Freight cash flow lives on a different calendar than sales. You can book revenue the moment a container lifts at origin, yet the money won’t actually settle until bills of lading move, customs clears, and somebody agrees who eats the demurrage. That’s why freight finance is an exercise in aligning three levers: who controls title and documents, which events release cash, and how fast you can settle local charges without creating FX and reconciliation noise. Treat those levers as design choices—not as paperwork—and your working capital stops swinging with the tides.
A single shipment already includes five parties with money at stake: shipper, consignee, forwarder/NVOCC, carrier, and customs broker. Add a bank on each side for trade instruments, an insurer, and a drayage operator, and you have a cash map that only runs cleanly if documents and payments speak the same language. The operational truth is simple: custody of documents equals leverage. Whoever can command the original bill of lading (or the eBL token), the delivery order, and the cargo release codes can determine when money moves. Your payment design needs to codify that leverage, not fight it.
Documentary collection that actually protects control
Documentary collection sits between open account and letters of credit. In the D/P (documents against payment) flavor, the collecting bank releases title documents only after the buyer pays; in D/A (documents against acceptance), the buyer accepts a time draft and receives documents before actual cash. Both are governed by standard banking rules (URC) and work well where counterparties know each other, cargo is standard, and time-to-cash can stretch a little. For forwarders and NVOs, the practical trick is to keep the “keys to the warehouse”—original B/Ls or an eBL control—out of the buyer’s hands until the collecting bank signals payment or acceptance. If you use house bills, make sure your master–house mapping is unambiguous so the release message in destination can match the payment event without manual detective work.
Letter of credit (UCP) offers stronger assurance but adds cost and friction. Use it for high-value, bespoke, or sanction-sensitive cargo, or where buyer credit risk is the blocker. Be precise in the credit: latest shipment date, presentation period, Incoterm, description of goods, and any “stale document” tolerance. The finance win appears months later, when the audit asks why you shipped with an expired LC and still booked revenue. A tight LC stops that conversation before it starts.
Electronic documents reduce accidental working-capital traps. eBL and eAWB workflows eliminate courier lag and “paper stuck at customs.” They also make conditional release feasible: your system can turn a bank’s “paid” or “accepted” message into a token transfer rather than a bike ride across town. For a forwarder, that means cash can clear on a milestone, not on an office-hour window.
Milestone-based payments that match how freight actually moves
Freight moves on events: gate in at origin, vessel departed, vessel arrived, out of gate at destination, POD after final delivery. Money should move on events too. A workable structure for B2B open-account trade is a three-stage schedule:
- Deposit at booking (small %): aligns carrier space commitment and spread risk for blank sailings.
- Main charge at departure (major %): triggered by an authenticated carrier event (EDI/track API).
- Balance at delivery (residual %): net of accessorials, verified by POD or out-gate event.
Add two rails to make it auditable: a rules engine that maps events to release amounts (including currency and rate lock), and virtual accounts/IBANs so each shipment or buyer cohort gets a unique remittance reference. That’s the difference between “finance will chase it” and 98% straight-through auto-match.
Customs and duties sit next to these stages but follow their own logic. Many importers use deferred accounts or bonds/guarantees to avoid paying duties on day one. As a forwarder with brokerage, you can hold a limited reserve from the shipper to cover duty risk, release it at customs clearance, and document the reconciliation against the customs entry number. Keep the duty currency native; back-converting for reporting is where exceptions are born.
Demurrage and detention: where margin quietly leaks
Demurrage (storage at the terminal beyond free time) and detention (equipment kept outside the terminal too long) are predictable, which is why they’re unacceptable as a month-end surprise. Fix the finance mechanics first:
- Negotiate free-time windows at booking and store them per shipping line and lane; finance should see them alongside the ETA.
- Price priority services (expedite, off-dock moves) as options, not apologies; most customers will pay to avoid a daily meter they don’t control.
- Attach cost-pass-through rules to Incoterms: under FOB/FCA, buyer owns destination charges; under DAP/DDP, the seller or its forwarder does. Put that into the invoice logic so AR doesn’t argue law with AP.
- Treat demurrage/detention as event-rated accessorials, not “misc charges.” Use in/out timestamps from port community systems, EDI 322/315, or gate telemetry as evidence.
The operational win is faster dispute closure; the finance win is predictability. Publish a weekly dashboard showing free-time at risk by vessel and consignee. If you consistently see the same buyers late on docs, switch them to D/P or require higher deposits.
Incoterms decide who pays and when cash triggers are even possible
Incoterms don’t move money by themselves, but they decide where you can hang a payment trigger. Under EXW/FCA, the buyer takes risk early—your best trigger is “cargo received” or “carrier departure.” Under CIF/CFR, the seller tends to pay ocean freight and insurance; that justifies a larger pre-departure collection. Under DAP/DDP, the seller owns destination pain; your milestone needs to include customs cleared and final delivery if you want to keep cash honest. Write these as parameters in your billing system, not as tribal knowledge in the ops team.
FX and treasury: USD ocean, local everything else
Ocean freight quotes are largely USD-denominated, even when local origin/destination charges are not. That creates translation and timing risk if you bill customers in local currency but settle carriers in USD. Two practical disciplines keep the P&L stable:
- Natural hedging: collect in the currency you will spend (port fees, drayage, depot charges), and only convert the net exposure.
- Short-dated forwards: ladder coverage on predictable USD outflows (BAF/CAF, base rates) for the next one to three months; keep small buffers in high-velocity wallets to absorb weekend and cut-off drift.
Store the rate source and timestamp on every monetary event—invoice, collection, carrier payment, refund—so you can explain variances without spreadsheet archeology.
Exceptions and liabilities that blindside finance if left implicit
The industry’s exotic edge cases—General Average, LOI for missing original B/L, partial damage, short-shipment—are really cash events in disguise. When a GA is declared, capture the GA guarantee and cash deposit as ledgered items tied to the voyage, and enforce a stop on delivery until security is in place. When goods must release on an LOI, treat it as a risk asset with approvals, expiry, and counter-signatures, not as a PDF on someone’s desktop. Each of these has a payment consequence later; your ledger should not discover them after the fact.
Data and reconciliation: make “where is my money” a screen, not a meeting
Money wants structure. Store all amounts as integer minor units plus ISO currency. Stamp every payment with rate, source, and timestamp, and every external call with an idempotency key. Ingest ISO 20022 bank statements so remittance data survives the trip, and allocate virtual IBANs per buyer, lane, or shipment so inbound funds land with a deterministic reference. Tie payments to transport milestones (EDI 214/315/322, AIS feeds, terminal messages) so you can prove why you billed an accessorial or released a reserve. North-star targets: 98%+ auto-match by count, 95%+ by value, and fewer than 15 manual minutes per 1,000 transactions to clear exceptions.
Risk and compliance you can’t wish away
Screen sanctions at onboarding and again before releasing documents on higher-risk lanes; vessel-based restrictions change quickly. Keep a watch list for dual-use goods and require documentary proof where needed. For KYC/KYB, scale depth with exposure: small occasional shippers don’t need the same file as a buyer taking weekly FCLs through sensitive corridors. For instant-rail refunds or advances, add name-matching (confirmation of payee) and cool-offs for first-time beneficiaries to blunt push-payment fraud.
A pragmatic 90-day plan
- Days 1–30: codify D/P vs D/A usage and eBL eligibility in your SOPs; map Incoterms to payment triggers; stand up virtual accounts per shipment or per top buyer; standardize rate sources and lock windows in the ledger.
- Days 31–60: switch demurrage/detention from “misc” to event-rated accessorials; integrate gate and terminal timestamps; publish a free-time-at-risk report; start short-dated forwards on predictable USD outflows.
- Days 61–90: pilot instant bank rails for destination charges and refunds in one corridor; wire name-match checks on outbound payments; automate GA/LOI handling as ledgered objects with approvals and expiries; ship a finance dashboard (DSO/DPO by lane, demurrage per TEU-day, FX bps, auto-match rate).
When a payment intermediary helps
If you need multi-currency accounts to separate origin, freight, and destination charges, virtual IBANs to tag remittances by shipment, and local rails to clear destination fees and refunds quickly—without negotiating a dozen bilateral bank setups—bring in a specialist. A provider like Collect&Pay can accelerate corridor coverage and give operations a cleaner reconciliation surface. Weigh providers on corridor breadth, uptime, line-level fee/FX transparency, and payout failure handling more than on headline fees; opaque reporting will cost you more than a few basis points saved.