On a net terms order, who pays for shipping depends on the freight terms agreed with the customer, not on the payment terms. Payment terms say when the invoice is due. Freight terms say who pays the carrier and whether that cost shows up on the invoice. The two are set separately, and disputes can come from treating them as one thing. This post describes common commercial practice in plain language; it is not legal advice, and your contracts and purchase orders govern.

What is the difference between payment terms and freight terms?

Payment terms set the due date of the invoice, while freight terms set who pays the carrier. A customer on net 30 has 30 days from the invoice date to pay for the goods and anything else on that invoice. Whether shipping is one of those invoice lines is a freight terms question.

Payment terms vary widely. Shopify, for example, documents payment terms from net 7 to net 90 for B2B orders, per its B2B plan features page. The longer the terms, the longer the seller carries any cost it paid up front, and shipping is usually one of those costs.

Freight terms normally live in three places: the customer agreement or credit application, the purchase order, and the customer record in your ERP or order system. When those three disagree, the warehouse tends to follow whichever one it can see at the pack station, so it is worth making them match.

What do prepaid, prepaid and add, collect, and third-party mean?

These four terms describe who pays the carrier and whether the seller bills the cost back. The wording differs a little between companies, so confirm the meaning with each customer, but the common usage is:

Term	Who pays the carrier	Does shipping appear on the invoice?	Whose carrier account is used
Prepaid	Seller	No, the seller absorbs it (often built into the price or tied to an order minimum)	Seller's
Prepaid and add	Seller	Yes, as a separate freight line	Seller's
Collect	Customer (the receiver)	No	Customer's
Third-party billing	A party that is neither shipper nor receiver	No	The third party's

Prepaid is the simplest for the customer. The seller buys the label and the cost is part of the seller's margin. Some wholesalers offer it above an order value threshold.

Prepaid and add means the seller buys the label and then adds the shipping charge to the invoice. The customer pays it along with the goods, on the same net terms. This is a common arrangement for parcel shipments to accounts that do not have their own carrier contract.

Collect means the carrier bills the receiver. The customer gives you a carrier account number, and the shipment is charged to it. Larger customers may ask for this when they have negotiated rates and want freight on their own carrier invoice.

Third-party billing means the carrier bills an account that belongs to someone other than the shipper or the receiver. A typical case is a drop shipment where the retailer's account pays for a parcel going from the supplier to the end customer.

When does the seller actually get the shipping money back?

Under prepaid and add, the seller gets the shipping money back when the customer pays the invoice, which can be weeks after the label was bought. That gap is the part people overlook when they agree to long terms.

Here is a worked example. The numbers are hypothetical and chosen only to show the timing.

A distributor ships 400 parcels a month to net 60 customers on prepaid and add terms.
The average label costs $14, so the distributor pays out $5,600 a month in shipping.
Invoices go out on the ship date and customers pay on day 60, on average.
At a steady state, the distributor is carrying roughly two months of shipping, or about $11,200, at any time.

In this example nothing is lost if every invoice is paid in full. The cost is the cash tied up, plus whatever is never billed. If one shipment in twenty goes out without a freight line on the invoice, that is 20 unbilled labels a month, or $280 in this example, and nobody notices because the goods were invoiced correctly.

Under plain prepaid terms the seller never recovers shipping directly, so the same data matters for a different reason: it tells you whether the free shipping threshold still makes sense for each account.

How do you get the freight line onto the invoice reliably?

You get the freight line onto the invoice reliably by tying every label to the order or invoice number at the moment it is bought. If the label cost and the order share a reference, billing becomes a lookup and not a memory exercise.

A workable routine looks like this:

Store the freight terms on the customer record, and print them on the pick ticket so the packer can see them.
Put the sales order or invoice number in the label's reference field for every parcel, including each carton of a multi-carton order.
Decide what you bill: the actual label cost, a rounded amount, or a flat charge per order. Write the rule down so customer service gives the same answer every time.
Export shipping costs by reference on a fixed schedule, daily or weekly, and match them to open orders before invoices are finalized.
Review the exceptions list: labels with no matching order, and shipped orders on prepaid and add terms with no freight line.
Decide how to treat later adjustments, such as a re-weigh that changes the cost after the invoice went out. You may choose to absorb small differences and rebill only above a set amount.

Step 2 is the one that makes the rest possible. A fuller treatment of reference conventions is in our guide to shipping cost allocation software, and the wider picture of tracking spend by account is covered under parcel spend management.

If your orders start in an ERP, the reference usually comes across in the export file or the API call that creates the label. The options for that handoff are described on the ERP shipping integration page.

What should you do when a customer asks to ship collect?

When a customer asks to ship collect, confirm the carrier, the account number, and the billing postal code in writing before the first shipment. Carriers generally bill the account you name, and a wrong or closed account number can end with the charge coming back to the shipper, so check your carrier's terms.

A few practical points:

Keep collect and third-party account numbers on the customer record, not in emails or on sticky notes at the pack station.
Check that your shipping tool can bill another party's account. Not every tool can, and the ones that can may require your own carrier account to originate the shipment.
Agree who files claims. With collect shipments, the party paying the carrier may be the one the carrier expects to hear from.
Watch for larger shipments that should not be parcel at all. A pallet-sized order under collect terms is usually a freight shipment with its own paperwork; see LTL vs parcel shipping for where the line tends to fall.

If your customer base is mostly collect accounts with their own carrier contracts, choose tooling around that requirement first.

Which freight terms suit which kind of customer?

Prepaid and add tends to suit small and mid-sized accounts, while collect tends to suit customers with their own carrier contracts. A simple policy keeps the exceptions manageable:

Small accounts without a carrier contract: prepaid and add, billed at actual cost or a published flat charge.
Accounts above an order minimum: prepaid, with the threshold reviewed against real shipping costs once or twice a year.
Large accounts with negotiated carrier rates: collect or third-party, with account details verified up front.
Drop ship programs: whatever the retailer's program specifies, which is often third-party billing.

Teams that sell wholesale through a store platform face the same choices; the WooCommerce wholesale shipping software page walks through that setup.

Where GoatLabels fits

GoatLabels fits prepaid and prepaid and add terms. You buy the label from a prepaid wallet, and every label debits the quoted amount to a dated ledger entry that carries your reference, such as the order or invoice number. Re-weigh adjustments post to the same ledger. A multi-carton order produces several labels, each a ledger line with the same reference, so the freight line for an order is the sum of its lines. USPS, UPS, FedEx, and DHL are rate-shopped on every parcel from one account.

The limits matter here. GoatLabels cannot bill a customer's carrier account, so collect and third-party billing are not supported, and you cannot bring your own carrier accounts or negotiated rates. It does not create invoices or write costs back into an ERP automatically; you move ledger data yourself, for example through the REST API. It does not handle LTL or freight, and there are no sub-accounts or per-customer balances. The wallet is prepaid, so GoatLabels does not extend terms to you either: you fund labels up front and recover the cost when your customer pays.

If most of your accounts are on prepaid or prepaid and add terms, the Free plan covers 50 shipments a month at $0, and Pro is a flat $40 a month with unlimited shipments. Details are on the pricing page.