LANDLINE

JUNE, 2006

ARTICLE0606LL

 

FINANCIAL STATEMENTS – A TOOL TO YOUR SUCCESS

PART II

 

We are continuing our series on the financial aspects of your business and the importance of proper record keeping.  You probably didn’t go into trucking to learn how to become a bookkeeper.  But as a self-employed person, it’s good business to familiarize yourself with the basics of bookkeeping .  If you currently have a recordkeeping system that is working for you – great, stick with it.  If you’re operating as a sole proprietor, the good news is when it comes to bookkeeping you have it the easiest.  As a sole proprietor you are not required to maintain a full set of books.  You just need to keep track of all your dollar transactions and formulate them into a profit and loss statement.  If you operate your business as a corporation, partnership, or LLC (partnership or corporation), you will need to maintain a more complex set of books.   For purposes of this article, we will be discussing the simpler bookkeeping requirements.  Whether you are doing your bookkeeping by hand or on a computer, you need to make sure you’re accounting for all your income and expenses.

 

Keeping Track of Income

If you are independent and are doing your own billing, you will be maintaining a record of all accounts receivable (all business billing or invoicing) as well as a record of all receipts (money coming in).  You should keep some type of notation summarizing each deposit and its source.  If you work as an owner-operator and receive a settlement statement, the amount of money deposited into your bank account is going to reflect an amount less deductions for certain expenses, such as, truck payment, insurance, fuel, etc.  However, for bookkeeping purposes, the gross amount or the amount before expense deductions will be recorded.  Since this gross amount is your actual business income, it will be reflected on the books.

 

Keeping Track of Expenses

When recording expenses each month, remember there are several areas to cover in gathering all the information.

 

·         Checkbook – Be sure to record all checks written for business expenses.

·         Settlements – Most deductions shown on your settlement are business expenses, and must be recorded.

·         Credit Card Charges – All business expenses charged on your credit card must be recorded from your monthly credit card statement.

·         Cash – The only way to keep track of cash expenses is to SAVE RECEIPTS.  If you lose the receipt, you lose the deduction.

 

If you are using an accountant to do your bookkeeping, you will still need to maintain the same information so that it can be sent to the accountant each month.

CHOOSING A BOOKKEEPING SYSTEM

It’s especially important for self-employed truckers to have a handle on how they are doing on an ongoing basis.  You should know your income and expenses at any given time during the year.  Again, most truckers seem to rely on their checking account to tell them how they are doing.  But this is not the smart way to run a business.  You need to adhere to a bookkeeping system so that you can produce information that is necessary for planning, tax projections, budgeting, and cost analysis.  Your bookkeeping system will show you where your money is going and may show the way to cut expenses.

 

There are various methods that are used in keeping records.  One type that we are all familiar with is fondly referred to as the “shoebox” method.  The shoebox method is simply a collection of receipts, paperwork, cancelled checks, and credit card charges all thrown into a box.  At the end of the year, everything needs to be summarized.  This is the start of the bookkeeping process.  However, that type of bookkeeping will not be very meaningful since you could not have made use of the numbers during the year.  But, it will enable you to do your taxes.  However, when your tax preparer tells you that you owe a large amount of income and self employment tax, you may not be prepared.  You’ll complain, “I’ve spent all my money on my business and I have nothing left over.”  Or, “I didn’t make any money, so how can I owe so much in taxes!”

 

Proper bookkeeping can equate to efficient business planning.  Bookkeeping is nothing more than grouping and summarizing all your income and expenses so that they can accurately reflect how you are doing.  It can tell you how much you have collected, how much you have spent by category – such as fuel, insurance, repairs, parts, etc.  It can tell you if you have been successful, and highlight areas where your expenses should be examined.  In short, it gets you thinking about your business and what you can do to make it better.  There are various bookkeeping methods available to you other than the “shoebox” method.

 

Manual Bookkeeping

One method is to buy a record book specifically suited to truckers that allows you to record income and expenses on a daily or monthly basis.  At the end of each month, total your expenses.

 

Another method to help you record your income and expenses is to make up your own worksheet.  Simply list each month across the top of your worksheet and your income and expenses down the left side.  You can then total your expenses and subtract them from your income to arrive at your net income or profit.

 

Computerized Bookkeeping

If you are going to do your own bookkeeping, we recommend using a computer.  There are many good software programs available specifically designed for trucking or you can simply use a spreadsheet program such as excel.  If you have a multi-truck operation, you can review information by truck, or the business as a whole.

 

 

Here are a few trucking-specific bookkeeping programs.

 

            Profit Tracker by Edonna Products Service, Inc. – www.edonna.com

            The Truckers Helper – www.truckershelper.com

            Truck Books by PBS – www.pbstruckbooks.com

            Easy Trucking Software by Omni Communications – www.2omni.com/land

            Owner/Operator by Hammerlane – www.hammerlane.com

 

You could also use programs such as Quicken or Microsoft Money.  They are not trucking-specific, but will get the job done.  Once you have all your income and expense information in an organized format, you will be able to review that information to gain more insight into your business operation.

 

Whether you are looking at a professionally prepared Profit and Loss Statement or a self-generated one, you will have the information necessary to start managing cash flow and controlling costs.

 

This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century.  Contributions to this article were made by Shasta May, Director Business Development for PBS.  If you would like further information, please contact us at 800-697-5153.  Visit our Web Site at www.pbstax.com .

 

“Everyone’s financial situation is different.  This article does not give and is not intended to give specific accounting and/or tax advice.  Please consult with your own tax or accounting professional.”