It’s not uncommon for owner-operators, or anyone else running a relatively small trucking business, to have a narrow profit margin. This is one of the more compelling reasons to understand and track your income and expenses if you’re in this business. Also, it’s fairly common for payments from clients or delivered loads to take several weeks or months to be received. Avoid potential roadblocks related to the nature of this business by keeping the tips mentioned below in mind.
A good place to start with tracking income and expenses is by having a bookkeeping method that works for you. One option is to hire a bookkeeper or accountant. If this isn’t in your budget or practical for your business operations, use bookkeeping or accounting software. Popular options include:
*Xero allows income and expenses to be tracked even when you’re out of the office or not at home. They can also help you locate a bookkeeper or accountant if you prefer this option.
If you’re fairly new to the trucking business as an owner-operator, get a feel for how delivery payments generally work. Shipping contracts, for instance, typically require payment 30 to 90 days post-delivery. This type of arrangement isn’t unusual. Still, it can present some issues financially if these delays aren’t managed well. One way to do this is with freight factoring. This is a type of financing that allows you to receive immediate payment in exchange for a fee that’s taken out of the invoice amount when it’s paid. Businesses may have good accounts but if you are cash poor, you will struggle to make ends meet and this alone is a good enough reason to consider freight factoring.
The one thing you don’t want to do is go into your business without a general idea of what you’ll likely earn. This knowledge also makes it easier to prioritize and manage expenses to maintain a healthy balance. An owner-operator, for example, typically earns about $140,000 annually. If you break this down into five-day workweeks, the average is just over $550 per day. Once you figure out your earnings potential, you can set up a budget that’s likely to be realistic or manageable.
Once you’ve estimated your revenue potential, it’s time to identify your likely expenses. There are several variables that will determine your actual expenses, such as the current cost of fuel. That said, expenses typically related to truck-related operations include:
Also, consider average operating costs for your vehicle(s). Remember, required insurance will be part of your vehicle expenses, too.
After figuring out the potential review and recurring expenses, be diligent about maintaining thorough records. Yes, bookkeeping software – or an accountant or bookkeeper – can help with this, but it’s also important to:
Lastly, remember to keep your personal and business expenses separate. This is especially important for tax purposes. Also, maintain individual bank accounts so there’s no confusion over what’s business-related and what’s personal.
The more organized you are with your truck-related business, the better off you’ll be financially. The good news is as you move forward with your efforts and your business operations, you’ll understand and track your income and expenses in a way that works for you. While it may seem difficult now, your understanding will grow and it will become second nature to you.
We hope that you have found this journey useful so far. Our final post is due out soon. If you haven’t already, please check out our previous step which covers how to find loads and grow your business.
Our final post is out! Check it out here and read about how to stay in compliance.