Freight forwarders · Logistics and supply chain
Freight forwarding with every shipment closed against its full cost
A forwarder earns a thin margin on large, mostly pass-through billings, and the costs of a shipment often arrive weeks after the customer is invoiced. We close every shipment against its full cost and reconcile overseas agents and currency differences, so the margin reported on a job is the margin it actually earned.
In one paragraph
International freight forwarders, ocean consolidators, NVOCCs and air cargo agents handle exports and imports for manufacturers and traders, often with an affiliated customs brokerage. Most of what they bill is paid on to carriers, overseas agents and terminals, much of it in foreign currency. The margin per shipment is small enough that one missed cost turns it into a loss. That margin is the number owners and finance heads most need to trust.
Managing director or finance head
The economics
How the money moves in this trade
A forwarder buys space from shipping lines and airlines, adds origin and destination services through its own offices or overseas agents, and sells the whole movement to the shipper. Billings are large relative to margin. Carriers and agents invoice in dollars or other currencies, and the shipper is invoiced at a booking-date rate. Settlement happens weeks later at another rate. Carriers often want payment before release while shippers expect credit, so the forwarder funds the gap.
Overseas agents bill each other for services on both legs and settle the net balance periodically, so agent accounts need regular reconciliation. Whether the forwarder presents gross billings as revenue or only its margin depends on whether it acts as principal or agent for each service. GST on international freight depends on the leg, the place of supply and how the service is invoiced. The place-of-supply rules for moving goods across borders have changed more than once, including when the destination-based rule was removed. Detention, demurrage and other charges arise after the shipment has moved and are easy to absorb rather than recover.
The problem
Where the numbers usually break down
Shipments are closed before costs arrive
The customer is invoiced on dispatch, the carrier and agent invoices arrive later, and without accruals each job first shows a full margin and then a loss in a later month.
Overseas agent balances are not reconciled
Debit and credit notes exchanged with agents accumulate, and the net balance each side believes it is owed differs by amounts nobody can trace.
Currency differences are not attributed to shipments
Gains and losses between booking rate and settlement rate are booked as a single exchange line, so shipment profitability excludes a material cost.
Billings are presented as revenue without a basis
Gross freight is reported as revenue on every service, whether the firm acts as principal or agent, which overstates scale and distorts margin ratios.
Post-shipment charges are absorbed
Detention, demurrage, amendments and storage charged by carriers or terminals after the movement are paid and not recharged to the shipper.
What we do
The work, and the result each part produces
Shipment-level costing with accruals
Expected carrier, agent and terminal costs accrued when the shipment is invoiced and trued up when actual invoices arrive.
Every job shows its real margin in the month it moves.
Overseas agent reconciliation
Agent statements reconciled to the books monthly, with differences traced to shipments and settled.
Agent balances agree on both sides.
Currency difference by shipment
Exchange differences between booking, invoicing and settlement attributed to the shipments that caused them.
Shipment margin includes currency cost.
Principal and agent assessment
Each service reviewed for whether the firm controls it, with revenue presented gross or net on a documented basis.
Reported revenue and margin can be defended to auditors and lenders.
Post-shipment charge recovery
Detention, demurrage and other later charges matched to shipments and recharged where the terms allow.
Charges the shipper caused are billed to the shipper.
Carrier prepayment and credit view
Carrier payments due before release compared with shipper collections, by customer and trade lane.
Credit given to shippers is matched to the cash needed for carriers.
Where we start
The first steps of an engagement
Job files and agent statements
We ask for the job register from your freight system, carrier and agent invoices, overseas agent statements, the bank's foreign currency settlements and the customer receivables ledger.
Shipment close-out test
Recent jobs are closed against every cost that has since arrived, including currency differences. The result is compared with the profit the freight system showed at invoicing.
Accruals and agent reconciliation
Expected carrier and agent costs start to be accrued when each shipment is invoiced, and agent statements are reconciled monthly with differences traced to jobs.
Shipment margin report
The first report shows margin by shipment, customer and trade lane after accruals and currency, agent balances agreed and disputed, and post-shipment charges not yet recharged.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Margin by shipment, customer and trade lane
- Accrued against actual cost, by month
- Agent balances reconciled
- Exchange difference by shipment
- Post-shipment charges recovered against paid
- Receivable days against carrier payable days
Who it suits
Written for, and not the right fit for
- You need customs clearance filed; that is done by a licensed customs broker, which may be your own affiliated business, or by the importer or exporter itself.
- You run trucks rather than book international freight; our fleet operators page is a closer fit.
- Freight forwarders, consolidators, NVOCCs and air cargo agents handling international shipments.
- Forwarders with a network of overseas agents and multi-currency carrier payables.
- Firms preparing for bank limits, an acquisition by a larger network or an investor review.
Services
Services this work draws on
Outsourced accounting
Your books kept current and reconciled, closed to a published calendar.
Explore service ↗Costing and profitability
What each product, line and customer really contributes.
Explore service ↗GST, TDS and tax compliance
GST, TDS and income-tax prepared from reconciled data, not a working file.
Explore service ↗Finance technology and automation
Systems configured around your process, not the other way round.
Explore service ↗Internal controls and risk
Controls sized to your business, documented and actually tested.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
Our freight software already shows job profit. Why is it wrong?
Usually because it shows profit on the costs entered so far. Without accruals for carrier and agent invoices still to come, and without currency differences, the job looks better than it is until the last invoice lands.
Should we report gross freight as revenue?
Only for services where you act as principal. It depends on whether you control the service before it's transferred to the shipper. We document the assessment, and your statutory auditor confirms the treatment.
Do you handle customs clearance?
No. Customs filings are made by a licensed customs broker or by the importer or exporter itself. We maintain the accounts and reconciliations of the brokerage business, if you have one, alongside the forwarding business.
5th Quadrant maintains shipment, agent and currency accounting and prepares GST workings. Customs filings are made by a licensed customs broker or by the importer or exporter, and statutory audit and tax-audit reports are signed by an independently engaged chartered accountant, coordinated through 5th Quadrant. Full detail is on our Professional Scope page.
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