Expense Groupings for Transportation and Logistics Companies
In the fast-paced world of transportation and logistics, managing costs is more than just tracking spending, it’s about knowing where every dollar is going and why. In order to track and analyze spending effectively, companies should consider grouping their expenses. Clear and accurate expense groupings allow companies to identify areas for improvement, make informed decisions and maintain healthy margins. These expense breakdowns also help businesses to compare various classes such as company owned assets, operator fleets and logistic divisions in order to assess performance.
Organizing Grouping Expenses
To effectively manage transportation and logistics costs, expenses should be grouped into two primary categories:
Purchased Transportation
The largest expense category for transportation and logistics companies is purchased transportation. These costs can be further broken down into the following categories:
- Driver wages and benefits – Includes salaries, payroll taxes, workers’ compensation and benefits, including health insurance, which should be tracked separately for drivers to better understand the cost of each driver and assess job profitability.
- Fuel expenses – Covers the costs of fuel, diesel exhaust fluid and fuel taxes.
- Trailer costs – Costs vary based on trailer type and usage, and may include repairs, maintenance, tires, registration fees and either depreciation or lease payments.
- Tractor costs – Includes tractor insurance, depreciation or lease payments, repairs and maintenance, tires and registration plate fees.
- Tolls and permits – Fees incurred from the use of toll roads and highways, as well as necessary permits.
- Insurance claims – Rather than reacting to claims as they occur, companies should proactively set aside monthly accruals to cover potential claims.
Operating Expenses
Operating expenses can be grouped into these areas:
- Administration expenses – Includes salaries, benefits and other associated costs for staff in administrative and billing roles.
- Operations – Covers costs involved in moving freight to market, including wages for dispatch, sales and marketing, load boards and travel for customer engagement.
- Office supplies and utilities – Includes office equipment, rent and other utility expenses.
Optional: Cost of Capital
The cost of capital can be considered an optional expense category for companies that utilize a line of credit or finance equipment purchases.
The Benefits of Grouping Expenses
Grouping expenses is a strategic tool for transportation and logistics companies to gain visibility into their operations and improve profitability. By categorizing costs into purchased transportation and operating expenses, companies can compare spending against industry standards, identify areas of overspending, gain the insights needed to support better budgeting, improve decision-making and enable a more accurate financial analysis. Ultimately, taking time to improve expense tracking can lead to greater stability and long-term success.
If you have any questions regarding accounting for the transportation and logistics industry, please contact an advisor at Brown Plus.