How To Figure Out Operating Costs...

[Rev.Vassago]

Exactly right. And if there's one thing that is certain in the trucking industry, it's that past performance doesn't dictate future opportunities. Basing your future projections off of something that is completely uncertain is foolhearty.

Although, the business model of "I have money in the bank, so I must be turning a profit" has its allure.

[chris1]

Although, the business model of "I have money in the bank, so I must be turning a profit" has its allure.

Many don't understand that turning a profit doesn't mean that you're not going broke.

[GMAN]

Many don't understand that turning a profit doesn't mean that you're not going broke.

I think you mean cash flow. I have known owners who have had cash flow but went broke due to not making a profit. If you are making a profit you should be able to survive, providing you have included all of your costs or expenses.

[chris1]

I think you mean cash flow. I have known owners who have had cash flow but went broke due to not making a profit. If you are making a profit you should be able to survive, providing you have included all of your costs or expenses.

I would have said cash flow if that's what i meant.
I'm speaking of someone who's business structure doesn't include an actual payroll(fed,state,SS,medicare,UMC,WC) Your assumed "profit" includes your money's for work. So many go broke turning a profit.

[GMAN]

I would have said cash flow if that's what i meant.
I'm speaking of someone who's business structure doesn't include an actual payroll(fed,state,SS,medicare,UMC,WC) Your assumed "profit" includes your money's for work. So many go broke turning a profit.

If you have a sole proprietorship you can show a profit without actually having a formal payroll. The business may show a profit, but you could still go broke from not having enough profit to take care of your living expenses and taxes. Of course, if you are not showing enough profit to live then you won't need to worry about taxes.

There are many owners who think that as long as they have cash flow they are making money. I am not sure most owner operators who operate as a sole proprietorship pay themselves a salary or wage. They just spend what is left after they pay the bills. A friend of mine has a sole proprietorship and pays himself $2,000/month. I don't think most sole proprietors do that. I think it makes it easier to distinguish costs when you have a corporate structure. It makes it easier to pay yourself a salary or wage.

[chris1]

That's why i said you can go broke while still making a profit. I think many O/O's would find they are working far below wages if they ran comparison books with payroll and all the other associated costs including the items they fail to consider.

[Aviator]

Is there any software out there that can help organize/simplify the operating costs?

[chris1]

Lots of programs for trucks designed by truckers using trucker math and accounting. Much better to use real accounting programs instead.

[Aviator]

LOL! I like that answer.

[SickRick]

If you have a sole proprietorship you can show a profit without actually having a formal payroll. The business may show a profit, but you could still go broke from not having enough profit to take care of your living expenses and taxes. Of course, if you are not showing enough profit to live then you won't need to worry about taxes.

There are many owners who think that as long as they have cash flow they are making money. I am not sure most owner operators who operate as a sole proprietorship pay themselves a salary or wage. They just spend what is left after they pay the bills. A friend of mine has a sole proprietorship and pays himself $2,000/month. I don't think most sole proprietors do that. I think it makes it easier to distinguish costs when you have a corporate structure. It makes it easier to pay yourself a salary or wage.

Interesting...

Big difference between a sole proprietorship and a Sub-S Corp. Mainly in the SS taxes, and the scrutiny the books end up getting.

I've been running a Sub-S for almost a decade (non-trucking/home office). Back when we HAD an economy and there WAS CASH FLOW - I'd pay everything except my mortgage, child support, food shopping & medical (doctors & scrips) - out of my corporate account and take whatever $$ I needed for my "personal" expenses as "distributions" - which my accountant would straighten out at the end of the year as W-2 income. I make a payroll tax deposit of whatever my (accountant estimated) personal tax liability (since Sub-S's have no liability - any black ink goes on 1040 sched E) and go from there.

In discussions with my accountant - if I DO decide to go O/O right away - I'm going to run it similarly. Business (corp) pays for everything - EXCEPT - doctors/scrips, rent or storage (since I'm losing my house) - accountant will figure out my personal liabilities at the end of the year. As long as all the BILLS GET PAID, and I get FED - I'm not looking for a helluva lot OVER THAT for the first couple of years (especially in THIS ECONOMY) anyway.

Rick

[chris1]

Actually in an S-Corp you can use the money for any purpose you want. It just has to be adjusted between business and personal at the close of the year.
Regardless of the tax structure if you omit numbers and/or items you will never have an accurate accounting of true profit/loss. There is a difference between accounting P/L and tax P/L. If you don't run a comparison of total payroll cost(one of many items omited) you have an in-accurate accounting of cost. That's why many operate at sub-par wage yet still believe they are at a profit.

[dobry4u]

this thread makes my head spin...!

[chris1]

this thread makes my head spin...!

If you don't think like a trucker it won't spin.

Actually you will find the same thing in any business. People want to believe they are making money even if they're not.

[GMAN]

Actually in an S-Corp you can use the money for any purpose you want. It just has to be adjusted between business and personal at the close of the year.
Regardless of the tax structure if you omit numbers and/or items you will never have an accurate accounting of true profit/loss. There is a difference between accounting P/L and tax P/L. If you don't run a comparison of total payroll cost(one of many items omited) you have an in-accurate accounting of cost. That's why many operate at sub-par wage yet still believe they are at a profit.

You should be careful mixing personal and corporate money. It could cause your corporate status to be challenged. If you constantly mix corporate and personal expenses you could be considered a proprietorship if someone wanted to challenge you, such as the IRS or some legal eagle. I have had corporations for well over 30 years. Most have been set up with the S election.

[Patriot]

I'm still pretty confused on all of this. I was wondering if somebody could give me some guidelines or links on where I can educate myself better on the topic. Thanks!

[GMAN]

Is there any software out there that can help organize/simplify the operating costs?

There are quite a few trucking specific software packages. Some do more and are better than others. Truckers Helper seems to be a good program. It will do most anything you want in this business including your payroll. They have several versions available depending on whether you are a company driver, owner operator, run your own authority or have a fleet of trucks. www.truckershelper.com. Two that I have are EasyTrucking and TrucknPro. Easy Trucking will do about everything except your payroll, including your fuel taxes. It is not as user friendly as I would prefer. TrucknPro is one that I like. It will do everything except payroll and your fuel taxes, although you can put in your miles and it will print it out for you. All you need to do is put the figures into the state supplied form and do the calculations. www.trucknpro.com and www.easytrucking.com are the two websites. All three should have an online demo or trial. There are others, but these are the three I am most familiar. One thing that I like about all three of these programs is that they will automatically give you your mileage rate for which you are running. Each has their own set of features. All of them will help you keep the books current.

[GMAN]

Other than things like equipment payments and insurance, the only way to be accurate on projections is to estimate using some average costs. If you want complete accuracy you will need historical data. When someone is starting out they have no basis on which to do projections or estimates other than using averages from others. I still prefer to look at costs based upon miles since that is the way most of us are compensated. It helps to know your operational costs by the mile so that when you are quoted a rate you will know whether you can profitably take the load or not. It is simple and easy to use. There are some who use a day rate to figure costs. I guess we can each use what is most comfortable for us.

[Aviator]

There are quite a few trucking specific software packages. Some do more and are better than others. Truckers Helper seems to be a good program. It will do most anything you want in this business including your payroll. They have several versions available depending on whether you are a company driver, owner operator, run your own authority or have a fleet of trucks. www.truckershelper.com. Two that I have are EasyTrucking and TrucknPro. Easy Trucking will do about everything except your payroll, including your fuel taxes. It is not as user friendly as I would prefer. TrucknPro is one that I like. It will do everything except payroll and your fuel taxes, although you can put in your miles and it will print it out for you. All you need to do is put the figures into the state supplied form and do the calculations. www.trucknpro.com and www.easytrucking.com are the two websites. All three should have an online demo or trial. There are others, but these are the three I am most familiar. One thing that I like about all three of these programs is that they will automatically give you your mileage rate for which you are running. Each has their own set of features. All of them will help you keep the books current.

I'll check these out, thanks GMAN.

[Aviator]

Other than things like equipment payments and insurance, the only way to be accurate on projections is to estimate using some average costs. If you want complete accuracy you will need historical data. When someone is starting out they have no basis on which to do projections or estimates other than using averages from others. I still prefer to look at costs based upon miles since that is the way most of us are compensated. It helps to know your operational costs by the mile so that when you are quoted a rate you will know whether you can profitably take the load or not. It is simple and easy to use. There are some who use a day rate to figure costs. I guess we can each use what is most comfortable for us.

Is this still good for percentages of the load?

[GMAN]

Is this still good for percentages of the load?

I think so. Your operational costs should not change dramatically per mile. When you work percentage you know before hand where you need to be per mile to break even. When you look at your share of the load you know right away if it is going to work for you or not. If your break even is $1/mile and your percentage only pays $0.90 then you know it will not be profitable for you to take that load. On the other hand if the load pays $1.50 then it may be profitable to take the load. If it goes to an area that has a lot of tolls then it may not be worth it to take that load due to the extra costs of doing business in that area. Your fixed costs can be broken down by the mile or day if you prefer. Since everyone's operation is slightly different each must do some fine tuning to make sure everything works as planned.