Finding a Financial Adviser

| December 12, 2008

A professional who knows the trucking industry can help you organize your paperwork, take advantage of tax deductions and give you key advice throughout the year.

Selecting a professional to help you with your finances isn’t as easy as flipping through the phone book. There are several kinds of financial professionals, and one of them should fit your needs:

CPA. Not every owner-operator business needs a Certified Public Accountant. Because CPAs have extensive training, they are more expensive than basic accountants.

ENROLLED AGENT. An enrolled agent (sometimes referred to as an EA) is a half-step below a CPA. Enrolled agent is a designation of the Internal Revenue Service. To achieve this designation, the agent is required to pass a two-day examination on taxes administered by the IRS. In addition, the agent must take a minimum of 24 hours of continuing tax education each year. Many EAs are former IRS employees. CPAs and EAs are qualified to represent a taxpayer in an audit or in court without the taxpayer being present. An EA generally charges less than a CPA or a tax attorney.

STOREFRONT PREPARER. Commercial tax-preparation services, such as H&R Block, prepare mostly personal tax returns and are very conservative about the deductions they will let you claim. They usually are not well-versed in trucking-related aspects of the tax code, so they might neglect legal ways to cut your tax bill. In addition, they are tax preparers only and cannot give you year-round tax-planning advice.

ACCOUNTANT. Using a full-time accounting service familiar with trucking is the most common practice for accounting and tax preparation in the trucking industry.

Know that a good accountant isn’t cheap. Expect to pay $100 to $200 for an initial consultation and $50 to $150 a month. If you gross $80,000 per year and pay $1,000 for accounting services, that amounts to only 1.2 percent of your total gross. If you run 100,000 miles per year, it’s only a penny per mile. A good financial adviser can easily pay for his services with the money he saves you, and a good accountant will provide you with monthly and quarterly reports, which include profit-and-loss statements and balance sheets.

More than that, your accountant should be able to help you:

  • Develop a business plan.

  • Determine which business structure is best for you.
  • Set up your business books.
  • Manage your cash flow.
  • Prepare periodic business assessments.
  • Determine when to upgrade your equipment.
  • Analyze the tax consequences of business decisions.
  • Maximize your tax deductions.
  • Select computer software.
  • Choose an investment adviser.
  • Establish a retirement program.
  • Develop an estate plan.

EVALUATING POTENTIAL ACCOUNTANTS
You don’t necessarily need an accountant who specializes in trucking, but it’s better if he has trucking experience. Not every accountant is familiar with the tax deductions that a trucker is allowed. If you find an accountant you like who doesn’t have trucking experience, plan to spend time explaining what you do and what kinds of reports you need. If you can’t find an accountant who’s experienced in trucking, at least find one who caters to small service businesses.

Start your search by asking for referrals from other successful owner-operators. Many accountants advertise in Overdrive and other trucking publications.

When you talk to an adviser, make sure you ask: Do you offer a free in-person consultation? What is your fee? Do you charge by the hour or by the month? What services does your fee include? Can I call you any time with questions?

Because you are on the road so much, the answer to the last question is especially important. You need to be able to call your accountant from time to time without incurring a great deal of cost. Find out whether he allows unlimited calls for a set rate or charges for each call after a certain number.

You will reveal personal information about yourself and your business to your accountant. You want to build a long-term relationship, so you need to feel comfortable communicating with him. You also need to feel that your business is your accountant’s priority.

Your financial adviser should be a trusted partner. The more he knows about your business, the more likely he is to offer meaningful suggestions for improving your operation. Part of your responsibility is to educate your adviser, so that you can entrust more to him and free yourself for the trucking business. Most owner-operators talk to their accountants only at tax time. That’s a mistake. Call your accountant whenever you have a question regarding your business. Don’t rely on other truckers.

Your accountant needs to know before you buy a new truck or change companies. There are significant tax ramifications on major purchases. And, in many cases, a good accountant can advise you on a company or a lease. You’ll save yourself money and heartache if you talk to your accountant regularly.

Let your accountant be your business partner. If you have a good one and are paying a fair fee, let him earn it. Call him once a month, even if you don’t have business to discuss. Regular contact helps your accountant get to know you, and the better he knows you, the better he’ll be able to help you.

GETTING ORGANIZED
Haphazard record-keeping, such as stuffing a week’s worth of receipts into your shirt pocket, will hurt you. Such habits could mean paying more taxes, because you might lose receipts that could have entitled you to a deduction.

Organize your truck so that you can keep files with you. Make it as easy as you can to record expenses and to file receipts and other documents daily. You can use file boxes, expanding file folders or customized envelopes. Preprinted, customized envelopes cost about $100, but that cost can be defrayed because it is tax-deductible. On the front of the envelope you can keep your trip information. On the back of the envelope are columns to record expenses. This system lets you record and file at the same time.

You can organize paperwork by category, by month or by trip, but do it consistently. Organizing by month is perhaps the most popular record-keeping method. Place all your business paperwork and receipts for each month in an expanding file folder and send it to your accountant quarterly.

You can also organize your files by trip. A trip record tracks your destination, miles and so on. Put all your receipts in a trip envelope. On the front, show all the necessary trip information; on the back, list every purchase for that trip. Place all paperwork, including freight bills and all receipts, inside the envelope. After three or four trips, send the envelopes to your accountant. This method allows you to identify the profitability of loads and the value of a shipper’s business to your operation over time.

A third method is to keep a folder for each main category: Fuel, Meals, Tolls and Settlements. Most accountants prefer this method because the categories match with those on IRS Form Schedule C.

It’s important to enter the numbers daily, so that you don’t get overwhelmed at the end of each month. Daily record-keeping also lessens the possibility of forgetting something, especially when you don’t get a receipt.

You can keep other papers in the file, including cost-per-mile charts, maintenance reports, trip profit reports, insurance papers and warranty information.

Regardless of how you choose to file your receipts, the important thing is to record every expense. When you forget to get a receipt or cannot get one, write the details of the expense on a piece of paper and file it with your official report.


BUILD A PROFESSIONAL TEAM
In addition to a good accountant, other professionals can add to your success by providing their expertise. Your team could include the following:

AN ATTORNEY. Don’t wait until you need an attorney to find one. You’ll need a lawyer for reviewing a new lease before you sign it, defending a traffic violation, getting your own authority, assessing damage from an accident or considering bankruptcy. It’s important to have a general-practitioner attorney in your own state because laws vary from state to state. If you need an attorney in another state for a traffic violation or a contract dispute with a carrier, your attorney can make a recommendation.

AN INSURANCE AGENT. A good insurance agent can save you hundreds of dollars. He will keep up with changes in the insurance industry and in your business that might warrant a reduced premium or a change in coverage.

A TRUCK TECHNICIAN. You should know and trust anyone who works on your rig. It’s best to have a technician located close to home. If that’s not possible, try to find one in a city you travel through often.

A FINANCIAL PLANNER. As your business grows and you generate more disposable income, you’ll want advice on directing your retirement savings and other investments. You’ll need to shelter your income and assets. Some trucking accountants are also financial planners. Planners who have studied to pass an industry exam will hold the title Certified Financial Planner.


This article comes from Overdrive’s 2005 edition of Partners in Business, a comprehensive manual for new and existing owner-operators. The updated version includes new articles and worksheets, as well as other revisions. You can order a copy by calling (800) 633-5953, Ext. 1135.

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