When owner-operators launch into their own entity, they consistently look at their trucking company profit margin. Whether they are starting with one truck or managing multiple drivers and trailers, it ultimately comes down to how financially sound this endeavor will be. Although the supply chain at large may not concern itself with the health of each individual owner-operator, the industry’s success literally rides on the trailers of these entrepreneurs.
According to the American Trucking Association, “Trucks move roughly 72.5% of the nation’s freight by weight.” Such a high statistic demands that owner-operators and small fleet managers invest in knowing what their trucking company’s profit per truck is. The most common way owner-operators can do this is by pulling an entire trucking company’s profit and loss statement.
What Are Profit and Loss Records and Data Sheets?
A trucking company’s profit and loss statement is a report that offers insight into overall financial health. While this document remains applicable across industries, a P&L statement for a trucking company is immensely helpful to owner-operators. It summarizes in a straightforward way every expense and earnings while still providing a bird’s-eye view of overall business trends. While an owner-operator may assume their most profitable loads are the ones with the highest dollar signs, a profit and loss statement for truck drivers will reveal the actual truth. It will highlight how much profit margin their trucking company can expect to see after the expenses add up. Owners can separate the most common costs on their trucking profit and loss statement template into three key categories: fixed, variable, and personal.
- Fixed Expenses: Otherwise known as “overhead costs,” fixed expense are the costs that a company has to pay to get its show on the road. While every company has overhead costs, pulling a profit and loss statement for a trucking company will reveal expenses in this category that might not be common to those outside the industry. These expenses include license and registration, equipment insurance, CDL endorsement renewals, a tax professional, routing software, WiFi or mobile data, truck parking, and hardware such as an ELD, cell phone, and computer. Although the fixed expenses represent a significant chunk of all operational costs before the engine even warms up, drivers can accurately predict them and pre-pay them.
- Variable Expenses: These cover all costs accumulated operating the truck(s)—including fuel, routine maintenance, equipment repairs, meals, and lodging. Most of these can be tax deductible. In addition, intangible expenses such as a freight factoring fee or broker credit check might also count as a variable, depending on if the fees are a monthly flat rate or a load-by-load percentage. Although the dollar amounts may vary, some owner-operators may move back-office partners’ costs to their fixed expense category if they consider the acquired services necessary to the business function. Accurately tracking variable expenses enables owners to better understand their trucking company’s profit margin, down to each load and route.
- Personal Expenses: The final category of expenses on a P&L statement for a trucking company covers all purchases made for personal comfort that fall outside the first two categories. Long days on the road might call for an ergonomic seat cushion, a premium podcast subscription, sturdy work boots, or quality clothing. Some might even go so far as to include a tv for the cabin to watch trucker movies for nights spent at a rest stop. While many might think the personal expenses won’t make a significant dent in a trucking company’s profit margin, investigating the numbers might say a different store.
Develop a Trucking Business Plan to Monitor Profits and Losses
Planning is the most dynamic yet simple difference between companies that struggle to thrive versus those that are a seed of success. Without a plan, owner-operators move from haul to haul with little concern for their trucking company’s profit margin. However, those with a plan have a direction that can guide them and provide a straightforward way to success. Even starting with a sample income statement for a trucking company can keep all employees on the same page to come together as a team to identify errors and respond to disruptions more efficiently. Here are five tips to consider, whether an owner is basing their monitoring off their company’s P&L statement or a random trucking company balance sheet example.
1. Know Expected Business Related Expenses
Successful trucking business entrepreneurs know that understanding their fleet expenses is vital, whether pulling a profit and loss statement for all truck drivers or not. Truckers are less likely to see how outliers, errors, or unexpected expenses could be stealing their trucking company profit margin without tracking the heartbeat of steady and fluctuating company costs. For example, suppose an owner-operator solely focused on their battle to control trucking fuel costs without being aware of other expenses. In that case, they might miss subtle insurance cost changes that can significantly impact profit.
2. Plan and Optimize Shipping Routes and Lanes
Calculating the trucking company profit per truck often starts with economizing the variable expenses of each route for maximum fleet efficiency. Owner-operators and fleet managers can work toward this by planning their route stops, thereby minimizing wasted miles searching for a truck stop. Purchasing high ROI aerodynamic gear for trailers can diminish the impact of gas-guzzling routes such as through mountains and windy areas. An owner-operator can also protect their trucking company’s profit margin by leveraging a TMS with an integrated dynamic route planner.
3. Track Short and Long-Term Business Expenses
When a fleet manager is evaluating their profit and loss statement as a trucking company, long-term business expenses can be some of the hardest to classify amongst expense types. For example, leasing a semi truck typically falls under long-term overhead costs, yet initial down payments might be considered a short-term business expense. Owner-operators who properly track these complicated expenses carefully are more likely to be capable of adequately calculating the ROI on each investment and expense. Owner-operators can confidently guide their budgeting with this expense knowledge and equipment ROIs written on a trucking company balance sheet example.
4. Establish Disruption Alert Notification Parameters
One of the most significant attacks on a haul’s profitability is disruption. Leveraging a profit and loss statement for truck drivers could often seem like you’re constantly evaluating past disruptions to discover what can be adjusted and applied to current events. From there, all team members must have a communication system to communicate disruptions to minimize lost or damaged products that seriously affect an owner-operator’s profit margin. As the truck driver shortage causes ports and freight yards to pile higher, customers are more willing to be gracious with their timetable as long as communication is quick and consistent.
5. Analyze Data and Make Adjustments as Needed
As important as maintaining an accurate trucking profit and loss statement template can be, owner-operators must understand that no template is perfect. Even the best plans and budgets can fall short at the whim of consumer trends or traffic patterns, thus driving the importance of flexibility and data tracking. Monitoring ongoing patterns through their company profit and loss statement enables truckers to observe upcoming issues and readjust their budgets and transportation factoring options.
How Does Cash Flow and Financial Health Impact Truckers?
A business’s cash flow is the economic activity obtained from company profits and expenses. Positive cash flow means more money remains consistently earned than spent, whereas negative cash flow means the exact opposite is true. For most truckers, determining whether their company has positive or negative cash flow is based on an aerial view of their operations. For example, a long-hauler with a traditional pay structure would spend multiple days accruing expenses on the same route and not receive payment up to 60-90 days after the delivery. A profit and loss statement for a trucking company that has to do its accounting across extended payment windows can also benefit shippers significantly. And improving cash flow management is all the more critical when, as highlighted by Statista, “It is projected that the revenue of general freight trucking, long-distance, truckload in the U.S. will amount to approximately 118,3 billion U.S. Dollars by 2024.”
Keeping track of the trucking company’s profit and loss statement is essential to ensuring cash flow issues remain as minor and undisruptive as possible. There ultimately are two main factors at the heart of the trucker payment evolution that makes it challenging today for shippers to balance cash flow:
- High Daily Expenses. Aside from the planned expenses directly associated with freight movement, other daily expenses often get overlooked. Things like meals, personal spending funds, and additional costs can quickly add up, especially for owner-operators who have to cover all business expenses themselves. These daily costs eat away at the budget, making it harder to plan and manage cash flow, predict what fees might occur, and add up over time.
- Slow-Paying Customers. Aside from the obvious issue of having to wait longer than planned for money, customers to take too long and who do not pay on time can cause significant complications for shippers. Cash flow issues stemming from slow invoice and bill payments within the industry today include the inability to buy gas, delays with vehicle maintenance, limited load capacity, payroll complications, and increased difficulty with other daily operations.
Shippers must keep track of profits and losses and carefully monitor cash flow levels and trends. A trucking company’s profit margin, along with a trucking company’s profit per truck or load, can provide valuable insight into the company’s overall financial health.
Benefits of Profit and Loss Monitoring and Cash Flow Management
With proper financial planning and a reasonable budget, planning becomes more manageable, end-to-end financial insights are more accessible, and transparency and real customer support insight become possible. This knowledge helps trucking companies grow, expand, and improve delivery services and operations. Tracking expenses and following up with profit and loss statements for truck drivers can bring a host of benefits, including the following:
- Keeps Finances Organized and Easily Accessible. Shippers must accurately track and monitor cash flow and create an environment that makes data collection and sharing much simpler and more accessible.
- Identify Inefficiencies in Records in Near Real-Time. With routine auditing checks and automated accounts receivable to track financial performance, shippers can more easily detect anomalies and economic inefficiencies.
- Keeps Customer Service Optimized and Innovative. When shippers spend less time worrying about financial stability and health, they can put their time and energy toward maintaining the highest level of customer service.
- Easier Audits on Invoices and Expense Reports. Routine checks and balances also improve a trucking company’s profit margins, which ensures they have reliable and on-demand access to accurate data in real-time.
- Faster Analysis and Application of Current Data. Better profit and loss monitoring and tacking also allow for a more streamlined approach to applying data and reacting to market trends and changes in customer demands.
- Ability to Scale and Adapt Easily Based on Trends. With greater control over finances comes a more remarkable ability to scale services and adapt to current market trends, limitations, or growth expectations.
- Improved End-to-End Transparency. One of the biggest challenges today’s shippers face is a lack of transparency and insight into real-time tracking of daily cash flow management activities.
Personalized insights into a company’s financial health, such as a P&L statement for a trucking company, can help them grow their trucking business more effectively, regardless of the current market conditions.
Connect With BasicBlock and Improve Cash Flow Management and Profit Loss Protocols
It’s worth reiterating that owner-operators cannot simply assume their most profitable loads equate to those with the highest dollar amounts attached. It takes careful insight, planning, and some financial forecasting and monitoring to get a clear picture of company finances. A profit and loss statement for truck drivers will show the true profit margin their trucking company can expect to see once expenses are fully considered. Any transportation services provider can benefit from the insight and financial stability of working closely with a freight factoring company. The most common expenses, fixed, variable, and personal, can all add up quickly over time without careful monitoring and consideration. To learn more about financial planning and budgeting—and to get better insight and control over your trucking company’s profit margins—contact Basic Block today to get started.