Pre-billing: what the bill of lading gives away
An invoice dated before the goods shipped, or for more than was delivered, is a purchased receivable with nothing behind it. The shipping documents usually show it, if you put them beside the invoice.
On Business Audits · October 21, 2026 · 5 min read
Pre-billing means invoicing before the goods ship or the work is done. A client short of cash pulls next week’s sales into this week’s schedule of accounts, and the factor advances against invoices for goods still sitting on the dock. If the client fails before delivery, the customer owes nothing. It is one of the most common findings in a factoring audit, and the evidence is in documents the client already holds.
The documents to ask for
For each invoice in the sample:
- the customer’s purchase order, showing what was ordered and when;
- the bill of lading, showing what the carrier picked up and when;
- the signed delivery receipt or proof of delivery, showing what the customer received and when;
- for services, the timesheet or job ticket, showing who worked, which days, and how many hours.
Then compare each document to the invoice on three points: date, quantity, and the item itself.
Dates: shipped after it was billed
The plainest sign is a ship date after the invoice date. An invoice dated March 28 with a bill of lading dated April 2 was billed five days before anything left the building.
Single cases have innocent explanations, such as a split shipment or a bill of lading dated at pickup after a delayed truck. A pattern doesn’t. Several invoices billed ahead of shipment, clustered at the end of the month or just before a funding request, mean the client is invoicing to reach a number.
Record every lag and its length. “Three invoices billed before shipment, by 2, 5 and 11 days” is a finding a credit committee can act on. “Some timing differences” is not.
One late bill of lading is a question. Three at month end are an answer.
Quantities: the short load
An invoice for 120 cases against delivery receipts totaling 102 bills for 18 cases that never arrived. Add up every shipment against the invoice line by line, because one invoice often covers several loads.
Compare like with like: cases with cases, pallets with pallets, hours with hours. Don’t convert days to hours on an assumption, or you will invent shortfalls and miss real ones.
A short shipment may be corrected by a credit memo. Look for it. If none is issued, the customer simply short-pays, and the shortfall becomes dilution on a receivable you have already purchased.
The item itself
Check that what shipped is what was billed. Codes often differ between the client’s invoice and the customer’s receiving documents. That is fine when they are the same product and a problem when they aren’t. For staffing clients, check the worker names and the week on each timesheet against the invoice. A timesheet for another week or another worker doesn’t support the bill.
Trucking and freight factoring
For carriers, the rate confirmation and the signed bill of lading or delivery receipt together are the proof that the load was hauled for the amount billed. Check the pickup and delivery dates against the invoice date, the broker or shipper against the account debtor, and the rate against the rate confirmation. A freight bill without a signed delivery receipt is a load you can’t yet prove was delivered.
When the client says “we bill on shipment”
Billing on shipment is normal and acceptable, as long as the goods really shipped that day. The test doesn’t change. The bill of lading should carry the invoice date, and the signed delivery receipt should show arrival within the usual transit time. If goods “shipped” on the last day of the month consistently arrive a week later, ask the carrier for its pickup records, or ask the customer for its receiving log. Stage billing, progress billing and service retainers need the same care: ask for the customer’s sign-off on the work, not just the client’s application for payment.
How many invoices to test
There’s no single right number. Cover the largest customers, any customer you already have doubts about, and a spread of dates that includes the last days of the month. Twenty to thirty invoices is common for a routine exam. Widen the sample when early results show problems, since each failure suggests others.
Choose the invoices yourself and set a short deadline. Documents produced weeks after the request have had time to be tidied.
What to do with the findings
- Ask the client for a written explanation of each lag and each shortfall.
- Check whether pre-billed invoices were on schedules you funded, and how they have since been paid.
- Verify a wider sample directly with the customers before the next exam.
- Record each finding with an owner and a due date, and retest the same customers next time. A client that knows the same invoices will be checked again has a reason to fix the process, not just the paperwork.