Top Expenses of Owner-Operators
As an owner-operator, you have a lot to stay on top of in the way of finances. From monthly expenses to profit margins, you need to know what's going on at all times. That's why we've created this guide. These are the top expenses that matter to owner-operators — by getting familiar with them; you can create a plan to help easily manage your finances.
Expenses of Owner-Operators
A high-profit margin is the main goal of owner-operators. To improve your profit margins, you need to understand your owner-operator expenses. Knowing what you're spending can help eliminate unnecessary expenses and increase profits. These are the top expenses you need to address to keep your business profitable and stable.
Fuel and Toll Costs
Fuel can cost owner-operators tens of thousands of dollars annually and must be budgeted for. The best way to do this is to plan out your monthly fuel costs per mile. To calculate this figure, you'll divide your truck's miles per gallon by the current cost of fuel per gallon. Take that number and multiply it by the miles you expect to drive, and you have your answer.
Say your truck gets 6.5 miles per gallon of gas, and the current cost of diesel is $3.70 per gallon. If you're planning to drive 800 miles in a month, you would first divide 6.5 by 3.7 to get 1.76. Then, multiply 1.76 by 800 miles. The total fuel cost would be around $1,408 for the month and $16,896 for the year.
Tolls are another cost you must consider — these expenses can add up fast. You can take routes that avoid tolls, but these can add significant miles to your trip. One option is to trust a toll management solution to bridge the gap between tolling authorities and your fleet. With a toll management solution, it's easy to make digital payments, and these solutions providers can also handle issues like improper charges, saving you time and money.
Truck Purchasing and Leasing
As an owner-operator, perhaps the most substantial fixed cost is your truck payment(s). It is vital that you make sure to budget for your monthly lease payments. Companies that own their truck fleets can ignore this expense. However, companies planning on buying new trucks must keep those expenses in mind for the affected months.
Trucking expenses like maintenance and repair are crucial costs. The condition of your trucks impacts how much use you'll get out of them, and the law requires you to keep your truck up to road safety standards. The cost of preventive maintenance is far lower than the price of a massive repair that might halt your ability to deliver cargo.
You should allocate a small percentage of your overall expenses to truck maintenance and repairs. You should also treat tire replacements and repairs as separate costs.
Permits and Licenses
Permits, licensing and other required documentation should be accounted for in your annual owner-operator income and expenses planning. These costs and the required documents will vary by state. You'll likely need to account for these five documents:
- Business licenses: These documents allow you to conduct business within your government's jurisdiction.
- Registration fees: These are the licensing documents for your trucks.
- Renewal fees: This is how much you need to pay to renew your licenses every year.
- Transport permits: This is a permit that allows you to transport goods in accordance with the terms of legislation.
- Vehicle inspections: Vehicle inspections determine your truck's road safety rating before long trips.
Insurance is one of the more intricate monthly expenses you need to account for as an owner-operator. It's important to carefully consider your insurance costs versus benefits to make sure you are paying the right amount for the coverage you're getting. More coverage means higher monthly premiums. However, less coverage comes with more risks. An owner-operator needs to deal with two types of insurance: vehicle insurance and health insurance.
Taxes are an essential category on your list of owner-operator expenses. You may be able to reduce your corporate taxes by qualifying for deductions. For this to happen, you need to provide proof which means keeping receipts. Consult with a tax attorney every year and keep a detailed record of your expenses, claims and proof. Taxes can be divided into many categories, including personal, corporate, fuel and road use.
Professional services refer to any additional services you outsource to make your business operate more smoothly. These are the most common professional services used by owner-operators:
- Broker fees: Freight brokers match shippers with truckers and provide a steady list of loads to transport for your business. Every broker sets their own rates, so consult with them for exact prices.
- Expedited payment fees: While small, expedited payment fees still need to be accounted for. They help you receive your money immediately rather than waiting for a check. You need to pay a small percentage of your invoice to make this happen.
- Load board subscriptions: Load boards allow you to book higher-paying loads. Instead of paying per load, you can pay a monthly subscription fee to access the load board for a number of advantages and vital features.
Food and Drink Budgets
Drivers need to eat and drink during their long journeys. Carriers are able to deduct some meal expenses from their taxes using the per diem tax deduction. Keep your food budget per driver relatively low but fair. Consider investing in appliances like like a mini-fridge or microwave to keep in your trucks to save money on meals. Eating from truck stops or restaurants at every meal adds up quickly.
How Bestpass Can Help
Bestpass can help you manage your business and improve your owner-operator profit margin. We are a comprehensive payment platform provider for toll management solutions. Our services are ideal for commercial fleets of all sizes. Bestpass provides data accuracy, payment consolidation and citation payment services, and we help you save time and money going through tolls. We're founded by truckers, for truckers and have been in business for more than 20 years. Bestpass is a recognized and trusted partner for your company in the office and on the roads.
What we offer is a way for service fleets, trucking companies and owner-operators to simplify their toll payments and get discounts on tolling. We provide violation dispute management services and allow your company to pay for your toll costs in one convenient place.
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