LANDLINE

MAY, 2006

ARTICLE0506LL

 

FINANCIAL STATEMENTS – A TOOL TO YOUR SUCCESS

 

 

We are beginning a series on the financial aspect of your business and the importance of proper record keeping.  We have found that a number of truckers rely on their checking accounts to determine how their business is doing.  That will tell you, obviously, your cash position, but will not provide the profit and loss statement necessary for tax purposes, tax planning and information to properly manage your business.  You need to have a bookkeeping system so you can produce information that is necessary for planning, tax projections, budgeting, cost analysis and to realize some kind of savings by spotting areas where expenses could be reduced.  That kind of statement can also help you analyze the efficiency of your current equipment and if changes should be made.

Important financial records are to be relied upon for making important financial decisions.  Do you have those records?  Good financial records do not have to be complicated.  A bookkeeping system is like any tool used in a business; it needs to provide the information you require to run your business.

 

A Profit and Loss Statement (P&L) is one of your most valuable tools as a business owner.  However, to many business owners, Profit and Loss Statements appear to be complicated documents that only accountants understand.  They may seem to be useful only when you are borrowing money or filing taxes.  You should know how to read them and understand them.

 

Only the owners are ultimately responsible for the success or failure of their businesses, so you must know how well your operations are performing.  Your Profit and Loss Statements provide you with the basic tools.  These statements are designed to summarize financial activity for specific periods.  They are filled with information for profitable business management.

 

Regardless of whether you are preparing the Profit and Loss Statements on your home computer or having them prepared by a professional, the prospects for any business’s success are enhanced if an accountant can review the information in these reports.  The accountant can more easily spot potential problem areas and recommend necessary changes before small problems become big ones.

 

ABC’s OF RECORDKEEPING

 

A = Always keep receipts.  Your receipts are the tickets to your deductions, and deductions are the key to paying less tax.  Each receipt you’re able to hang on to represents money you don’t have to pay in income tax.  Organization is the key to keeping track of your valuable receipts.  Keeping all your records in one place makes the job easier and more efficient.  Good organization is important.  An accordion folder, files, or just plain envelopes are easy to deal with in the compact area of the truck.  There are several ways to keep track of your records.  By month, or by trip, or according to type of expense – fuel, insurance, repairs, cell phone, and so on.  Once you’ve worked out a system for the truck, set up an area at home to retain the records for each month – a filing cabinet, separate desk, or some boxes would do.  When planning your home record- keeping, look for a system that can expand with your needs.  Many office supply stores sell organizational and record keeping systems.

 

B = Bookkeeping System.  You must have some type of bookkeeping system, whether it’s manual, computerized, or a professional service.  If you decide to do your own bookkeeping, using a computer can make things a lot easier.  Reports and calculations can be done with the touch of a button.  Many excellent software programs are now available that are designed specifically for the owner-operator.  In addition to basic bookkeeping, many programs track fuel purchases, track maintenance, maintain accounts receivable and payable information, calculate cost-per-mile and more.

If you don’t have the time, the know-how, or the inclination to do your own bookkeeping, hire a professional service.  Take the time to find a service that specializes in the trucking industry.  Trucking is a very specialized field and unless you use someone who knows your industry, you won’t get the expertise you need.

 

C = Costs.  Know what they are and how to control them.  Learning to manage your money is crucial to your success.  Keeping track of your costs and learning where you can reduce spending is essential. You should sit down and write out a budget and have a system for projecting your income and expenses.  Determining your minimum cost to operate is the first step.  You must know your expenses, so you’re not caught off guard. Regardless of whether there are good times or bad, there are always fixed expenses such as truck payments and insurance.  When budgeting, always plan for emergencies.  Then, compare the budgets to actual results and see if you hit your projection or did better or worse.  Then analyze the results and comparisons outlining where you can improve, and plan what needs to be accomplished.

 

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.”