two common options for shipping goods, but do you know when to use which? Knowing the difference between freight prepaid and collect can help you save money and ensure your shipments arrive on time.
In this blog post, we’ll explore what freight collect and prepaid freight mean and when to use each option. Read on to learn more!
What Is Freight Collect?
Freight collect is a shipping payment method in which the receiver of the shipment pays for all freight costs directly to the carrier. This means the sender of the shipment does not need to pay for shipping upfront. Instead, they send it on a freight collect basis and pay upon delivery. It’s important to note that freight collect does not mean free shipping—the receiver must still be prepared to pay for all associated charges.
How It Works
When shipping with freight collect, the sender must enter “freight collect” or “FOB origin freight collect” as the payment option when booking their shipment. This ensures that all delivery fees and other shipping costs are billed directly to the receiver of the package by the carrier delivering it.
These fees include transportation costs, fuel surcharges, and applicable taxes or customs duties. The sender is then responsible for these costs when the carrier invoices them. Freight collect is commonly used in international shipments, as it can help to simplify the process of collecting payment from the receiver.
To get the most out of your shipping operations, you need to be able to send and collect accurate, on-time payments. Discover how our freight audit and payment solutions can help.
What Is Freight Prepaid?
Freight prepaid is a transportation contract that requires the shipper to pay for the freight charges upfront. This gives the shipper more control over the shipping process, as they will know exactly how much they will be paying for their shipment before it leaves their facility.
How It Works
When using freight prepaid, the shipper must provide a Bill of Lading (BOL) to the carrier before they can ship out their goods. A BOL is a legal document that details the shipment information, such as its destination, contents, weight, and other pertinent information. Once payment has been made upfront and all documents have been completed, the carrier can take possession of the goods and start transporting them to their destination.
Prepaid vs. Collect: How to Make the Right Choice
When deciding between freight collect and prepaid, it’s important to consider the type of shipment you’re sending, where it’s going, and the cost associated with each option. Generally speaking, if you’re shipping goods from one location to another within the same country, then you can use either option.
If you’re shipping goods internationally or require special services such as insurance or additional handling fees, then paying for your shipment upfront may be a preferable option. In addition, this method works if you know what your shipment will cost. Freight collect is the better choice if you’re unsure of how much a shipment will cost or if there will be ancillary fees.
Understanding How Shipment Size Affects Your Decision
Although it’s important to consider both freight prepaid and freight collect when shipping goods internationally, the size of your shipment may indicate the best option for your current situation.
Smaller Shipments
For smaller shipments (under 500 kg) or those going a long distance, freight collect tends to be cheaper due to lower handling fees and reduced insurance premiums associated with smaller packages.
Larger Shipments
Freight prepaid tends to make more sense for larger shipments (over 500 kg) or those going short distances. This is because it eliminates any risk associated with an increase in transit costs due to unforeseen events, such as bad weather or mechanical breakdowns.
Making the Right Choice for Your Business
When deciding between freight prepaid vs. collect for an international shipment, several factors need to be considered, such as the size, distance, or frequency of shipments. You must also know your destination country’s regulations, tariffs, and taxes. All of these affect the total cost of shipping, so it’s important to weigh them before making a decision. Each scenario presents different challenges requiring detailed analysis for logistics companies to maximize their savings while ensuring timely delivery.
Maximizing Cost Effectiveness With Data and Technology
Knowing which type of shipping payment method to use can be challenging—many variables and moving parts can significantly impact your bottom line. Fortunately, this process can be made easier by leveraging the power of transportation management software (TMS). These high-powered systems centralize all of the information relating to your shipping and logistics operations, from current shipping rates to carrier performance. This information provides you with crucial insight and visibility and allows you to make the best decision for every shipment.
For example, if you can predict the costs of a shipment accurately and are transporting goods a short distance, you might use freight prepaid. However, if significant weather events make it difficult to forecast costs or delivery times, you may choose an alternative route and opt for freight collect.
Start Thinking Logistically With Sheer
At Sheer Logistics, we know how difficult it can be to navigate the world of shipping and transportation. As your logistics partner, we strive to simplify the process and give you the tools to deliver goods effectively at the best rate possible. Whether you’re looking to integrate a powerful TMS, ship internationally, or optimize your logistics processes, we can help. Get in touch today to find out how you can ship with confidence.
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