What is a bill of lading
A bill of lading (BL or BoL) is a legal document issued by a carrier to a sender which details the type, quantity and destination of the goods transported. A bill of lading also serves as a shipping receipt when the carrier delivers the goods to a predetermined destination. This document must accompany the products shipped, regardless of the mode of transport, and must be signed by an authorized representative of the carrier, the sender and the recipient.
For example, a logistics company plans to transport gasoline by heavy truck from a factory in Texas to a gas station in Arizona. A factory representative and the driver sign the bill of lading after loading the gas onto the truck. Once the carrier has delivered the fuel to the Arizona gas station, the truck driver requests that the station clerk also sign the document.
Key points to remember
- 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 transported.
- A bill of lading is a title document, a receipt for the goods shipped, and a contract between a carrier and a shipper.
- This document must accompany the goods shipped and must be signed by an authorized representative of the carrier, the sender and the recipient.
- If managed and reviewed properly, a bill of lading can help prevent theft of property.
Explanation of bill of lading
The bill of lading is a legally binding document that provides the carrier and the sender with all the details necessary to accurately process a shipment. It has three main functions. First, it is a title to the goods described in the bill of lading. Second, it is a receipt for the products shipped. Finally, the bill of lading represents the terms and conditions agreed for the transportation of goods.
Separation of duties
Each company must have internal controls to prevent theft. A key element of internal control is the separation of duties, which prevents an employee from having too much control within a company.
No two internal control systems are the same. However, most follow a standard set of basic philosophies and have become standard management practice. The implementation of internal controls can help streamline operations and prevent fraud.
Example from the real world
A bill of lading is one of the many key documents that must be properly managed and reviewed to prevent asset theft. Suppose, for example, that XYZ Fine Dining receives shipments of fresh meat and fish five times a week. The restaurant manager determines the type and quantity of meat and fish that the restaurant must order. He then completes an order form and the owner of XYZ reviews and initials each order form before it is emailed to the food vendor. The seller collects the meat and fish, and he and a representative of the night transporter sign a bill of lading.
Then the transporter delivers the food to the restaurant and the manager compares the information on the bill of lading to what he asked for on the order form. If the information matches, the order form and bill of lading are sent to the owner, who reviews the documents and makes a check payable to the food vendor.
In this example, the owner does not issue a check to the seller without examining the purchase order (purchase order) and the bill of lading. This step ensures that 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 seller about the exception. A third employee reconciles the bank statement and makes the company’s deposits. All of these steps must be in place to prevent theft.