Numbers Game

Leased owner-operator Gary Frisbie of Depew, N.Y., says his carrier’s settlements are important in understanding how his business is doing. “My settlement gives me weekly and year-to-date figures for income,” Frisbie says. “It’s a big help in keeping track of what I make and what I spend.”

Not paying attention to settlement details costs money, says Ray Kasicki, an owner-operator leased to Mawson & Mawson. “Owner-operators have to ask questions, and they have to care about their business,” Kasicki says. “Too many guys simply don’t want to worry about where the money is going. I know guys who don’t know what they made last week.”

Too often, business experts say, settlements do anything but settle the financial questions they are designed to address. If you aren’t fortunate enough to be leased to a carrier with clear settlements, you could be losing money because of camouflaged costs, inappropriate charges or reimbursements that appear as income and cost you extra at tax time.

It’s not that most carriers are dishonest. Even honest carriers make mistakes, in which case owner-operators who simply don’t care enough to be watchful and ask questions come out losing. But even owner-operators who do care can find themselves bamboozled by unclear settlements. “Many carriers buy software to expedite their settlements to owner-operators, then leave it to owner-operators to figure them out,” says Kevin Rutherford of Whiteline Business Services in Orlando, Fla.

While there is no standard settlement form, there is a standard approach to deciphering any settlement.


Although many settlements leave a great deal to be desired, Rutherford says, he has never seen one without a statement of gross income. “This is the first thing an owner-operator should look for,” he says. “It is the starting point in trying to understand what you are owed and what the carrier is taking out.”

Verifying gross income is much easier if payment is based on mileage instead of percent of revenue, Rutherford says, because you can simply multiply paid miles by the cents-per-mile rate.

Before signing a lease, a contractor ought to negotiate how mileage pay is calculated, making sure the formula uses practical miles rather than short miles, says Todd Spencer, vice president of the Owner-Operator Independent Drivers Association. “If contractors assume the contract is OK and don’t negotiate with carriers, they will continue to play on an uneven field,” he says.

Once you sign a contract, you have no choice but to accept the pay rate and the means of calculation as stated in the lease, Rutherford says. “A lease should spell out what the settlement shows,” he says.


Common reimbursements can include tolls, permits or gate charges. Keep careful records for each trip to ensure you’re not left holding the bag for out-of-pocket expenses.

Watch how your reimbursements are treated. When carriers fold reimbursements into income, it raises the level of taxable income. Owner-operator Bob Esler uses an Excel spreadsheet for income and another for expenditures, and checks both against his settlement. “I catch reimbursements rolled into income using this method and justify my entire settlement with it,” Esler says.

“I know guys who don’t know what they made last week.”

– Ray Kasicki


The lease should explain how the carrier figures the difference between gross income and net. On a typical settlement, your carrier might deduct insurance premiums, plate escrow and a general escrow (sometimes called a maintenance fund), fuel taxes, fuel expenses, Trip Pak charges, charges for equipment bought through the carrier, etc.

It’s your responsibility to make sure you really owe the charges, that they are the right amount, and that the cumulative amounts do not exceed what you owe. An owner-operator who does not understand what is deducted might find himself frustrated and financially strapped. In a worst case, you might discover something that’s clearly wrong. For example, Truckers’ Home Office, an owner-operator business service, has documented at least one case of a contractor getting a double charge – both a lease fee and a truck payment for a truck bought through the carrier.

Other charges might be less blatantly out of line, but still alarming. Unpleasant surprises can include:

The cost of paperwork. Submitting claims weekly, rather than at the completion of every load, can save you hundreds of dollars a year in Trip Pak or postage expenses. Sending in paperwork at the end of every load may not be necessary. Not all carriers make your choices clear.

Administrative fees. Some carriers charge contractors a fee just for advancing them their own money. Or the credit card company may charge the carrier $1.75 per advance, but the carrier may charge the contractor $3 and pocket the difference. If the carrier does not disclose this on a settlement, it violates truth-in-leasing laws.

Camouflaged fuel costs. Some carriers combine fuel charges and advances into one figure. Asking for precise fuel purchase amounts can help you control your costs by isolating items such as administrative fees charged for advances. It can also help you determine whether the carrier is passing to you all its fuel program discounts.


If your math doesn’t produce the same net income the carrier shows, you need to ask why. Carriers aren’t in the business of looking out for their contractors, which is why contractors must “make the effort to ask their carriers for explanation,” says Paula Hudson, president of Truckers’ Home Office in El Paso, Texas.

Some carriers appear to purposely hide information from contractors, says Mickey Dragash, a lawyer specializing in owner-operator matters. Line items might be coded or numbered, for example, with no immediate explanation. Unless a contractor learns what the codes stand for, he will not fully understand where his money is going.

Many such charges are for fuel-tax reporting and other services that the carrier provides, though carriers often fail to tell contractors they are free to turn down such offers, Dragash says. Any requirement to buy services through the carrier violates truth-in-leasing laws.

Some leased operators are willing to accept services such as buying a base plate, insurance, tarps, chains and other equipment because of the convenience of one-stop shopping. However, the convenience can be costly. Learning what services can be bought elsewhere and comparing prices help the astute owner-operator make an informed decision.

“I lost a lot of money in unpaid escrow and hidden fees,” says owner-operator John Mordus, who once leased 16 trucks to a carrier. “And on insurance through my carrier, I was charged more for it than the insurance company charged the carrier.”

Mordus now runs three trucks as Black Ribbon Express, and he keeps his settlements as simple as possible. He pays his two owner-operators “5 to 7 cents more than most companies pay,” keeps no escrow and offers no services other than fuel tax reporting. “My settlements show trips from here to there with revenue,” Mordus says. “I show fuel taxes taken out quarterly. That’s all. If we have a good year, I give bonuses, and there is a profit-sharing plan.”

Owner-operators who lack the patience or the inclination to check settlement details should consider using a specialized accounting service or joining an organization such as OOIDA that gives members free business and legal advice. Services such as Rutherford’s Whiteline and Thompson’s Truckers’ Home Office, in addition to computing income taxes, can check settlements for a fee.

The successful contractor understands both his lease’s settlement provisions and every settlement he receives. If you’re not on top of these financial details, you’re losing not only income but also control of your career.

Bob Esler uses an Excel spreadsheet for income and another for expenditures.


Escrow charges on a settlement might be plain enough, but the smart owner-operator will make sure he knows exactly how they work and will track their growth.

A typical escrow will be labeled “general,” “maintenance” or “equipment,” covering breakdowns or other maintenance. Or it may be for something as specific as tires. Your lease should spell out exactly what the money is to be used for, how much you will pay, how interest will be computed, and terms for your receiving the balance upon leaving the carrier.

Plate escrows can be particularly thorny. For example, officials at the Owner-Operator Independent Drivers Association say some members have had carriers give them a plate left behind by a contractor who quit. They were paying for a plate that was partially or fully paid for, while the former contractor was never reimbursed.

If you don’t understand your lease and don’t keep track of your plate escrow on the settlement sheets, you won’t know whether the carrier is required to give back unused plate escrow, or how much that amount is. “A contractor has the right to buy and keep his IRP in his name,” says Todd Spencer, vice president of OOIDA. “If the contractor leaves his carrier, he takes the plate with him.”

While it is legal for a carrier to earn interest on money in a contractor’s escrow, he must pay the contractor that interest. This accumulating interest will show up on some of the more thorough settlements, but there is no legal requirement for it to appear.

Not being paid escrow money, which federal law says must be done within 45 days of the termination of a lease, is probably the most common problem contractors have with their carriers, says attorney Mickey Dragash. Some leases have a clause saying a contractor who does not complete the lease will not get his escrow back. Though this is illegal, you will probably spend more in legal fees, travel expenses and lost work to fight this in court than the escrow is worth, says owner-operator accountant Kevin Rutherford. Not agreeing to that clause in the first place is the best policy.

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