Tuesday, 21 July 2015

Business Management Breakdown | Figuring Cost Per Mile

Are you ready to talk business? This new series has been a long time coming. Managing a trucking business can be a bit overwhelming when everything is thrown at you all at once. The TruckLogics Crew is going to help you out by breaking things down and fully explaining what knowing the information does for the progress of your business. Business management might not sound exciting, but have faith. Once you understand where your money is going, you will know how to increase profits. And don't worry, we will get to the topic of increasing your profits very soon. Before we get there, you need to know your cost per mile.

Why Knowing Your Cost Per Mile is Important?

When you know your cost per mile, you will be able to select profitable loads and know exactly how much your profit will be. There are two types of costs that factor into your cost per mile: fixed cost and variable cost. 

Fixed Cost

Fixed costs are expenses that do not change whether you're on the road, or your truck is parked in the driveway. Expenses in this category are your truck/trailer payments, insurance, renewal fees, permits, licenses, accounting services, or any cost that stays the same no matter the volume of business. When you know your fixed cost, more specifically your fixed cost per day, you will be able to decide what loads are really worth your time. 
  • You can figure your fixed cost per day by adding up all your fixed expenses for the year. Then, divide your total fixed expenses for the year by 12 to get your fixed cost per month. Once you have your fixed cost per month, divide that number by 30 and that will give your your fixed cost per day. When you know your fixed cost per day, you can decide if a load is worth waiting for and eating those expenses, or if a different load you can pick up right away is the better option. 


Variable Cost

Variable costs are expenses that directly relate to operating your truck. These types of expenses include, fuel, tires, maintenance, repair, meals, tolls, scale fees, fines, legal fees, lodging, loading/unloading fees, or any cost that varies depending on your business volume. Knowing your variable cost is really important in figuring out your cost per mile. 


Figuring Cost Per Mile

The easiest way to do this is to add up your total fixed costs and total variable costs for the year. The number you get from adding your total fixed and variable costs will be your total vehicle costs. You want to divide your total vehicle cost by the amount of miles you drove that year. The number you get will be your vehicle cost per mile. To get your cost per mile, you will simply add your driver pay per mile to your vehicle cost per mile. Let's create an example so you can actually see what I'm talking about.

  • You will see that I took the cents per mile out three decimal places. This will give you a more accurate cents per mile for your total cost of operation. 


How TruckLogics Takes it One Step Further

Cost of Operation sheets, like the one above, are great for breaking down finances to see your operational cost per mile. But this is only an annual breakdown, and it's only for one truck. What if you wanted to view a different truck, and just see what the cost per mile was for one month? Things start to get a bit more intense, right? 


With TruckLogics, you can view a Profit & Loss Report that can be set for any date range and any vehicle you have in your account. TruckLogics does all the calculations for you, so all you have to decide is for what, and when, you need a report. It just makes your life easier when you need to run financial reports. There is a great in-depth look into the Profit & Loss Report feature in last week's last blog, check it out - Profit & Loss Reports | Show Me The Money.

Experience TruckLogics today with a 15 day free trial

If you have any questions about TruckLogics or would like to schedule a personal demo, we would love to hear from you. Contact the TruckLogics Support Crew via phone: 704-234-6946 or email: support@trucklogics.com

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