Bill of Lading vs. Invoice

Last Updated June 27, 2024

A common error made in logistics is confusing the bill of lading with an invoice. These documents serve distinct purposes in the transportation and sale of goods. Here, we outline the details of these essential documents, so you can ensure accurate business transactions.

What Is a Bill of Lading?

A bill of lading (BOL) is a legally binding document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried. It serves multiple roles: as a receipt of freight services, a contract between a shipper and carrier, and a document of title that can be used to transfer ownership of the goods. As one of the most important documents in the shipping industry, the BOL ensures that carriers and shippers have a common understanding of the service provided.

Smartsheet

When Is a Bill of Lading Required?

A bill of lading is required whenever goods are transported by sea, land, or air from one point to another where different parties are involved. It is essential for international trade, where goods pass through multiple carriers and borders, but it’s also used in domestic shipments. The BOL must be presented at various checkpoints throughout the shipment’s journey and upon delivery.

What Is the Purpose of a Bill of Lading?

The bill of lading serves three primary purposes:

• Evidence of Contract of Carriage: It is proof of the contract between the shipper and the carrier for the transport of goods.
• Receipt of Goods: It acts as a receipt issued by the carrier once they have received and taken charge of the goods.
• Document of Title: It indicates that the person in possession of the bill of lading is entitled to the goods in transit, allowing for the transfer of the goods between the shipper, carrier, and receiver.

Who Issues and Receives a Bill of Lading?

The carrier issues the bill of lading to the shipper or their agent, indicating that the cargo has been loaded. Once the goods are delivered, the receiver also signs the bill of lading. So, in summary, there are three primary parties:

• The Shipper: The party sending the goods, who receives the BOL as proof their goods have been taken into custody by the carrier.
• The Carrier: The entity responsible for the transportation of goods that issues the BOL.
• The Receiver or Consignee: The party receiving the goods, who uses the BOL to claim the shipment at the destination.

What Goes on a Bill of Lading?

When filling out a bill of lading, you must include detailed information essential for the transport of goods, such as:

• Shipper and consignee names and addresses
• Description of the goods (including quantity, weight, and dimensions)
• Type of packaging (e.g., pallets, boxes, containers)
• Special instructions for the carrier
• The pick-up date and the expected delivery date
• The route and transit points (if applicable)
• Terms and conditions of the carriage
• The signature of the carrier’s representative, confirming the receipt of the goods as described

What Is an Invoice?

An invoice is a detailed bill sent by a provider of a product or service to the purchaser that specifies the amounts and costs of the products or services provided. It serves as a request for payment and documents the sale transaction. It is used across all industries to indicate the terms of a financial transaction.

Smartsheet

When Is an Invoice Required?

An invoice is required after the delivery of a product or the completion of a service but can also be issued in anticipation of a delivery or service. It is a record of sale for the accounting process of both the seller and buyer. Invoices are fundamental in business-to-business (B2B) transactions, where they serve as a formal request for payment.

What Is the Purpose of an Invoice?

The primary purpose of an invoice is to record the sale of goods and services. Other key purposes include:

• Requesting Payment: An invoice is a formal request for payment from the buyer to the seller for goods or services provided.
• Legal Documentation: It serves as a legal document that can be used as evidence of the transaction for accounting and tax purposes.
• Record Keeping: Both parties use invoices for record-keeping, helping to track inventory and manage finances.
• Taxes: Invoices provide the necessary details for both parties to report income or expenses and to file taxes accurately.

Who Issues and Receives an Invoice?

An invoice is issued and received between two parties.

• Issuer (Seller): The seller or service provider issues an invoice after the delivery of goods or completion of services. This can be a company, a freelancer, or any type of vendor.
• Recipient (Buyer): The recipient of the invoice is the party that receives the goods or services, which makes them responsible for paying the stated amount. This is typically a business or consumer who has purchased from the issuer.

What Goes on an Invoice?

When writing an invoice, you’ll include details that are necessary for the buyer to make a payment, such as:

• The names and addresses of the seller and buyer
• An invoice number for tracking purposes
• The date of the invoice
• A description of the products or services provided
• The quantity of items purchased or scope of services rendered
• The price per item or service and the total amount due
• The payment terms (e.g., due date, accepted payment methods, late payment penalties)
• Tax information, if applicable
• The signature of the seller or a digital authentication

In Summary – Bill of Lading vs. Invoice

	Bill of Lading	Invoice
When It’s Issued	Issued when a carrier receives the goods for shipment.	Issued after the delivery of goods or completion of services, or in anticipation of such.
Purpose	Serves as a receipt for the shipment of goods, a contract between the shipper and carrier, and a document that can transfer ownership of the goods in transit.	Serves as a request for payment from the buyer, documents the sale transaction, and provides legal and accounting records of the sale.
Who Issues It	Issued by the carrier or their representative to the shipper.	Issued by the seller or service provider to the buyer.
Who Receives It	The shipper signs and receives a copy of the BOL when the freight is initially accepted by the carrier, and the receiver signs and receives a copy of the BOL when the goods are delivered.	The buyer or client receives the invoice as the party responsible for payment.
What Goes on It	Includes details like names and addresses of the shipper and consignee, description of goods, quantity, type of packaging, pickup and delivery dates, and carrier signature.	Includes seller and buyer details, invoice number, date, descriptions of products/services, quantities, prices, total amount due, payment terms, and tax details.

Bill of Lading vs. Invoice FAQs:

Can a bill of lading be an invoice?

No, a bill of lading cannot serve as an invoice. The documents serve different purposes. A bill of lading is a shipping document issued by a carrier that outlines the terms of shipment and serves as a receipt of goods, a contract, and a document of title. An invoice is a financial document requesting payment for goods or services provided. They contain different information pertinent to their distinct roles in the transaction process.

What is the difference between a bill of lading and a purchase order?

A bill of lading is a shipping document that serves as evidence of a contract between a shipper and carrier, details about the goods being transported, and a receipt once the carrier takes possession. A purchase order, on the other hand, is a document issued by a buyer to a seller, authorizing the purchase of goods or services at specified terms. The purchase order initiates the transaction, while the bill of lading confirms the shipment of goods as part of fulfilling that transaction.

What is the difference between an invoice and a purchase order?

An invoice is a request for payment issued by the seller to the buyer after goods or services have been delivered. A purchase order is issued by the buyer to the seller before the transaction occurs, indicating the types, quantities, and agreed prices for products or services. Thus, the purchase order is a commitment to buy, and the invoice is a request for payment after the sale has been completed.

What is the difference between a bill of lading and a packing list?

While both documents are used in the shipping process, they serve different purposes. A bill of lading is a legal document between the shipper and carrier that outlines the terms of shipment, acts as a receipt for the goods, and can transfer ownership. A packing list, however, details the specific contents of each shipment, including the types and quantities of goods packed.

Is a bill of lading required by the DOT?

The Department of Transportation (DOT) does not specifically require a bill of lading for all types of transportation. However, it recognizes the bill of lading as an important document in the transport of goods, especially for commercial shipments. Specific requirements can vary depending on the mode of transportation and the nature of the goods being shipped.