What Is a Bill of Lading?
A bill of lading (BL or BoL) is a legal document issued by a carrier to a shipper that details the type, quantity and destination of the goods being carried. A bill of lading also serves as a shipment receipt when the carrier delivers the goods at a predetermined destination. This document must accompany the shipped products, no matter the form of transportation, and must be signed by an authorized representative from the carrier, shipper and receiver.
- A bill of lading is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried.
- A bill of lading is a document of title, a receipt for shipped goods, and a contract between a carrier and shipper.
- This document must accompany the shipped goods and must be signed by an authorized representative from the carrier, shipper, and receiver.
- If managed and reviewed properly, a bill of lading can help prevent asset theft.
Bill of Lading
Understanding Bills of Lading
The bill of lading is a legally binding document that provides the carrier and shipper with all of the necessary details to accurately process a shipment. It has three main functions. First, it is a document of title to the goods described in the bill of lading. Secondly, it is a receipt for the shipped products. Finally, the bill of lading represents the agreed terms and conditions for the transportation of the goods.
As an example, a logistics company intends to transport, via heavy truck, gasoline from a plant in Texas to a gas station in Arizona. A plant representative and the driver sign the bill of lading after loading the gas on the truck. Once the carrier delivers the fuel to the gas station in Arizona, the truck driver requests that the station clerk also sign the document.
Every business needs to have internal controls in place to prevent theft. One key component of internal control is segregation of duties, which prevents one employee from having too much control within a business. No two internal controls systems are the same. However, most follow a standard set of core philosophies that have become standard management practice. The implementation of internal controls can help streamline operations and prevent fraud. A bill of lading is one of several key documents that must be properly managed and reviewed to prevent asset theft.
Bill of Lading Example
Assume, for example, XYZ Fine Dining receives shipments of fresh meat and fish five times a week. The restaurant manager determines the type and amount of meat and fish the restaurant needs to order. They then fill out a purchase order (PO), and XYZ’s owner reviews and initials each PO before it is emailed to the food vendor. The vendor gathers the meat and fish and signs a bill of lading along with a representative from the overnight carrier.
Next, the carrier delivers the food to the restaurant, and the manager compares the information on the bill of lading to what was requested on the PO. If the information matches, the PO and the bill of lading are sent to the owner, who reviews the documents and writes a check payable to the food vendor.
In this example, the owner does not issue a check to the vendor without reviewing the purchase order and the bill of lading. This step ensures XYZ only pays for what it ordered and what it received. If the two documents do not match when the restaurant manager compares them, the manager will ask the vendor about the exception. A third employee reconciles the bank statement and makes company deposits. All of these steps must be in place to prevent theft.
Frequently Asked Questions
Why Is a Bill of Lading Important?
The importance of a bill of lading lies in the fact that it's a legally binding document that provides the carrier and shipper with all of the necessary details to accurately process a shipment. This implies that it can be used in litigation, if the need should arise, and that all parties involved will take great pains to ensure the accuracy of the document. Essentially, it is undisputed proof of shipment. Furthermore, a bill of lading allows for the segregation of duties that is a vital part of a firm's internal control structure to prevent theft.
What's the Purpose of a Bill of Lading?
A bill of lading has three main purposes. First, it is a document of title to the goods described in the bill of lading. Secondly, it is a receipt for the shipped products. Finally, the bill of lading represents the agreed terms and conditions for the transportation of the goods.
What's In a Bill of Lading?
Typically, a bill of lading will include the names and addresses of the shipper (consigner) and receiver (consignee), shipment date, quantity, exact weight, value, and freight classification. Additionally, a complete description of the items including whether they're classified as hazardous, type of packaging used, any specific instructions for the carrier, and any special order tracking numbers are included.