Your profit and loss statement should show monthly and annual costs and revenue, as well as miles driven and cost per mile.
THIS ARTICLE IS FROM the 2007 edition of the Partners in Business manual for owner-operators. The next Partners in Business seminar will be 2 to 4 p.m. Aug. 24 during the Great American Trucking Show in Dallas. To order a manual, call (800) 633-5953, Ext. 1301. Visit this site for more excerpts and program information. The seminars and the manual are brought to you by Overdrive, American Truck Business Services, Freightliner Trucks and Castrol.
All your settlement statements and expense receipts should be sorted into categories and added up for a total at the end of each month. All your operating information should then be incorporated into a consistent format called a profit and loss statement, also known as a financial statement or a statement of earnings.
This should be done monthly so you can see how you are doing and whether your situation is improving month to month. You also will be able to compare your profit and loss statement to your budget to see whether you are on track with your plan.
The statement should tell you how many miles you drove, what your revenue was, what your costs were and how much money you made during the month – your profit or loss. The statement should include ratios such as cents per mile and percent of revenue so you can analyze your performance. In addition, the statement should have a year-to-date (YTD) column that accumulates each month into a total for the year.
A profit and loss statement is a valuable tool for your business. Not only does it show how you are doing, it allows you to analyze your operation and pinpoint areas that require attention.
KEEPING UP WITH A CHANGING MARKET
Successful owner-operators have to know how to adjust for changing conditions. If they don’t, their profitability will be poor at best.
Are fuel prices low or high? What about insurance costs? Is the economy growing? What do industry analysts say about conditions in the months ahead, and how should you respond? The answers always are changing, and your strategies should change as well.
Use your personal profit and loss statement to compare your performance with your business plan and budget. Working harder does not necessarily mean working smarter.
Your profit and loss statement should show weekly, monthly and annual costs and revenue, as well as miles driven and cost per mile. Make it part of your routine to compare your profit and loss report with your budget and figure out exactly what changes you need to make to maximize profitability.
COMPARING YOUR OPERATION
Compare yourself with other drivers, but be careful because some comparisons are dangerous. Casually comparing settlement checks in the lounge, for example, can mislead operators into thinking they are doing better or worse than they really are. It’s more effective to compare revenue and what other drivers are doing to achieve it, and also what they are doing to reduce costs and minimize waste.
A better way to compare is through benchmarking. This is the key to understanding the big picture: not just where you stand in relation to a few other drivers, but in the industry as a whole. A good business services provider can provide key benchmarks, or averages – such as cost per mile for dry van haulers – that will help you analyze where you’re performing well and where you need to make changes.
Comparisons help you understand changes that are going on in the trucking industry and what other drivers are doing to adapt. If you are not doing as well in some areas as other drivers are, solving the problem is up to you.