As a trucking business owner, keeping track of business expenses is not an option; it’s a necessity. How you manage your finances can either make or break your business.
You have to be careful with how you manage and allocate your finances to not affect your profits. Bigger expenses are often easier to record because they’re more conspicuous, especially since they require significant capital.
However, the smaller costs, such as meals, are usually insignificant but sum up to huge amounts in the long-term. If you don’t take note of such expenses, your numbers might fail to add up down the road. In this article, you’ll learn about ways to keep track of expenses for your trucking business.
Invest in a TMS
You should invest in a Transport Management System (TMS) for your trucking company. It’s primarily a platform that allows you to track and manage your transport business’s logistic operations. You simply log in to the system and see the location of the cargo in real-time. One of the major benefits of a TMS is helping your business move cargo from one point to another efficiently and cost-effectively.
Below are some of the crucial benefits of a TMS:
- Save on cargo expenses– A TMS allows your business to cut down on expenses spent on freight. This is because you can obtain analytics for your transportation costs and optimize this data to save more money. It provides data with valuable information, which you can leverage to cut costs.
- Track cargo– With an efficient TMS, you can track your trucks and cargo’s location in real-time. This can help determine which routes and drivers are the most efficient. You can then create a structured route-schedule from this information.
- Improve supply chain network– You can analyze the data you get from the TMS to manage your inventory in a better way. For example, you can tell how long cargo takes from the warehouse to its destination. Some systems even allow you to receive status updates whenever you want.
As you can see, an efficient TMS will significantly reduce the amount of time you spend in the office and on paperwork. This will eventually reduce your overall business expenses. Investing in a TMS may initially look expensive on paper, but it will definitely save you money in the long run.
Determine the Operating Costs
This is one of the primary strategies to help you keep track of expenses for your trucking business. The amount of money you spend per mile can pile up to exorbitant amounts if you’re not careful. Also, how can you cut back on expenses if you don’t know how you’re spending your money?
There are basically two types of operating costs for trucking business owners. They are:
- Fixed Expenses– These are the fixed costs that you incur, whether your track is on the road or lying somewhere in a yard. They remain constant every month regardless of the miles you cover. Examples of fixed expenses include truck payment, licensing and permits fees, and insurance premiums. Calculating your fixed costs will help you know what it costs to operate your business. Some costs, such as license plates, are incurred annually, not monthly.
- Variable Expenses– These are the expenses associated with the actual operation and mile coverage of the truck. They vary depending on the number of miles covered. Fuel cost is an example of variable expenses. If you cover a longer distance in a month, you’ll spend more on fuel. Other examples include maintenance and repair costs. You’ll note that the more your truck moves, the more money you spend on variable expenses.
You also have to remember about labor fees. You will have to hire drivers unless yours is a one-truck company. Other than drivers, you also need people to load and offload the cargo. Labor fees can make up a huge chunk of your annual expenses. This will depend on whether you hire them yourself or outsource to an independent company. You also need to take time and calculate cost per mile. It’ll be worth it!
Have A Monthly Budget
Like any other business, a monthly budget is essential in keeping track of the money coming and going out. This gives you complete control over your trucking business and ensures you enjoy maximum returns.
Budgeting requires effort. That’s why you should get started by determining the operating costs. This way, you’ll be able to allocate each step enough money. With insight into where your money goes, you can tell where to cut costs and allocate more funds. For example, you can track monthly subscriptions that you’re no longer using and allocate that money to buying new beddings for another driver.
Operating your business without a budget is similar to flying blind and can eventually cost you. It’s recommended that you work with an accountant to generate your business financial statements and look at your spending habits. At times, it makes more sense to cut back on spending rather than increase profits, so keep that in mind. You can never downplay the role of budgeting in helping you accomplish your financial goals.
If you’ve observed the fuel prices in the past few years, you’ll realize it has constantly been going up. This means that you need to efficiently plan your shipping routes and schedules for your trucking business to save more money.
While you can’t prepare for everything, a smooth trip can be accomplished by looking at route availability, alternative routes, weather, bridges, construction and maintenance delays, and truck issues.
Here are few tips that can help you with efficient route planning:
- Use the right software– First things first; stay away from Google maps. It’s been designed for private individuals who need help in finding directions. Commercial route-planning software can help you save a considerable amount of time and effort. It enables you to reduce the amount of time spent on shipping.
- Include breaks and night stops– Any long-distance truck driver will have to take breaks in-between the route. You’ll have to include these breaks in your route plan. This ensures a comfortable trip and reduces the chances of any unexpected incidents along the way.
- Plan for low-priced fuel– Fuel prices vary all over the country. Did you know you could save up to 30% of fuel costs by planning to fuel at the right places? Optimize these differences in fuel and include them in your route plan.
Route-planning also comes in handy due to load limits in different jurisdictions. Commercial route-planning, thus, involves considering such regulations to avoid any trouble along the route. Some truckloads may be prohibited from using certain roads, especially in residential areas. Your business can use route planning to develop alternative routes for such cargo to ensure it gets to the intended destination on time.
Did you know that truck-idling can cost you up to $5,000 each year? Other than wasting on fuel, engine idling can translate to thousands of miles in engine wear. You can use technology to track idle-time and reduce fuel expenses.
Other than reducing idling time, there are various other ways you can use to save on fuel. They include:
- Responsible driving– It’s very tempting to go over the speed limit, especially on highways, to take less time to deliver cargo. However, your engine suffers more stress when picking speed. Besides, fuel economy might reduce consumption by up to 7% for every 5 miles you go beyond the speed limit. Staying within the speed limits not only helps to avoid any incidents but also save on fuel.
- Improve on Aerodynamics– Heavy trucks spend a lot of energy overcoming air resistance. Trucks can use up to 50% of the fuel to overcome air resistance, especially when traveling at highway speeds. Improve your truck’s aerodynamics to improve fuel efficiency.
- Regular Vehicle Maintenance– Regular maintenance on your truck goes a long way in reducing your trucking business’ expenses. For example, driving your truck on low tire pressure will consume more fuel. You should also regularly check the axle placement because dragging the wheels sideways uses more fuel. You can also plan to have an engine overhaul if your trucks are older. Also, note that newer tires tend to have more roll resistance than older ones. If your tires can go a few extra miles before completely wearing out, don’t change them too soon.
Also, many people don’t realize that using your AC can result in higher fuel consumption. If temperatures are not extreme and you can manage to travel with the windows rolled down, then turn off the AC. Educate and train your drivers on whichever method you decide to use.
Tracking money in the trucking business is just as important as any other business operation. You ought to know where your money comes from and how you spend it. To start with, you should invest in a Transport Management System (TMS). This system helps you track your cargo along the shipping cycle and save money and time.
Establish your recurring expenses so that you’re able to budget appropriately. Always use a route plan so you can avoid any issues or incidents that may cost you money that you had not budgeted for. Finally, implement various fuel-saving techniques to save money on fuel.