The transport and deliveries industry is not only fast-paced, it can be cut-throat in terms of competition and building up a reputation for reliability. Because this industry is highly demanding it can be challenging to stay on top of financial matters, yet this is crucial for success.
Our CPAs have seen far too often that simply failing to document a stop or not factoring in fuel price changes can have knock-on effects on financial housekeeping. To help you stay afloat, we take a look at the top 5 accounting challenges that businesses in this industry often face. It is our aim to help you with smart financial management to pave the way for smoother operations. Be aware of these challenges.
1. Variable fuel costs
One of the most unpredictable aspects of the transport industry is the variable fuel costs. Fluctuating oil prices can make budgeting a challenge. To tackle this hurdle, our CPAs advise leveraging expense-tracking technology to monitor fuel consumption to optimize routes. The best way to make accurate predictions is to ensure reliable records of fuel consumption for a fleet of vehicles. It is important to consider if your expense management software integrates with your accounting software. This is essential for precise expense tracking and for claiming potential tax deductions or credits.
2. Depreciation and maintenance of vehicles
Vehicles are the backbone of transport and delivery businesses, but they come with their own set of financial challenges, which include the fact that they depreciate over time. Determining the appropriate method and rate of depreciation is crucial, especially when it comes to submitting taxes. Additionally, your fleet’s smooth operation would benefit from regular maintenance. Accounting for regular maintenance recurring costs and any unexpected repairs is vital for accurate financial reporting. Because these are intricate and dependent on several factors, we advise partnering with an experienced accountant to ensure a reliable depreciation schedule and adequate budget for regular maintenance. This will not only help your business remain compliant but also aid in ensuring an extended lifespan for vehicles.
3. Complex wage and labor costs
Transport and delivery businesses often face intricate wage and labor cost structures. This comes with the territory when you consider varying pay rates, overtime, and other complexities. Drivers, for example, might be compensated based on hours worked, distance traveled, or a combination of factors. Add to the mix overtime calculations and you can easily be faced with complicated payroll calculations. It is advisable to consult an accountant to help you simplify payroll processes and ensure labor regulations compliance.
4. Toll, licensing, and regulatory fees
Navigating tolls, licensing, and regulatory fees can be a maze for transport businesses. This is because toll fees are inconsistent from month to month and it can vary based on routes. Similarly, different regions may have specific licensing fees or regulatory charges for commercial vehicles. Ensuring these are accounted for and paid timely is crucial to avoid penalties. Toll and regulatory costs add up quickly and can catch businesses off guard. A proactive approach involves accurate budgeting and record-keeping to ensure compliance.
5. Revenue recognition and billing
Accurate and timely billing is crucial for maintaining healthy cash flow. But, revenue recognition can become complex, especially when dealing with different clients and services. This is because different use different billing models. Some businesses might bill customers based on weight, distance, time, or a combination of factors. Additionally, in some cases, especially with long-haul deliveries, there might be a delay in payment or revenue recognition. This can greatly impact cash flow and financial reporting. If you regularly deal with these scenarios then employing the services of a skilled CPA can help you create streamlined billing processes to reduce errors and delays.
At Fusion we offer outsourced tax and accounting services. Our CPAs are also NetSuite-certified and we have built numerous bespoke software integration tools to make automation simpler. We can help you look into your data to advise on the best way forward to mitigate the challenges that come with operating in the transportation industry. Contact us today!
This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. We base articles on current or proposed tax rules at the time of writing and do not update older posts for tax rule changes. We expressly disclaim all liability regarding actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.