Industry guides
How merchant exporters can see the margin on every shipment
Buy price, freight and charges change after you quote. How to know your margin before the shipment closes.
Contents
- A merchant exporter's margin is made or lost between the quote and the payment.
- Supplier prices, freight, exchange rates and bank charges all move after you quote.
- If you see margin only when the shipment closes, it is too late to protect it.
Your margin lives in the gap
A manufacturer controls much of its cost. A merchant exporter does not. You buy from many suppliers, add your costs, and sell under your own name. Your profit is the gap between what you pay and what your buyer pays, after everything in between.
That gap is usually thin, and it moves. The price you quoted was based on supplier rates, freight and the exchange rate on that day. By the time the goods ship, some of these have changed.
Where margin leaks
Supplier prices move. A supplier raises the rate after the order is confirmed, or a part order comes from a second supplier at a higher price.
Freight changes. Rates quoted at enquiry are rarely the rates paid at booking.
The exchange rate moves. You quoted in dollars at one rate and convert at another.
Charges add up. CHA fees, port charges, inspection, courier, bank charges and discrepancy fees. Each is small. Together they are not.
GST is handled wrongly. Merchant exporters can buy goods at a concessional GST rate of 0.1% when the conditions are met. If a purchase is made at the full rate by mistake, your working capital is tied up until the refund comes. Check the conditions with your CA.
Discounts and short payments. The buyer deducts something for a delay or a quality claim, and nobody records it against the shipment.
What good control looks like
Cost each order before you quote. Use current supplier rates, a realistic freight estimate and your known charges. Set the margin you need before you send the price.
Tie every purchase to the export order. When each supplier order is raised from the export order, you can see what the goods actually cost, line by line.
Record charges against the shipment. Freight, CHA, port and bank charges should be entered against the shipment they belong to, not lumped into monthly expenses.
Watch margin as the order moves. The moment a supplier raises a price or freight goes up, you should see the effect on that order's margin. Then you can still act: renegotiate, change supplier, or talk to the buyer.
Review closed shipments monthly. Compare quoted and actual margin. The same buyers, products and suppliers will keep appearing.
How Expodite helps. In Expodite, purchase orders are raised from the export orders they serve, and supplier bills can carry the concessional 0.1% GST rate or any other rate. The cost sheet shows your margin live as you price. Freight, CHA and other costs are booked against each shipment, so you see its margin, marked as an estimate until every bill is in.
See Expodite for merchant exportersQuestions to ask your team
- What was the quoted and the actual margin on our last ten shipments?
- Which costs changed most between quote and shipment?
- Are all our eligible purchases made at the concessional GST rate?
- Where are freight and bank charges recorded: against each shipment, or in general expenses?
- When a supplier raises a price after we confirm an order, how do I find out?
Quick answers
- How do merchant exporters calculate margin per shipment?
- Take the sale value received, then subtract the cost of goods from suppliers, freight, CHA and port charges, bank charges, and any discount or short payment.
- Can merchant exporters buy at 0.1% GST?
- Yes, when the conditions of the concessional scheme are met. Your CA can confirm what applies to your business.
This article is general information for Indian exporters. It is not tax advice. Check GST conditions with your chartered accountant.
