blog address: https://cjcpa.ca/blog/bookkeeping-tips-for-trucking-companies/
blog details: Few businesses are as vulnerable to economic fluctuations as those operating in the trucking and transport industry. Trucking and transportation is a unique industry that has always been challenged by a disruptive environment because of technological changes and fluctuating customer demands. With low margins, constantly-changing state tax laws, maintaining operations and fleets, etc, trucking companies need to implement radical Transportation and Logistic Financial solutions in their processes. Whether you’re a single-truck owner-operator or run a small fleet of trucks, knowing your finances is critical to monitor your business profitability. To maintain a healthy trucking business, owner-operators, and small fleets need to manage a wide range of documents, which can be overwhelming. Because of the high vulnerability to economic fluctuations, transportation businesses require professional accounting and bookkeeping services to make informed decisions, identify areas of potential cost savings, manage operations efficiently, and ensure long-term business sustainability. Accounting for the Trucking business differs from regular business accounting in more ways than one. In addition to common bookkeeping practices such as accounts payable (A/P) and accounts receivable (A/R), companies should manage operations with mileage tracking, fleet management, dispatching services, and IFTA reporting. With the right tips, tools, and guidance, you can be sure that your business’s finances are in order. Key Bookkeeping Tips And Best Practices For Truckers
Save every receipt irrespective of how insignificant the charge
Asking for and keeping your receipts in a folder is the first and perhaps most significant step in the bookkeeping process. Receipts will enable you to record your transactions accurately and deduct as many legitimate costs as possible.
Keep a separate folder or an envelope on your truck(s) to keep the receipts
Try to keep the receipts in a sequence (date-wise) as it will reduce the efforts later during the bookkeeping exercise.
Maintain both physical and electronic (scanned) copies of receipts as physical receipts tend to fade out with time.
Scanned photos of receipts are acceptable. However, try to save the hard copies for warranty purposes when purchasing large-ticket products
Keep the scanned copies in a dedicated folder on your computer or in a cloud folder which can be accessed anywhere when you are on the go.
Keep a notebook and logbook on your truck(s)
In addition to keeping a folder or envelope for receipts, use the notebook or a document on your computer or smartphone to record any expenses for which you could not get a receipt. Use this notebook to record mileage and transactions like a coin-operated machine washing your truck or when you use your vehicle for business purposes. Logbooks are the best proof for per diem expense entitlement, which primarily consists of expenses incurred on meals. For accurate bookkeeping for truckers, you must track the date, location, amount, and reason for each expense to meet CRA regulations.
Keep your records up to date
Bookkeeping becomes easier when you keep your records up to date. It is advisable to maintain and update your records at the end of each day or at least once per week. Keeping your books up to date helps you get a clear picture of your financial position and make correct business decisions - both near and long-term. Also, putting off the bookkeeping exercise means a higher likelihood of mistakes as you may forget what payments were for, resulting in categorization errors which can lead to missing out on deductions.
Open a Separate Business Checking Account
As a trucking company, it is important to have a well-organized financial structure for business sustainability and long-term growth. Opening and maintaining a separate checking account for your business transactions is an important step to ensure clear financial visibility. Use the business checking account to track your business income and expenses. When choosing a business bank account, it pays to consider factors like monthly fees, online banking accessibility, ease of transactions, etc. Carefully compare different options and select the one that aligns most with your specific needs and requirements. Having a separate business account can streamline the bookkeeping for a trucking company.
Use a separate Credit Card for business expenses
In addition to having a separate business account for commercial transactions, trucking companies should also have a separate credit card for business expenses. Use the credit card for operational expenses and use the credit card statements for a simplified bookkeeping process, as most credit card statements can be integrated with accounting systems available where you can easily import the transactions instead of entering them manually. Also, paying your business credit card dues promptly is a great way to build a strong credit history, which in turn helps in securing funds for business operations and expansion at reasonable rates. Choose a credit card that offers a lower rate of interest, minimum or no annual fees and a generous rewards plan.
Use an accounting system
Bookkeeping for a trucking company becomes easier when you identify and adopt an accounting system - cash-based or accrual based. The cash-based accounting system is the simplest one to keep track of finances as it considers the money paid as Income only when that is received in the business account. Similarly, expenses are recorded when they are paid from the business account. In the Accrual based accounting system, revenue is recognized when it is earned, irrespective of whether the payment has or has not been received in the business bank account. Similarly, bills are received as recognized irrespective of when they were paid.
Keep Your IFTA Data Up-to-Date
The International Fuel Tax Agreement (IFTA) is a treaty between the lower 48 states and 10 Canadian provinces that demands all interstate motor carriers report fuel taxes. Maintaining your IFTA data is one of the most crucial aspects of running a trucking company. At the end of each quarter, commercial truckers must submit an IFTA report detailing the miles that were driven and gallons purchased. These reports will determine whether you owe taxes or are due for a refund. The IFTA office in your trucking company's home state will notify you of your refund or debt.
Know Your Cost Per Mile
One of the key metrics for a trucking logistics business is the cost per mile as it helps you price the services to ensure business profitability. The expenses are categorized as fixed and variable costs. Your variable cost per mile—such as fuel—should remain relatively consistent regardless of the number of miles traveled. On the other hand, fixed costs per mile—such as insurance—will decline as the number of miles driven increases. You may want to compute cost-per-mile separately for each category—for example drivers, equipment, states, or consumers—to identify potential areas for improvement. To calculate cost per mile, divide total expenses (fixed cost + variable cost) incurred for the month by the total number of miles driven in the month.
Minimize Your Day Sales Outstanding (DSO)
Days Sales Outstanding (DSO) is an important metric to calculate business liquidity. It is the average number of days a company takes to collect payment from customers after the sale. A decrease in DSO means more money in the bank and consequently good cash flow. There are various approaches to reducing the DSO, including focusing on customer credit risk, defining client payment terms, managing accounts receivable (A/R), and improving invoicing practices.
Plan For Necessary Expenses
Understand your upfront fees and recurring expenses so you can plan for them. These include significant costs like docking and parking your fleet while not in use and office space for administrative tasks. Smaller expenses include tolls, petrol, tires, repairs, and maintenance. If you're just starting, you'll need to factor in the expenses of the trucks themselves as well as the insurance to cover them. You'll also need a general business license, a sales tax license, and possibly a license to conduct business across states. It is critical to price services correctly to pay expenditures and earn a profit. So, begin with a small fleet and expand it as the business expands. This will free up cash flow and allow you to expand as the company gains more clients. It is also critical to keep your fleet well-maintained, which includes obtaining regular oil changes and other standard maintenance on schedule. Bottom Line Irrespective of the size of your fleet or how long you've been in the business, understanding Transportation CPA accounting services will help you stay in compliance with industry-specific standards. It will also aid in making informed decisions and setting up your company for future growth. Therefore, you should follow these trucker bookkeeping practices to enhance profitability. Trucking companies need specialized Transportation and logistic Accounting & Advisory services to improve shrinking margins, address scalability issues, and ensure business continuity. At CJCPA, our certified CPAs have extensive work experience in the logistics accounting process for trucking companies across Canada. We strive to provide our clients with a comprehensive, accurate business valuation that will help them make informed decisions. Contact us today and get started.
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