How to calculate the margin of every freight order
Many forwarders know their monthly result but not which clients and routes actually earn money. The answer is to calculate margin for each freight order separately — with every carrier, every extra cost and every claim included. This guide gives the formula, a worked example and the mistakes that most often distort the number, and shows how OrgLines calculates it per order.
The basic formula
Margin of a freight order = what the client pays (without VAT) − what the carriers are paid for this order − direct extra costs of this order. Direct costs are those that would not exist without the order: waiting time you pay the carrier, extra stops, tolls or fees you cover. Office, salaries and software are overhead; analyse them separately, otherwise every order looks equally bad and you cannot compare them.
Express margin both in money and as a share of revenue. Money tells you what the order earned; the percentage lets you compare a small local run with a large international one.
Worked example (illustrative numbers)
A client orders 24 tonnes at 50 EUR per tonne without VAT, so the order brings 1,200 EUR. Two carriers take 12 tonnes each. Carrier A charges 38 EUR per tonne (456 EUR), carrier B 41 EUR per tonne (492 EUR). Truck B waits five hours at unloading. The client contract gives two free hours and a demurrage rate of 20 EUR per hour, so you bill the client 60 EUR; carrier B charges you 45 EUR for the waiting. Carrier A arrived a day late, and you agreed a claim of 30 EUR.
- Revenue: 1,200 + 60 = 1,260 EUR.
- Carrier cost: 456 + 492 + 45 − 30 = 963 EUR.
- Margin: 1,260 − 963 = 297 EUR, about 23.6% of revenue.
Now the same order with typical gaps. If only carrier A is recorded, the margin looks like 744 EUR. If demurrage is not billed to the client, you lose 60 EUR of revenue while still paying 45 EUR. If the client rate is taken with 20% VAT, revenue appears 240 EUR higher than it is. Each gap is small on one order; across a month they decide which clients you think are profitable.
Where the numbers usually get lost
- One order is served by several carriers or vehicles, and only the first one is recorded.
- Client and carrier rates are compared with and without VAT.
- Waiting time is not recorded, or free hours and demurrage were never agreed with the client.
- Payments arrive in parts and are not linked to the order.
- Claims against carriers live in email and never reduce the amount paid.
- For bulk cargo, the difference between loading and unloading weight is ignored.
- Cancelled trips stay in the calculation.
How OrgLines shows margin per order
In OrgLines a freight order can have several carriers and vehicles. The order card shows the difference as revenue without VAT minus the money for carriers on trips that were not cancelled. The client rate per tonne and the carrier rate per tonne are stored on the order itself — the tariff reference only provides templates — and the difference between them is the result you see in the order list. Incoming and outgoing payments are allocated to the order, and invoices to the client and from carriers can be filtered by order.
- When you pick a carrier, OrgLines warns if its rate is above the client's rate — that tonnage would run at a loss. If the client rate includes VAT, it does not claim a margin and asks you to compare yourself.
- Downtime terms — free hours and demurrage rate — are kept on the client card. Waiting time opens when the driver reports arrival and closes when the vehicle is released.
- A claim does not stop settlement with the carrier; it becomes a minus line in the amount due.
- Loading and unloading weights are recorded per trip, and the loss becomes visible on the trip card and in the register. A trip cannot be completed without the unloading weight and waybill number.
- The order counts as completed only from facts: client payment, documents sent to the client and closed carrier settlements.
- You can record who brought the client, who found the carrier and who ran the order, which makes bonus calculations transparent.
When invoices are in different currencies, reports do not add them into one misleading total.
What to do with the result
Once a month, sort orders by margin and group them by client and route. Clients and routes that repeatedly land at the bottom are candidates for a price review, better downtime terms — or a polite goodbye. Look at the top as well: those are the lanes where it pays to secure regular carriers.
Checklist
- Every carrier and vehicle on the order is recorded.
- Client and carrier rates are compared on the same VAT basis.
- Free hours and demurrage are agreed with each client.
- Payments and claims are linked to the order.
- Cancelled trips are marked as cancelled, not deleted or ignored.
- A monthly review by client and route is in the calendar.