Know Your Trucking Business Expenses

Any small business owner needs to track expenses, large and small. Here are some typical trucking expenses for single truck operations. This example works on 10,000 paid miles per month with another 2,000 deadhead.

• Truck Payment $1000
• Trailer Payment $600
• Truck Insurance $600
• Fuel $5,000 (6 mpg, $2.50/gal)
• Tolls $300 (totally dependent on where you run)
• Licensing/Permits $150 (est. $1800/yr)
• Tires $600
• Maintenance/repairs $500
• Factoring $1100
• Office Expenses $500 (incl. telephone, faxing, Fed Ex, etc)
• Taxes $200
• Home/Salary $4000

Total $14,550

If the average pay per mile is $2.00, for 10,000 miles a month, that brings in $20,000. That means a net profit of $5450. But if an owner operator's (o/o) average pay per mile is only $1.50 and he's only getting 9,000 paid miles/mo, then his total pay is $13,500 and he's $1050 short every month.

In that case, there are a few things he can do:

1. Reduce deadhead

2. Cut other expenses

3. Negotiate for more $ per mile

Increase Paid Mileage by Reducing Deadhead

Cutting deadhead is sometimes difficult if the last load puts a truck in a dead area. In that case, the truck driver (or dispatcher) needs to make sure the load putting him there is paying enough to get him out again. For instance, if there is a refrigerated load going into Montana, there aren’t going to be many loads coming out. So, instead of accepting the same $2.00+ that could be expected going to Yakima in the heart of apple season, the owner operator need to raise his price to over $3.00 (or whatever he feels will make the trip worthwhile) or don’t take the load. That may mean he sits a day waiting for a better load, but in the long run it may well prove worth it.

Cutting other expenses can be easier. For example, with proper planning, overnighting all Bills of Lading, is rarely necessary. Certified mail takes about three days to arrive and is completely traceable. Overnight can cost as much as $28.00 every time. Repeat that every three or four days and the costs shoots up to $250+ every month. Certified is only $2.70 over regular First Class or Priority postage. That saves $20 - $25 every time, or around $200/month. It takes some discipline to get out of the overnight habit, but there's a big financial advantage to doing so.

Factoring Companies Can Cost Truckers Money

One huge difference a company can make is getting rid of the factoring company. If a driver has someone at home who can handle his accounts receivable as well as collections, that can save a whopping 5% off every bill he would otherwise have factored. While it may be convenient, the factoring company isn't doing anything the trucking company can't. “Non-recourse” only means “non-recourse” when the broker/shipper hasn’t paid anything at all, and then only if the factoring company has pre-approved them. If they under pay, the factoring company is going to back-charge the trucker for the difference. By handling his own accounts, a trucker can save 5% of every invoice and see an immediate increase of over $1000 per month.

Negotiate to Increase Rates and Improve Trucking Income

The best and most rewarding way to fix a cash-flow problem is to get better rates for the truck freight hauled. Negotiating takes practice and guts. It's easy to panic and accept the first bid a broker offers. The owner operator is offering a service that the shipper or broker needs. Without trucks, the product sits and rots. Getting a fair price is critical to staying in business.

With fuel prices fluctuating faster than the tide, brokers are even faster to drop prices more than the drop in fuel. But that fuel is only a portion of a truck's expenses. As shown above, there are still truck and trailer payments, insurance, licensing and more, before there's anything left for the trucker and his family to live on. Flexibility is important, but only to a point. The owner operator must know what his bottom line is and hold to it. If the trucker isn't going to protect his business, no one else is going to do it for him.

For a small trucking business, or any business, success is only possible when income exceeds outgo. When there’s a deficit, there are ways to fix it. It takes work, but it can mean the difference between staying afloat and turning the truck in for repossession.

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