Managing cash and controlling costs are important elements to building a
successful trucking operation," says Howard Abrams of
PBS Tax & Bookkeeping Service, a California-based
bookkeeping and tax preparartion firm.  "Today’s trucker or expediter must
use every tool at his or her disposal to ensure they are operating as profitably
as possible."

To put it another way, there's more to it than just a fancy term for the
movement of money into, and out of, your business checking account. Or, yet
another  "take" on cash flow management is keeping more of your money in
your pocket as long as possible.

In addition, a cash flow awareness is a good way to predict your operation's
cash flow for the next month, six months, or even the next year.

In a perfect world, we would receive a settlement check every time we pay a
bill. But in the real world, cash inflows are usually behind your cash outflows,
leaving your business short of money - a cash flow "gap".

Managing your cash flow allows you to narrow or completely close your cash
flow gap. It does this by analyzing the different components that affect the
cash flow of your business and it can help you to forecast most of your
expenses, at least for the next few months.

The two components of cash flow are, surprise - inflow and outflow.  The
definition of each:

*Inflow is your settlement check every week, two weeks or whenever you
receive compensation from your carrier.

*Outflow is the movement of money out of your business -  anytime you
pay a bill, buy a business-related item or spend money on your business, well
that's outflow.

Some calculations

Tied to this is the ability to calculate both revenue per mile and cost per
mile and Howard Abrams of PBS cites this example (The figures used are typical
of a conventional trucking operation, substitute your own numbers when using
this example):

"To determine cost per mile for overall operation, divide your total cost of
operation by the number of miles you ran. This should be calculated monthly and
year-to-date to get the most accurate figure.

"Once you determine the cost per mile to operate your truck, you can use that
number to determine when a particular trip or load is profitable. Let’s assume
your cost per mile is 79 cents."

"Next you’ll need to know how to calculate your revenue per mile. Take your
total revenue (income) and divide by your total miles. This calculation will
give you the revenue per mile, or in other words how much you make for every
mile you run. Let’s say your revenue per mile is $1.40."

"Now that you know both the revenue and cost per mile, you can calculate
profit per mile. Take your revenue per mile of $1.40 and subtract your cost per
mile of 79 cents. That would tell you the average profit per mile is 61
cents."

Abrams continues, "Now, with these calculations you can always determine in
advance the profitability of a load. Take the total amount a job pays (this is
your total revenue), then divide by the number of miles the trip will take and
you will have your revenue per mile."

Let’s say a load pays $2,500 and the trip is 2,350 miles; the revenue per
mile is $1.06. You now know it costs an average 79 cents per mile to run. If you
accept this job, you will only make 27 cents per mile, that’s less than half of
what is needed to match your average profit per mile. When doing these
calculations be sure you include all the miles traveled including deadhead. If
you don’t include unpaid miles you won’t have an accurate number.

Dave Corfman is a veteran expediter and fleet owner who says
that cost-per-mile awareness is crucial to any trucking operation.  He
states that the simplest way is to somehow lower your greatest outflow which is
typically fuel expense. 

"Go to the cheaper fuel places, don't use Comdata-type cards that wind up
costing you five cents a gallon for the convenience.  Cash is king."

"Quit idling unless absolutely necessary.  Consider using a generator to
quit burning your profits with the truck engine.  This is not to say you
should live a  survivalist lifestyle on the road, by all means, be
comfortable.  But, how often do you see a dock full of trucks idling when
it's unnecessary.  Chances are, they're company drivers and someone else is
buying the fuel."

"Another big way to help your cost-per-mile is to avoid all those truck stop
restaurant meals.  If you're doing three squares a day in a T/A, that can
add up quickly, especially if you're buying for the co-driver as well. 
Find ways to cut down on the food costs by carrying snack items.  My wife
and I would limit ourselves to one restaurant meal per day."

Howard Abrams:  "The cost to operate your business is something you want
to continually review. The more accurate your expense records, the more
successfully you can manage your business."

"You must be able to project needed revenue vs. expenses. Will you have
enough cash flow? Are you within budget? Will you be able to qualify for a loan?
Is your cost per mile creeping up each month?
Why?"

"You should break down costs into three types: fixed, variable and individual
variable. Fixed costs stay the same regardless of the miles you run. Examples
would be equipment payment, taxes, license, permits, insurance, etc. Variable
costs are mostly operating expenses, and these will vary month to
month."
 
"Examples would be fuel, oil, repairs, maintenance, tires,
tolls, scales, etc. Individual variable costs differ with each individual
operation. In general, variable costs apply to most trucking operations whereas
individual variable costs do not.  Even if you’re not entirely sure what
category to use, be sure to keep track of every expense."

"Aside from using your calculations to determine the profitability of loads
you can also use the numbers to predict future costs, analyze past performance
and cost out equipment purchase comparisons. When it comes to being successful,
you have to operate smart and use all the tools available to you. Consult your
tax advisor for more information."