Solid financial and operating metrics reporting keeps you in the driver’s seat
The transportation industry navigates a winding economic road, with conditions changing like the spring weather on a long-haul run.
Just as a driver must touch base with the dispatcher, company owners and management must be in tune with the state of their financials. Around any curve could be unexpected economic trouble that might harm their company’s operations and, as a result, its bottom line.
Companies that fail to have a good grasp on their financial information miss opportunities to manage risks. To their detriment, they become reactive rather than proactive.
These are the factors you need to address to keep your company from taking an expensive detour.
Communication is critical
From operations and safety to maintenance, sales to accounting, information must flow throughout the organization. Representatives from each department should attend monthly management team and financial reporting meetings.
These collaborative discussions of financial and operational results will keep everyone on the same page when it comes to profitability and key operating metrics. If corrective action is needed, a plan should emerge from these meetings promptly.
And company confabs don’t have to be all work and no fun: How about an annual retreat for the management team to discuss long-term goals?
Review the data
To make sure your monthly review meetings are producing the reliable information management needs to evaluate needs and shift strategies, determine what data each department is expected to provide and set due dates.
The topics could include:
- Operations: Daily statistics should report on the number of loads, loaded miles and deadhead miles, as well as revenue per day.
- Safety: List the number of drivers hired and terminated, as well as the number of accidents.
- Maintenance: This category covers inventory numbers and service issues.
- Sales: Compile customer service issues and service needs.
- Financial statement: Reviewing and asking questions about your balance sheet is essential, as it is with the income statement. Changes in the balance sheet affect the income statement. To avoid potentially substantial and unexpected year-end changes, reconcile balance sheet accounts monthly.
- Review aging receivables: Examining this category to identify issues related to invoicing and collecting from your accounts will help you create a proactive correction plan.
See the big picture
Your company’s operating and financial metrics should be compiled into reports that gauge month-to-month and year-to-year snapshots. These reports help you recognize changes in the operational landscape. They will assist in your business planning by identifying seasonal and economic upward and downward turns, cost management issues, and operational challenges.
Make these alignments
It is important that you align capital expenditure planning and the management of deferred tax liabilities. Federal tax accelerated-depreciation rules often result in wide gaps between book and tax depreciation. Over time, your tax depreciation can be significantly less than your book depreciation, or your book and tax gains and losses can be significantly different, leading to an unpleasant surprise at tax time.
Having a handle on the book and tax attributes of your depreciation, including depreciation projections and net book values, reduces the risk of surprises. Aligning the timing of tax-depreciation reductions with capital expenditures could produce significant savings.
More Changes in 2018 and beyond
The 2017 Tax Cuts and Jobs Act created significant opportunities and affected the bottom line of almost every corporation and business owner. You also can expect significant changes on the financial-reporting horizon. Standards for revenue recognition will demand your attention in 2018 as they go into effect starting in 2019. Additionally, the lease accounting standards will be implemented in 2020 for nonpublic companies.
Working with an accounting firm that serves as a business partner who helps you navigate these rules will better prepare you for this period of change.
Matthew S. Wildasin, CPA is a principal of Boyer & Ritter LLC and a member of the firm’s Business, Transportation, and Manufacturing and Distribution groups. James A. Schuck, CPA is a manager with the firm and has more than 15 years of experience in public accounting. Contact Matt (email@example.com) and Jim (firstname.lastname@example.org) at 717-761-7210.