When you run a trucking business, or a freight brokerage business, there can be a lot of ‘wear and tear’ on you personally. The business is in constant motion—literally speaking.
You constantly have to manage the demands of customers, the needs of your drivers and staff, while needing to know where your loads are, or going to be, at all times. As such it’s always good to have some sort of system, or technology platform, in place so that you track your equipment, your drivers and the loads they are transporting.
Knowing ‘where’ a load is, and ‘when’ it’s going to get there is essential in order to manage the customer’s expectation and that of the consignees. As a Dispatcher you have to arbitrage the needs of these three constituents.
Customer: “When is going to get there?”
Consignee: “Is is going to arrive when I have an open slot for you as scheduled?”
Driver: “I don’t like to wait!”
A good trucking software platform should integrate into a GPS system that can track the location of the shipment either through satellite or cell technology systems. While these systems at the core provide important data to all the stakeholders for the load, they also serve other important functions relating to the optimization of fuel consumption and driver safety and accountability.
And of course, knowing the ‘ins’ and ‘outs’ of your business means you need to know what your equipment can do and what it can’t do. How heavy a load can you manage in a particular trailer? Knowing the ‘Tare’—the unladen weight—of a vehicle is important so that you can determine the net weight of your cargo after subtracting it from the gross weight of the entire load.
You need to know the ‘tare’ so you can compute the costs of goods for tax purposes, or for payments to a vendor, or for tolls relating some other means of transport (ie: barge, rail, etc.).
You will see the tare posted on the outside of truck vehicles and rail cars so it’s not like it’s a big secret, but it’s important to keep a record of this in your trucking software system as well.
And it’s not just the owner of a trucking business that struggles with the ‘wear and tear’ of the business. The trucks, the chassis, the trailers and all manner need to be maintained. A good trucking software system will help you track the maintenance activity on your vehicles, especially those that required remedial work after getting cited for a violation by a safety inspector.
Beyond all that, a good trucking software system gives you information on the current condition of your fleet and connects into a financial platform that allows you to account for the amortization of your investment in your fleet.
Amortization can be a bit arcane, a somewhat nebulous concept to people in business. And too often in the modern age of ‘live for today’ and ‘let tomorrow take care of itself’, it has been rendered an afterthought by technology entrepreneurs.
Amortization has a significant impact on two facets of a business:
1. Net Income-Taxes
The pace at which you amortize your assets can impact your income statement negatively or positively. If you can amortize and asset more quickly then you can increase your expenses, and this can result in lower taxes, and increased cash flow, especially in those cases when you have purchased the asset in ‘up front’ dollars and have a sunk cost to be depreciated.
2. A Going Concern
But the most important element to understand about amortization is that it makes a business account for its ability to conduct business on a ‘go forward’ basis. Think of it this way—if you don’t do any maintenance on your vehicle whatsoever, it will break down more quickly. If you don’t replace your tires or change the oil, you are going to run into some really, really big problems. Maybe you can get away with it for a week or so, but eventually you are going to blow a tire, or have your engine explode! You save the cost of replacing a tire, or an oil change, today………but you risk an accident or breakdown later on.
In much the same way, if you don’t take into account the ‘wear and tear’ on your fleet and other assets, and you don’t build that cost into your pricing, you will not have the capacity to REPLACE your assets—impairing the ability of your business to conduct business going forward.
So as you can see, there is a short-term component to ‘amortization’……and a longer term component to ‘amortization’.
As for me, this morning, I am writing off this total blog. I am amortizing this last paragraph and am going to go shopping for some new concepts, some new paragraphs and some great new words that I can use for my next blog.
You see…….I am just worn out writing about the ‘wheres’ and ‘tares’ of this industry and the ‘wear ‘n tear’ of this business. You know it can really ‘take a
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