Pricing lanes when the catalogue has no prices
Why the Logistics pack's freight items arrive unpriced, and how to build sell rates from carriers' buy rates, a margin rule and confirmed VAT codes.
By Achekam · · 4 min read · For Logistics businesses in South Africa, Nigeria, Kenya
Launching soon. The Industry CRM add-on described in this article is launching soon. This article describes it as it will work at launch.
Switch on the Logistics & freight pack and the catalogue fills with the things a freight business sells: domestic road freight, cross-border movements, and items for clearing and handling fees. Then you look at the price column and every item is blank. That is deliberate. No software vendor knows what a run from Johannesburg to Harare costs you this month, what a Lagos to Onitsha load is worth on a Friday, or what your carriers will charge between Mombasa and Kampala after the latest fuel adjustment.
This article explains why the starter items carry no prices, what they do carry, and how to build a rate card of your own from carriers' buy rates and a margin rule before the first quote goes out.
Unpriced starter items
No starter catalogue item in any of the Industry CRM's packs carries a price; the business sets its own. For the Logistics pack, the starter catalogue gives you the shape of what you sell rather than the numbers:
| Starter freight | VAT marking in the pack |
|---|---|
| Domestic road freight | Standard-rated |
| International and cross-border freight | Zero-rated |
The items post to two revenue accounts, Freight revenue (4630) and Clearing and handling fees (4640). They are unpriced, and their VAT codes are flagged for the business to confirm. Treat the list as a starting point you shape to your own services, not a price list you inherit.
Leaving the prices blank protects you. A suggested rate printed by software has a way of becoming the rate a junior quotes to a shipper, whether or not it covers the lane.
Buy rates per lane and your margin rule
In freight, the sell rate starts with the buy rate. The pack's quote-to-booking workflow gets carriers' buy rates for each lane, asks for approval when the margin falls below the business's rule, and sends a rate quote with a validity date. So the price on any one quote is built from what your carriers will charge and the margin you require.
That means two pieces of homework before pricing anything:
- Know your buy rates by lane. Collect current rates from the carriers you actually use, lane by lane, and note who quoted each and when. A lane is a direction as well as a route: the return leg may be cheaper if carriers are looking for backloads.
- Write the margin rule. Decide what margin a quote must clear before it goes out without approval. Investopedia's explanation of gross margin shows how the share of revenue kept after direct costs is worked out, which is the arithmetic behind any margin rule you set.
Base the rule on the full direct cost of moving the load, not the carrier's rate alone. Border fees, insurance, the cost of finance on carrier payments made before the shipper pays you, and your own team's time all come out of the gap between buy and sell. How the approval works when a quote falls short is covered in spot quotes with a margin approval rule.
Setting sell rates
With buy rates and a rule in hand, you can set standing sell rates for the lanes you run regularly and keep spot pricing for the rest.
- Regular lanes. Set a sell rate per lane, per vehicle type or per pallet, reviewed on a fixed cycle. Put the review date in the diary.
- Occasional lanes. Price them as spot quotes from fresh buy rates every time.
- Extras. Decide in advance how you price waiting time, additional drops, tail-lift work and fuel adjustments, so they are not invented at the invoice stage.
Keep the rate card in one place, with an owner. When a carrier puts its rates up, the rate card is the document that tells you which shippers' prices need to move.
A rate card in words
A broker running three regular lanes collects buy rates from two carriers on each. It sets its margin rule, then sets the sell rate for each lane so that the more expensive of the two carriers would still clear the rule. That gives the sales desk room to book either carrier without asking for approval. Lanes where the gap is too thin go on a list for renegotiation with carriers or shippers.
Accounts added on activation
Switching on an industry pack adds that industry's revenue accounts to the business's chart of accounts and its unpriced starter items to the catalogue. For the Logistics pack, that means Freight revenue (4630) and Clearing and handling fees (4640) appear in the chart, ready for invoices to post to.
There is one catch to check beforehand. If an account code the pack needs is already used in your chart for another type of account, activation is refused and the account is named, so you know what to fix. Look at your chart before switching on, particularly if you built it by hand or brought it across from another package.
VAT codes to confirm
The pack marks domestic road freight as standard-rated and international and cross-border freight as zero-rated, and flags those codes for you to confirm. Confirm them. Whether a particular movement qualifies for zero-rating depends on the route, the documents you hold and the law in your country, and South Africa, Nigeria and Kenya do not draw the lines in the same places. Your accountant should sign off each item's VAT treatment before any of them appears on a quote.
The detail of how freight revenue and its VAT codes reach the ledger is in freight revenue and VAT codes in the ledger.
Before the first quote
Check your chart for code clashes, switch on the pack, rename or add starter items to match your own services, confirm each item's VAT code with your accountant, and build the rate card for your regular lanes from current buy rates and a written margin rule. Then let the quote workflow do the checking every time.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
