When a buyer orders a seller's product, there are several downstream documents created from order placement through to shipment delivery. These include a purchase order acknowledgement, packing slip, bill of lading and invoice. Additionally, a pro forma invoice may be required for border crossings. A certificate of analysis most likely will accompany material destined for a laboratory. Each document has its own significance.
Financial vs. Legal Documentation
Comparison of the sales invoice with the bill of lading yields some similarities as to content, but the primary difference is that the invoice is a financial document. When an invoice is created it is posted to a customer's account, and once it is paid the invoice is cleared from the accounting system. A bill of lading is not an accounting document; it is a legal document reflecting title to goods as passing from the shipper to the buyer -- the consignee.
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Invoicing for Financial Transactions
Because an invoice is a financial document it reflects the product name, the quantity shipped, a price per unit of measure and a subtotal for the items shipped. Additional line items for freight and tax also are noted on the invoice with a final total due, and it reflects the payment terms and specifics as to where payment should be sent. Usually at the bottom or on the back of the invoice in fine print are the terms and conditions, which define the buyer's and seller's responsibilities.
Shipping Confirmation
A bill of lading makes no reference to price or cost. It notes the product and quantity shipped, the terms of shipment -- collect or prepaid -- and the trailer or carrier vehicle number. The carrier's driver reviews and signs the bill of lading when he picks up the cargo from the seller's warehouse or plant. Upon delivery of the shipment, the buyer reviews the contents and signs the bill of lading, confirming receipt. Any differences, such as damaged or missing pieces, should be noted on the bill of lading before the carrier leaves the buyer's premises with the signed copy. A bill of lading might also note batch numbers and the product's country of origin.
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Importance of All Documents
Though a bill of lading is not a financial document, it can have financial implications. If a buyer is invoiced for six pieces but the bill of lading notes only five arrived, it serves as backup documentation to short-pay the invoice or to request a credit for the missing piece. Though one document reflects a financial transaction and the other represents a logistical move, each document is important in its own way and each is an integral part of the order-to-cash process.
