What is a Freight Short Pay & Why are we seeing more of this?

A freight short pay occurs when a carrier receives less than their full bill from the customer/shipper or from the broker. For example, you send an invoice to the shipper for $2,500, and all you get is $2,200, with no explanation. Sometimes the shipper will provide a deduction notice weeks after the fact and just bury it in an email. With current freight market conditions tightening, and shippers looking for new ways to cut costs, what were once rare occurrences of paperwork disputes between the parties involved are now occurring regularly, with shippers reducing the carriers’ profits by using deductions from invoice amounts.

Common reasons shippers or brokers short-pay a carrier’s invoice

Accessories Not Approved Before Pick-Up (detention, layover, tonu)

Detention charges occur when a truck sits idle beyond two hours of free time, which can range from $50-$100 per hour. Layover fees for trucks that sit overnight can run upwards of $250, depending on the equipment type. Tonu (truck ordered not used) fees range from $150-$300 for cancellations made by the shipper after the carrier has committed to delivering the load.

The issue is that many shippers will not pay these accessory fees unless the carrier obtains prior authorization before the clock begins to tick.

Rate Confirmed Incorrectly

You confirmed a rate with the shipper of $2.50 per mile; the shipper claims you confirmed the rate at $2.35 per mile. Rate disputes arise when there is a discrepancy between the rate agreed upon verbally and what is reflected on the rate confirmation or other documents associated with the shipment. Without a signed rate confirmation that matches what you invoiced, you have lost the battle prior to even getting started.

Proof of Delivery (POD), Billing Errors, and Paperwork Issues

Missing proof of delivery is the easiest way to guarantee a short pay from a shipper. Proof of delivery is needed by the shipper to confirm that you delivered the freight. Incomplete bills of lading also lead to short pays. If the bill of lading does not accurately reflect the freight description, or the weight of the freight is inaccurate, do not be surprised if you experience a short pay.

Administrative, Compliance, and “Policy Fees”

Large shippers have administrative compliance programs in place that automatically deduct fees from their vendors for policy infractions. Arrived late at a dock? That’s going to cost you $100. Did you not include the correct appointment number on the bill of lading? That’s another $50 you will lose. These “policy fees” can come with generic explanations such as “admin fee”, “non-compliance fee”, etc.

Preventing Short-Pays Before Your Wheels Start Rolling

Before you ever haul a load, make sure you obtain all necessary information in writing. Obtain a signed rate confirmation prior to hauling your first load. The signed rate confirmation will protect you from rate disputes; however, the rate confirmation must be accurate and match what you will invoice later. Take photographs and include notes on the bill of lading regarding the condition of the freight at the time of pick-up. Obtain pre-authorization for accessorials prior to receiving any accessory charges by contacting your broker immediately when detention time begins or when experiencing a layover situation. Make sure to retain a copy of all documentation: rate confirmations, signed bills of lading, proof of deliveries, communication exchanges regarding additional charges, and approvals via email.

Disputing a Short-Pay – Step By Step

Identify specifically what was deducted and why. Review the remittance advice to ensure it matches your original invoice. Collect all supporting documentation: rate confirmation(s), proof of delivery confirming delivery, and communication exchanges regarding accessorials.

Notify Accounts Payable via a professional e-mail reference your invoice number, Pro #, and delivery date. Include your supporting documentation and request a specific timeline for resolving the dispute. If you do not receive a response within 7 business days, contact your broker or shipper’s operational team to further assist with the dispute.

Keep track of each communication exchange via email, note the date and name of whom you spoke with, and document any promises made to resolve the dispute. This documentation will become essential if you need to seek outside assistance in recovering the disputed funds.

Using a Third-Party Collections Partner to Help Recover Short-Paid Balances

There are times when it is not worth the time and effort to pursue short-paid balances, especially if the potential recovery amount is minimal ($200 across multiple invoices). At some point, the time spent pursuing a small dollar recovery may exceed the amount recovered. Freight collections specialists represent the carrier and handle all interactions with the shipper or broker, including escalating the dispute to the courts if necessary, and filing bond claims against the broker when they refuse to pay. Since third-party freight collections specialists operate on a contingency basis, the carrier only pays the specialist if they recover the monies owed to the carrier. Carrier companies with multiple short pays or past due receivable balances greater than 90 days will find that third-party collection services can recover monies that would have otherwise been written-off.

To speak with an expert freight collections specialist, please contact us today at AWCollects to see how we can help you recover your short-paid and unpaid freight invoices and allow you to focus on hauling freight rather than collecting dollars.