It is important to do the calculation of actual expenses that occur on a regular basis in trucking companies. Also, keep a vigilant eye on expenses will provide a clear view of the company’s financial status. For a smooth-running business, keep balances their all expenses per mile cost. But some of these expenses are easy to figure out as they are fixed cost expenses while others costs are hard to know as they come under the variable expenses.
For every business, profit is very important and your profit defines how much you keep, after paying all expenses. So, you must know all operating expenses which come under two general categories; fixed and variable expenses.
Let us discuss cost per mile:
Calculate fixed expenses
Fixed costs are generally periodic expenses that remain more or less unchanged from month to month. In the first step, you must know to determine the fixed cost expenses. Fixed costs are expenses that a company incurs whether trucks are hauling a load or parked idle. Fixed expenses include costs like insurance, property leases, permits, and other services. Maximization utilization of equipment can negatively impact fixed costs on business profitability.
Calculate Variable expenses
Variable cost expenses are directly related to the running operation of the trucks. These expenses increase when the number of miles the truck runs throughout the month. These costs add fuel, tires, repairs, maintenance, tolls, road taxes, other petty expenses including driver wages. It will be a good idea to know how many variables expenses before accepting a load.
A simple calculation to determine the cost per mile in trucking with operation sheets:
In order to identify the expenses on a per miles basis, trucking companies use the cost of operations sheets. This consists of fixed and variable both costs and written in separate columns, one for the monthly expense and other for annual expenses.
When all expenses are identified, then record them in an Operations Expense Sheet, and perform the calculation. Trucking companies do not share exactly the same outlay, so adapt the expense sheet to meet the specific costs associated with your unique operations.
Moreover, there is a requirement to estimate the number of miles the truck will be driven in that particular year to estimate variable expenses. If the drivers are paid for the mile, it will be easy to figure out the cost per mile for driver income. Generally, fixed costs are payable on a monthly basis. These totals can be divided by the estimated number of miles the truck will run in a year to determine the cost per mile.
Trip Profit Reports
To know about the detail of income and expenditures, the per-mile cost report is prepared. Trip profit reports are generally more accurate than the cost of operation sheets as variable expenses change often and there may be a large difference in fuel or permit costs from one trip to another. Trucking companies in California make the trip profit reports to choose the trips that are most profitable.
The bottom line is, it’s important to know what the cost per mile is to determine. The main objective is, to get paid more than it costs you to operate your trucks. Trucking companies suggests that it’s a good idea to figure out the cost per mile each month so that it can be made an effort to control variable costs as well as increase the number of miles that drives.