Calculating Cost-per-Mile of Your Truck Operations (part 2 of 2): Make More Money

Calculating Cost-per-Mile of Your Truck Operations (part 2 of 2): Make More Money

Accutrac Capital 22-Aug-2016 0 Comments

Performing the cost-per-mile calculation regularly on your fleet operations, as discussed in Part 1 of this article, is key to making more money for your company. Its not what you earn in revenues thats most important . . . its what you retain as earnings. How much you keep depends on how much you spend. Knowing how much you spend is key to determining how much you need to charge for services. This delicate balance of setting rates higher than expenses yet remaining competitive is one of the most essential exercises in determining the financial health of your trucking company.

Identify Where Cost Reduction is Needed

Using the cost-per-mile calculation to monitor expenses will reveal the costs of running your truck(s), provide a tool to monitor expense trends and helps to identify items where cost reduction is needed. A good example is fuel costs, the largest cost item on your expense sheet. Small changes can have big results, impacting your cost-per-mile rate with a noticeable and positive outcome. A growing number of trucking companies (both large and small) take advantage of fuel discount programs to achieve significant savings, thereby improving their competitiveness and enhancing profitability.

Maximize Equipment Utilization

The most impactful means of positively affecting your operational cost-per-mile is to maximize equipment utilization. As the miles a truck operates increases, the cost-per-mile will decrease. Fixed costs are exactly that . . . fixed. If your truck runs 1,000 miles per week or 3,000 miles, fixed costs remain the same. Variable costs, including driver pay increase with additional miles, but so too does the revenue generated by the equipment. Overall, greater equipment utilization translates into lower cost-per-mile and greater net revenues and profits (see Figure 2).

Control Expenses with Regular Reporting

The more financial data you have to analyze, the more you can control expenses to improve profitability. Formulate a report that tracks all related expenses, monitors trends and identifies due dates. There are a multitude of accounting tools and services available to assist with this discipline such as Excel spread sheets and QuickBooks to fully integrated trucking management software. Adapt a disciplined routine of entering and monitoring the data. The goal is to organize the numbers into units that you can relate to, which you can then use to recognize problems and identify solutions. Then implement policies and work practices throughout your organization designed to fine tune operations and reduce costs. Use the reports to ensure you are regulating every single factor of your operation that you have control over and understand all the ones that fall outside your sphere of influence.

Elements of a Profitable Trucking Company

Operating a trucking company without knowing the numbers is like driving with your eyes closed. Tracking costs on a per-mile basis is undoubtedly the clearest view for controlling the financial stability of your business. The three essential elements of a profitable trucking company are:

  • Tightly controlled cost management
  • Maximum equipment utilization
  • Positive cash flow

Invoice Factoring for Trucking

Accutrac Capital is an invoice factoring company that specializes in the trucking industry. Our unique factoring products and cost saving services are designed to provide positive cash flow, be simple to understand and convenient to use. For more information about invoice factoring and cost saving services such as our Fuel Discount program, please call 855-790-0906 or visit us online at: www.accutraccapital.com

 

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