While learning about bookkeeping for truckers might seem overwhelming, we have some tips for you. Following these can help you set up the right system and choose the right tools and services to help you.
Understanding Bookkeeping for Truckers
What is Bookkeeping and Why is it Crucial for Truckers?
Bookkeeping involves tracking income, expenses, assets, and liabilities. It is a systematic process that accurately records and organizes financial transactions.
Bookkeeping for truckers is crucial because you need complete and accurate records. This allows you to file your taxes correctly and monitor the financial health of your trucking business. This is how you make informed decisions and stay safe in case of disputes or legal issues.
Proper bookkeeping helps you to identify areas where you can cut costs and improve profitability. It also increases your chances of securing any loans you might need for truck repairs, upgrades, or business expansion.
If you want to sell your trucking business later on, you will need to show meticulous financial records to get the right valuation.
Key Financial Challenges in the Trucking Industry
Cash Flow Management
- Truckers often face irregular payment cycles due to varied and long payment terms.
- They also deal with high upfront costs like fuel, drivers’ wages, and insurance. More specifically, for example:
- Fuel prices fluctuate significantly, and strategies to mitigate costs can be complex and risky.
- Competition to attract and retain skilled drivers pushes wages higher.
- Insurance for trucks and drivers gets more and more expensive, but owners need to balance adequate coverage with affordability.
Equipment Costs
- Truck and trailer assets lose value over time, and maintenance and repair is expensive, too.
- Inflation affects the cost of new vehicles.
Economic Cycles
- Economic recessions can quickly lower freight demand and, therefore, rates.
- Intense competition can lower freight rates and make maintaining market share difficult.
Regulatory Compliance
- Staying compliant with federal and state regulations is costly, and non-compliance can result in significant financial penalties.
Setting Up Your Bookkeeping System
Choosing the Right Bookkeeping Software
Most bookkeeping for truckers isn’t really complex. You can do fairly well with basic bookkeeping features:
- Integration and syncing accounting software with bank accounts and logistics software for seamless financial management.
- Basic expense tracking, invoicing, payroll, and generating financial reports.
Where it can get complicated is in the available integrations with other essential management tools:
Fleet Management
- GPS tracking for real-time location monitoring, geofencing, and driver behavior tracking.
- Vehicle maintenance scheduling and repair cycle tracking to manage costs and asset depreciation.
- Equipment information and licensing tracking.
Dispatch and Logistics
- Load board integration to monitor freight loads and bids.
- Route optimization to save time and fuel.
- Driver dispatch scheduling and communication on the road.
- Cloud-based document management for ease of access.
Compliance and Safety
- ELD (Electronic Logging Device) Compliance: Ensuring adherence to hours-of-service regulations.
- Driver Safety: Monitoring driver behavior, accidents, and safety scores.
- Regulatory Compliance: Tracking permits, licenses, and inspections.
Integrating everything isn’t essential, but it can make bookkeeping go much more smoothly.
Manual vs. Automated Bookkeeping
Manual bookkeeping is much simpler and can work well for small businesses with minimal transactions. It also gives you complete control over your financial data. Although you will still spend on supplies, you won’t pay for software or additional hardware or cloud storage.
Note that manual entry and calculations are labor-intensive and therefore time-consuming. This method is also error-prone, leading to the need to spend more time checking for inaccuracies. This can increase costs.
Generating manual reports and analyzing the data is more difficult than with digital reports. This only gets more difficult as your business grows.
Automated bookkeeping saves a lot of time on data entry and calculations, and reduces labor costs significantly. Human error rates also go way down. Moreover, you get access to real-time insights on up-to-date financial information.
Automated solutions are generally scalable, and offer a lot of features like budgeting, forecasting, and reporting. Even if you might pay a subscription fee and may need to train staff, accounting software is worth it in the end. Just make sure you back up your data and choose secure tools.
Tax Preparation and Compliance
Understanding Trucking-Related Deductions
Bookkeeping for truckers will involve a lot of tracking around vehicles and drivers on top of the more usual operational expenses.
Trip-Related Expenses
- Fuel and toll fees
- Vehicle insurance
- Vehicle repairs and maintenance
- Depreciation of equipment year over year
- Licenses and permits for operating a commercial vehicle, including state registration, permits, and IFTA fuel taxes
- Communication expenses
- Meals and lodging for long trips
Operational Expenses
- Driver salaries or wages for employees and independent contractor fees for owner-operators and/or leased drivers
- Office expenses
- Legal and professional fees for advice, accounting, and tax preparation
- Advertising and marketing
- Costs of attending industry conferences and seminars and for driver training programs
- Insurance for yourself and employees, along with other required benefits
- Retirement plan contributions
Preparing for Tax Season
Maintain detailed records of income, expenses, mileage, and receipts throughout the year. We recommend using a digital system, but physical files work, too, if you can keep them organized.
If your business puts you in the self-employed category, make quarterly estimated tax payments to avoid penalties.
At the end of the year, gather all your records and collect the necessary tax forms. Sort and categorize them as you review your transactions. If you need to, seek professional help to determine all eligible deductions.
When tax season rolls around, you’ll be ready to complete and file your federal and state tax returns well before the deadline.
Best Practices to Ensure Accurate Bookkeeping
When in doubt, hire a professional bookkeeper, accountant, or tax specialist to advise you and help with tasks. They have experience and a broader perspective on industry trends and best practices. They can expertly diagnose problems and develop effective solutions.
We always recommend outsourcing non-core business functions so you and your staff can focus on core competencies. This increases everyone’s productivity without decreasing output quality. That’s extremely cost-efficient, on top of saving by hiring overseas freelancers.
Leveraging Bookkeeping for Business Growth
Apply proper cash flow management strategies to predict income and prepare for expenses. Keep track of potential cost increases so you can make budgeting adjustments and prevent financial crises.
Do a profitability analysis quarterly or at least twice a year to identify profitable routes and customers. Benchmark your performance to measure efficiency and use your results to set achievable financial targets for growth.
Plan for future investments in equipment purchases. Look into the feasibility of adding new trucks and routes, too. If you need loans for expansion, create projections for financial performance to support your applications.
As you plan, keep an eye on the potential threats of economic downturns and projected fuel price spikes. Always have an updated contingency plan in place to mitigate risks and protect the business.
Frequently Asked Questions
How often should truckers update their bookkeeping records to maintain accuracy?
Ideally, truckers should update their bookkeeping records daily or at least weekly. The more frequently you update your records, the easier it will be to manage your finances and prepare for tax season.
The most important daily tasks include recording fuel purchases, tolls, and other small expenses. The weekly tasks include reconciling bank statements, categorizing expenses, and reviewing income. Truckers should have wage calculations, invoicing, and paying bills on their bookkeeping monthly checklist.
What are some red flags in bookkeeping that truckers should watch out for?
The crucial things to watch out for are:
- Inaccurate and incomplete expense and income records, receipts, and reconciliations.
- Discrepancies in income and expenses reported to the IRS versus the actual numbers.
- Unusual and excessive expenses that are unrelated to business operations.
- Lack of financial controls and signs of potential fraud, like unapproved expenses and missing cash or assets.
Can bookkeeping help in reducing the operational costs for truckers?
Absolutely. Meticulous expense tracking helps you pinpoint areas where costs are escalating. Presenting detailed records can help you negotiate better pricing with suppliers, repair shops, and insurance providers.
Accurate bookkeeping also helps you identify discrepancies and potential fraud early. You can claim all eligible deductions, too, and improve your cash flow.
How can truckers effectively handle bookkeeping while on the road?
Some of the best accounting software for self employed individuals are great for truckers. They have apps that allow you to input expenses, track mileage, and capture receipts on the go. They’re usually cloud-based, so you can neatly store and retrieve records from any device with an internet connection.
Daily record keeping isn’t always possible on the road, but develop a habit of doing pending tasks as soon as possible. Keep your categories clean and consistent, and maintain accurate mileage logs.
What are the consequences of neglecting bookkeeping in the trucking industry?
You can face financial issues fairly quickly without proper bookkeeping for truckers. Cash flow can get out of hand, and you can lose track of transactions that can maximize tax deductions and minimize tax liabilities.
Without clean books, you’re unlikely to get loan approval. Coupled with poor resource allocation, you won’t be able to make good business decisions. If you lose control over expenses, you will likely end up with higher operational costs.
If that wasn’t enough, you could be facing legal disputes, IRS audits, penalties, and fines due to poor bookkeeping and failure to comply with tax regulations.
What Is AccountsBalance?
AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
In Summary
By investing time and effort in understanding bookkeeping for truckers, you can significantly improve your trucking business’s financial performance and stability.
