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How can Trucking Companies Determine Cost Per Mile?

Cost per mile is one of the most important calculations that owners of trucking companies make. Most loads pay by the mile and it is impossible to know if you’re making money on a run unless you have figured all of your expenses on a per-mile basis. Some of these expenses are easy to figure because they are fixed cost expenses that are the same every mile, while others are variable cost expenses that are subject to constant change. Many shippers and freight brokers offer truckers a fuel surcharge to offset the high cost of fuel and help keep the cost of fuel per mile consistent when prices at the pump are changing rapidly.

Fixed Costs

Figuring your fixed cost expenses is one of the first steps to determining your cost per mile. Fixed costs are expenses that are the same every month no matter how many miles your truck travels. These expenses include insurance, licenses, accounting services and permits. You are required to pay these costs even if the truck doesn’t move from the yard the entire month. Knowing your fixed costs helps you determine how much it costs your company to wait for a certain load and whether or not the amount of money you will be paid for the load is worth the wait time.

Variable Costs

Variable cost expenses are expenses that you will only have to pay if the truck is running down the road. They generally increase as the number of miles the truck runs throughout the month increases. Variable cost expenses include things like fuel, driver pay, lodging, tires, truck maintenance and meals. It is also essential to have an idea of how much your variable expenses will be before accepting a load.

Cost of Operations Sheet

A cost of operations sheet is one way for owners of trucking companies to determine their expenses on a per-mile basis. This sheet should contain both fixed and variable expenses separated into columns of monthly and annual expenses. You need to estimate the number of miles the truck will be driven in that particular year to estimate your variable expenses. Any fuel surcharge you will receive should be taken into account when figuring your average fuel costs. If you pay your drivers by the mile it will be easy to figure out the cost per mile for driver income. Figuring truck driver income if they are paid by the hour or based on a percentage of the total revenue is more complicated. The cost of operations sheet will show you what your total expenses are for both a month and a year. These totals can be divided by the estimated number of miles the truck will run in a year to determine the cost per mile. You should not accept any loads that pay less per mile than your expenses, otherwise you will be losing money.

Trip Profit Reports

Another way to determine your per-mile cost is to create a report that details the income and expenses generated during each individual trip. One advantage of a trip profit report is that it will generally be more accurate than a cost of operations sheet because variable expenses change often and there may be a large difference in fuel or permit costs from one trip to another. Trip profit reports also allow you to choose the trips that are the most profitable for your company and avoid taking runs where you have made less profit in the past.

Calculating the cost per mile of each run you take with your truck may seem tedious, but it is very important to have an idea of how much income your truck is generating at all times as well as how much your expenses are running. Many companies will ask you to bid a run by the mile, which is easy to do if you already know how much your expenses run per mile.

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