The Business of Trucking
How to track your business numbers
Last month I gave you an idea about how we would set up a system to track your business numbers. Here are the details. First we need a system to file the paper receipts and documents. This should be sorted by the expense category for the whole year, not by the trip or the month. I break the expense categories down into 18 different accounts, exactly the way it will be reported on the tax return. That way it will be easy in case of an audit. If you need the list of expense accounts, call my office at (888) 262-8585.
Once you have the receipts sorted and filed, you need a system for totaling your numbers and calculating profit and loss and cost per mile. I also like to use something called “percentage of income,” which I will explain in this series. I’ll explain how to calculate all of these numbers with a calculator and a pencil so that you have a basic understanding of the process. However, the second part of your system should include some sort of computer software that will total and track these numbers and give you the types of reports we need to run a profitable business. I’ll go over options for that as well, so start keeping track of your odometer miles and start a filing system for your receipts.
First we need to know your odometer reading on the first day of the month and the last day of the month. Subtracting your beginning mileage from your ending mileage will give you your total mileage for the month. Don’t worry about tracking anything but total miles; you don’t need to know empty miles or deadhead or bobtail. Think of it this way: Every mile your truck rolls is costing you money, so keep it simple and only track total miles.
Now let’s figure your income per mile. Go back through your settlements and add up all of your in-come. Again, don’t worry about separating income; just add up all income you receive including fuel surcharges. Divide the total income by the total mileage and that will give you your income per mile for all miles driven. If you drove 10,500 miles last month and your total income was $13,000, then your income per mile is $1.23 (13,000 divided by 10,500).
I know a lot of people in the industry will tell you to focus on this number, but I have a different opinion. I think it’s a good place to start, but you shouldn’t spend too much time thinking about your income-per-mile number. I believe you need to spend much more time working on your expenses. You really can’t do much to change your income, but you can change your expenses.
Tune in again next month, and we'll continue on this topic. Remember be safe, be profitable and master the journey.