Every shipment has a fundamental question: who pays the freight charges? The answer is determined by whether the shipment moves as freight prepaid or freight collect, and the choice affects your cash flow, your carrier relationships, and your control over the shipping process.
Freight prepaid
The shipper (sender) pays the freight charges. The carrier bills the shipper, and the consignee (receiver) receives the goods without owing transportation costs. This is the most common arrangement for B2B shipments where the seller's price includes delivery.
Advantages of prepaid: the shipper controls the carrier selection and routing, the shipper can negotiate better rates through volume consolidation, the consignee experience is simpler, they just receive the goods, and pricing is cleaner, the delivered price includes freight.
Freight collect
The consignee (receiver) pays the freight charges. The carrier bills the consignee upon delivery. The shipper sends the goods without paying transportation costs.
Advantages of collect: the buyer controls carrier selection and can use their own negotiated rates, the seller doesn't tie up working capital in freight charges, and the buyer can consolidate inbound shipments from multiple suppliers through their preferred carrier for volume discounts.
Third party billing
Neither the shipper nor the consignee pays, a third party (typically a freight broker or 3PL) is billed for the freight charges. This is common when a logistics provider manages the entire supply chain and consolidates billing across multiple shippers and consignees.
How to choose
Use prepaid when you want to control the shipping experience your customer receives, when your delivered pricing includes freight, when you have better carrier rates than your customer, or when you want to manage the logistics relationship directly.
Use collect when your customer has their own carrier relationships and negotiated rates, when you want to reduce your working capital tied up in freight, when the customer wants to consolidate inbound freight from multiple suppliers, or when incoterms specify the buyer is responsible for transportation.
How Total Connection handles billing
We support prepaid, collect, and third-party billing arrangements. Our team can advise on which structure optimizes your freight costs and cash flow based on your specific situation. Call 732-817-0401 or request a quote.
Frequently Asked Questions
What does freight prepaid mean?
The shipper pays transportation charges. The consignee receives goods without owing freight costs. Most common for B2B shipments where the seller's price includes delivery.
What does freight collect mean?
The consignee pays transportation charges upon delivery. The shipper sends goods without paying freight. Used when the buyer wants to control carrier selection or use their negotiated rates.
Can a third party pay the freight?
Yes, third party billing routes charges to a broker, 3PL, or other designated party. Common when a logistics provider manages the supply chain and consolidates billing.
Which is better for my business?
Prepaid gives you control over shipping quality and carrier selection. Collect reduces your capital outlay and lets customers use their own rates. The best choice depends on your pricing structure, carrier relationships, and cash flow priorities.
