To remain profitable in the transportation industry is a challenge these days. Without a proper way to track and control operational expenses for your trucking company, you run the risk of going out of business.
One way to gauge profitability is to accurately calculate the cost per mile for each of your trucks. That way, you’ll have a better understanding of your expenses when it comes time to charge your customers.
With strong bookkeeping and accounting practices in place, calculating your cost per mile starts with your company’s expenses. In the transportation industry, expenses typically fall into three categories: fixed costs, variable costs, and payroll.
How to Calculate Your Company’s Cost Per Mile
- Fixed Costs
Fixed costs for your trucking company are expenses you pay regardless of if your trucks are on the road working jobs or parked in the lot. Expenses include truck payments, insurance, permits, property costs, and other services.
Tally your fixed costs for the month, and divide those expenses by the number of miles your trucks drove for the same time period.
Example of Fixed Costs Per Mile:
$4,000 (fixed costs for the month) / 10,000 (miles driven for the month) = $.40 (per mile)
- Variable Costs
Variable costs are expenses needed to operate your trucks on a monthly basis. These costs may include fuel, repairs, regular maintenance, meals, lodging, and other expenses tied to operating your business on the road. Unlike fixed costs, variable costs can vary from month to month, depending on your workload.
Tally your variable costs for the month, and divide those expenses by the number of miles your trucks drove for the same time period.
Example of Variable Costs Per Mile:
$3,000 (variable costs for the month) / 10,000 (miles driven for the month) = $.30 (per mile)
- Payroll Costs
Don’t forget about your largest expense for the month: employee payroll. Similar to the equations above, divide the total payroll for the month by the number of miles your trucks drove for the same time period.
Example of Payroll Costs Per Mile:
$5,000 (payroll costs per month) / 10,000 (miles driven for the month) = $.50 (per mile)
- Total Cost Per Mile
To calculate your total cost per mile, simply add your fixed, variable, and payroll costs for the month.
Example Total Cost Per Mile:
$.40 (fixed) + $.30 (variable) + $.50 (payroll) = $1.20 (per mile)
Having these numbers on hand helps you to identify spending patterns for your trucking company. These reports also give you a benchmark to determine an appropriate rate to charge customers.
Don’t ignore bookkeeping and accounting for your trucking company.
Why? Your business depends on having a solid financial foundation. Avoid cash flow issues, trim unnecessary expenses, and remain profitable by partnering with an accounting service to handle monthly reporting specific to your business and industry.