THIS ARTICLE IS FROM the 2006 edition of the Overdrive Partners in Business manual, co-written by American Truck Business Services, presenter of the Partners in Business seminars. The program is sponsored by Freightliner Trucks and Castrol. The next seminar will be during the Great American Trucking Show, Aug. 24-26 in Dallas. Visit this site.
Don’t judge the performance of your business by the size of your settlement check. Once your business plan is in place and you have a month’s worth of actual performance history to review on your profit and loss statement, you can look closely at your spending habits and come up with ways to reduce your expenses if necessary.
Bookkeeping is one of the most important aspects of being a successful owner-operator. The receipts and records that you keep are used for a number of reasons, such as income tax reporting, warranty issues, maintenance information and monthly profitability.
A business services provider can save you time with this task, but you will need to take an active role in the collection of the information. The more organized and thorough you can be in your receipt gathering, the better.
You can make the task of bookkeeping as easy as possible by following six simple practices that translate into higher profits and less hassle for you:
SAVE EVERY RECEIPT, NO MATTER HOW SMALL. Why “tip” the taxman? It’s the job of your business services provider to worry about whether the receipt is a legitimate deduction. Place an envelope in your truck for collecting your receipts and send them at the end of each month to your business services provider, who can sort and tally them and provide you with a monthly profit and loss statement as well as accurate quarterly tax estimates. If you’re unsure something is tax-deductible, save the receipt and check with your financial services provider.
OPEN A SEPARATE CHECKING ACCOUNT FOR YOUR BUSINESS. If you are the sole owner of the business, you can open an additional personal account and save yourself the extra fees that are associated with business accounts. You should deposit your settlement checks in this account and then pay yourself for driving from these funds. The amount to pay yourself for driving is determined by your budget. You should also pay all business expenses from this account to make your bookkeeping easier. Bank fees for this account are tax-deductible.
USE A SEPARATE CREDIT CARD FOR BUSINESS EXPENSES. Try to find a credit card without an annual fee and with a low interest rate. Pay the balance in full every month. Having a business credit card may help you reduce the amount of advances you take from your carrier and will make it easier to keep track of business expenses.
SAVE YOUR LOG BOOKS. Your log book is the best record of your per diem (daily) expense, so be sure to keep it in a safe place along with your receipts and tax returns. You may need them to prove your expenses, should you be audited.
GET A NOTEBOOK TO CARRY WITH YOUR RECEIPT ENVELOPE. This notebook will be used to record those expenses for which you cannot obtain a receipt, such as when you wash your truck at a coin-operated facility, personal use of your auto, etc. A record of these expenses should be given to your business services provider on a monthly basis along with your other receipts.
You must track the date, location, amount and reason for each expense in your log in order to meet IRS regulations.
The following is a listing of some special circumstances:
SAVING RECORDS. You must keep the records that were used in the preparation of your tax return (records that support income and deductions) for at least three years from the date you filed the return. Other records that you must keep for your business are:
- Records of estimated tax payments that you make to the IRS. These are vital for your business services provider.
- Monthly profit and loss statements. You should compare your profitability and expenses to your budget on a monthly basis so you can be sure you are maximizing your profits.
- Insurance papers. In the event of any type of claim, you will want to have this information at your fingertips.
- Maintenance reports and records for your truck. These will be important for repair and warranty issues, and the general maintenance of your truck.
- Warranty information. This should be immediately available in order to keep your truck on the road and avoid unnecessary downtime and minimize maintenance costs.
- Registration information. Required by federal and state authorities.
- Settlement statements. These will be used to determine your income and expenses.
- Cancelled checks and bank statements. These are your proof of truck-related expenses.
- Business credit card statements. These statements help prove your truck-related expenses.
All this paperwork is used to develop your monthly profit and loss statements and to accurately estimate your quarterly taxes. In addition, it is used for your income taxes to ensure you are getting all the deductions you are legally allowed.