Managing your trucking company’s books is one of the most important things you can do to ensure its success. To help you, we have listed ten trucking bookkeeping guidelines and best practices, from identifying your company entity type and using a business credit card to accounting for trucking businesses. If you’re looking for a reliable trucking partner that provides accounting services, check out this site.
Comprehend Your Business Type and Taxation
When establishing an owner-operator or carrier firm, you have several alternatives for structuring the company, each of which will affect your accounting and tax reporting obligations. Setting up your firm as a sole proprietorship is easy and will allow you to avoid processing payroll, but it will expose your whole net revenue to self-employment tax.
A frequent tax categorization for trucking firms is S corporation (S-corp) since it permits a part of net revenue to transfer to the owner/employee free of payroll and self-employment tax.
With an S-corporation, you must process payroll for yourself just like you would for any other employee. However, any residual income after payroll and costs may be taken tax-free.
Remain Current With Your IFTA Data
IFTA was created to shift the tax to the states where the gasoline is consumed rather than where it is bought. When deciding whether to purchase gasoline in one state vs. another, removing the state fuel tax from the retail price is necessary.
Keeping track of your IFTA data is essential to operate a trucking company. After each quarter, you must submit an IFTA report detailing the miles traveled and the amount of fuel bought. These reports will determine either the amount of tax you owe or your tax refund. The IFTA office in the home state of your trucking firm will inform you of your refund or debt.
Know Your Mileage Cost
The most significant indicator for all trucking firms is the average cost per mile, which is very beneficial for decision-making since it enables you to price your services profitably. Additionally, it may pinpoint high-cost areas that you may be able to cut or remove.
Your variable expenses per mile, such as gasoline, should remain relatively consistent regardless of the distance traveled. Your fixed expenditures per mile, like insurance, should decrease significantly as your mileage grows. To identify patterns or areas for improvement, you may compute cost-per-mile separately for each category, such as drivers, equipment, states, or consumers.
To calculate the cost per mile, you must first:
- Determine the estimated amount of miles traveled each month.
- Divvy your fixed and variable expenses by that number (so that you get an average cost per mile for each category).
Maintain Detailed Records
Maintaining up-to-date records of truck driving per diem makes bookkeeping considerably simpler; if feasible, strive to update your books daily or at least once weekly. Delaying the work will increase the possibility that you will forget what the payments are for, resulting in categorization mistakes that might cause you to miss deductions.
You should make truck drivers keep copies of their trip reports, receipts for money spent, and maintenance receipts. They should also carry a notepad in their vehicle to record mileage and costs for which they do not get a receipt.
Logbooks are the greatest evidence of eligibility for per diem, mainly food expenditures. This will let you deduct the maximum amount of reasonable expenses.
Utilize a Commercial Credit Card
Using a company credit card may aid in the simplicity of your bookkeeping, and most accounting systems integrate with your bank and credit card accounts. The fact that the data will be input automatically whenever a payment is made will save time and prevent mistakes. In addition to streamlining your accounting, a business credit card allows you to categorize often costs, such as petrol, meals, and maintenance.
The first step is to research and obtain a loan with a cheap interest rate and no yearly charge. Given how much truckers spend on gasoline, credit cards with fuel benefits are great. Pay your monthly bill in full to avoid incurring excessive interest charges.
Plan for Essential Expenses
Gain a grasp of your up-front and recurring expenditures to budget for them. These expenses include docking and parking for your fleet while it is not in use and office space for administrative duties—tolls, petrol, tires, repairs, and maintenance fall under smaller costs.
If you are starting your firm, you will need to include the expenses of the vehicles and their insurance. Additionally, you will require a general business license, a sales tax license, and maybe a cross-state business license.
It is essential to price your services appropriately to pay these costs and generate a profit. You may also begin with a small fleet and expand it as your business expands. This will free up cash flow and allow you to grow as your firm acquires more clients.
Maintaining a well-maintained fleet is also crucial, including timely oil changes and other essential maintenance. The most straightforward approach to save money on petrol is to download an app such as GasBuddy, which can help you locate the lowest-priced gas stations in your area.
Reduce Your Outstanding Day Sales
The number of days it takes to convert a transaction into cash is denoted by days sales outstanding (DSO). DSO is an essential indicator since a lower DSO indicates more cash on hand and hence a healthier cash flow situation.
There are various approaches to lowering your day’s sales outstanding, including concentrating on customer credit risk, properly managing your accounts receivable (A/R), enhancing your invoicing procedures, and specifying client payment terms.
DSO might also signify a possible problem that requires resolution. For instance, poor customer satisfaction might decrease customers’ propensity to make timely payments.
To earn your DSO:
- Divide your yearly sales by 365 days to get your average daily deals.
- Divide your A/R by the average daily sales volume.
- Additionally, it would help if you distinguished between external and internal DSO. External DSO is the time between your client getting the invoice and being paid. In contrast, internal DSO is the time between the shipment being finished and the invoice being delivered. Streamlining procedures to expedite invoice delivery may assist increase cash flow.
Submit Correct Per Diem Claims
Per diems are tax deductions that cover meals regularly instead of tracking and deducting actual meal expenditures. It is essential to claim per diems accurately to minimize your gross income, reducing the amount payable to the IRS. To qualify for a per diem deduction, you must spend the night away from home.
You may deduct the expense of meals and housing in one of two ways: by the number of days and nights you were on the road or by submitting receipts. You may deduct greater than 80% of the per diem rate for each day or 80% of the total receipted expenditures for the duration of your trip. Each year, you must choose one of these possibilities. If the IRS ever audits you, it’s also crucial to maintain the proper documents.
Find the most effective accounting software.
Trucking firms have unique accounting needs that distinguish them from other enterprises. For instance, you should be able to handle loads and dispatches and create data that will assist you in filing IFTA reports.
Regardless of the size of your organization, it is essential to maintain accurate records of mileage and travel. The perfect accounting system should provide all of this information and transportation management capabilities, such as fleet maintenance monitoring.
Whether you’re an owner-operator or operate a small trucking firm, the correct accounting platform can aid your business’s success. Our top option for trucking accounting software was QuickBooks Online with the TruckingOffice interface, which combines the robust revenue and spending tracking of QuickBooks with the dispatching and fleet management functions of TruckingOffice. QuickBooks topped our ranking of the best accounting software for small businesses.
Select the Appropriate Payroll Solution
Payroll processing for a trucking firm might vary from most other sectors. Because drivers might be rewarded by the truckload or kilometers traveled as opposed to getting a monthly or weekly salary, engaging with the appropriate payroll provider can be the key to saving time and reducing paperwork.
Ideally, you would be able to manage unusual payroll issues and meet trucking-specific criteria while simplifying compensation calculations. Depending on the size and demands of your company, you may be better off with simple software or software with transportation management capabilities.
We researched the best payroll software for trucking firms and determined that ADP Run is the best option for expanding trucking companies that need robust HR solutions. In addition to payroll, the HR package includes solutions for time monitoring, benefits administration, and talent management. It supports non-driver employee classifications and connects with trucking management systems such as Tenstreet. In addition to supporting hours worked as a pay designation, mileage traveled may also be used to determine compensation.
How Trucking Accounting Is Distinctive
In various ways, trucking accounting varies from standard commercial accounting. In addition to accounts payable (A/P) and accounts receivable (A/R), businesses need to manage operations with mileage monitoring, fleet management, dispatching services, and IFTA reporting. If you have workers, you must also be able to handle various forms of payroll and provide flexible payment alternatives.
Regardless of the size of your fleet or the time you’ve been in business, a solid understanding of trucking accounting best practices can help you comply with industry-specific requirements. It will also assist you in making educated choices and positioning your business for future expansion. Therefore, you should adhere to these trucking accounting recommendations to boost your profitability and save time.