A handling fee is an amount charged to a customer on top of the order subtotal and shipping fees. It covers the cost of expenses related to fulfillment, such as warehouse storage cost, shipment cost, and packing cost. Handling fees are charged once per order but not to each individual product in an order.
TradeGecko’s inventory and order management software will help you automate your workflows so you can focus on growing your business.
Your handling fee is largely determine by the amount of resources you have allocated to fulfilling orders.
Calculating Handling Fees
If you have a team fulfilling orders
Multiply how long it takes them to prepare each item for shipping, by how much you’re paying per hour. You can do that with this formula:
[Average number of minutes taken to pack an item / 60] x hourly rate.
For example, 10 minutes / 60 =0.16; 0.16 x $12 per hour = $2.00.
$2 is your handling fee on orders.
If you fulfill orders on your own
If you are fulfilling orders on your own, you might not think to add handling costs, however, your time spent is valuable and an overhead to running the business.
Determine the time it takes you to pack an order. Then set the minimum amount you’re willing to earn per hour to pack the items—that’s your hourly rate. Finally, complete the same formula from above:
[Average number of minutes worked to package an item / 60] x hourly rate.
The result is your “opportunity cost”, which time you could have spent generating revenue. Use it as your handling fee on orders.
Shipping and handling fees need to be clearly labelled in your order invoices so that your customers don’t think you are overcharging them. With TradeGecko’s buildable order invoice capability you can add and remove shipping and handling fees to invoices easily.
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