One of the essential tools in any business owner’s arsenal is their budget. A budget will allow you to set and achieve your goals and compensate for any losses. This is especially true when you’re in the often-volatile transportation business.
A budget can seem overwhelming, but it is simple and easy to start. Create a simple 50/30/20 budget.
You spend roughly 50% of your after-tax dollars on payroll, equipment, repairs, maintenance, etc. No more than 30% on wants such as new office equipment. Then, 20% on savings and any debt repayment.
This plan is simple, and if followed, the result will be manageable debt, room to grow your business, and savings to pay for any unexpected expenses.
5 tips to create a budget
Now that you have a budget model in place, creating and maintaining a budget can be done in five simple steps:
- Determine your income after taxes to give you an accurate picture of your savings and expenses. Ensure that you have an accurate picture of your annual income by noting any automatic deductions or additional income sources.
- Choose a budgeting plan that works for you. You will want to pick a plan that covers all of your needs, includes some of your wants, and covers savings for emergencies and such as claim offsets.
- Track your progress by recording your spending. There are many free-to-use online budgeting and savings tools. It is essential to find one that is simple and easy to use daily so you can monitor your budget.
- Automate your savings as much as possible and hold yourself accountable for your budget.
- Revisit budget as needed. Income, expenses, and priorities will change over time, and the budget can be revised. The most critical piece is to make sure you have a budget and accurately record your expenses and income to track your progress – especially when it comes to reaching your financial goals.
Bonus tip: Categorize your costs
Categorizing your costs into fixed versus variable costs is important when reviewing your budget. Fixed costs are those that will stay constant month after month. These are items such as your truck insurance premium, trailer, and truck payments, health insurance, license plates, and permits.
Your variable costs will be those that vary depending on your business fluctuations. For instance, depending on how much you drive and what routes you take, your fuel costs, tolls, food expenses, phone, and repairs are all examples of variable costs.
Another essential variable often not recognized is your open accounts receivable and uncollected invoices. It is necessary to review your budget and make sure you have your costs in the correct category of fixed versus variable.
The key to a budget is to accurately set your income and expenses, hold yourself accountable to the budget, and monitor it daily. This way, you can see progress, revisit, and restructure your budget if needed, and set goals that you will be able to reach to help grow your business!
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The England Carrier Services (ECS) division offers various services for carriers ranging from maintenance to support. As ECS members, carriers have access to nationwide discounts on fuel and tires from dedicated team members committed to finding the best price. ECS also provides factoring services with benefits such as same-day funding to a bank account or fuel card. These options allow carriers the freedom to focus on growing their business while saving time and money.