In running a successful trucking company, owners have to think about how to reduce operational costs. Of course, it’s not all about cutting costs, but managing expenses efficiently.
There’s a host of steps that should be taken into consideration: from working with the right truck insurance company to planning routes, there are ample opportunities to lower operating costs.
Here are some of the top areas you should look at to keep your operating costs under control:
Keep an Accurate Operating Costs Budget
When trucking companies fail to trace their operating expenses budgets, there are all kinds of room for misspending and mistakes. While larger trucking companies may have a dedicated accountant or employee to manage finances. Small business owners may not have a dedicated person in this area, but they may also not focus enough attention on tracking finances and costs.
Business expenses can change quarterly, monthly, weekly, or even daily. While these changes may not happen immediately, they can often be attributed to decisions previously made. That’s why it’s important to watch what is being spent and why.
Make Investments, Not Purchases
When a company finds itself not making its desired profit margin, the response is usually to try and find ways like pushing sales to make up the difference. While higher sales can certainly help the bottom line, it’s often harder to do than it appears.
One of the easiest ways to ensure operation expenses and profits are in the right place is to actually cut operating costs. Of course, not all expenses are created equally. The trick to making cuts is to evaluate your budget to look for waste.
Does the company pay for multiple insurance policies when it could save by discussing a fleet program with its truck insurance company?
When looking at where your money is spent, take a mentality that values investing overspending. Everything you put money into should be something that helps bring money back into the business. If you find costs that don’t work as investments in your company, you have to evaluate if those expenses are worth keeping. For example, you might put funds towards marketing efforts that don’t produce results, but you’ve always done them. You might also pay for a subscription to an industry-specific magazine that is available online for free. It may not be as convenient, but this could be a quick cut.
Some expenses are harder to explain but do serve as an investment in the company. For example, you might consider adding a water line in your office that goes straight to the coffee pot. This expense may be easy to object to, but it could boost overall productivity. If someone has to walk the coffee pot across the office to fill it with water multiple times per day, it may be worth the plumbing expense to avoid wasted time.
Don’t automatically assume that a layoff is your effective way to cut expenses. Sure, payroll expenses may be the biggest part of your operating expenses, but it also plays a critical role.
Downsizing can add stress to your existing employees, which would lead to burnout or folks quitting. The additional recruiting and training costs could negate any savings made from the layoff.
Focus on Education, Safety, and Health
Some trucking companies, especially small businesses, assume that injuries and downtime are related to accidents.
This assumption is a dangerous way to accrue worker’s compensation costs, downtime, or hiring expenses to replace injured employees. There’s also the cost of repairing or replacing your equipment. Even if you shop around for a good truck insurance quote, accidents will raise costs across the board.
Another factor your business can dramatically reduce operating costs is to create a zero-tolerance policy for accidents and unsafe behavior. That means focusing and investing in safety training and policies that encourage and reward safe behavior.
It’s also worth investing in driver health. Life on the road often leads to poor eating habits and lack of exercise. The lack of energy from these poor health decisions can impact the driver’s ability to stay focused or stay on schedule.
Business owners are wise to encourage the use of health-motivated apps that track meals, movement, and more. A company that encourages healthy drivers will see excellent returns in the longevity of its employees.
Reduce Idling Time in Doing Business
One of the best ways to reduce costs is to limit the time drivers are just idling. This practice consumes fuel and engine power when the truck isn’t even moving. A way to reduce idling time and save money is to know when to cut the engine. Typically, if a truck has to hold still for more than 10 seconds, it may be worth turning off the engine.
Many drivers believe that it’s better to leave a truck running than to turn it off and one multiple time. The reality is that turning on an engine barely impacts the engine and doesn’t consume as much fuel as often thought.
Always Plan Your Routes
There is a great deal of money to be saved by properly planning your routes. An efficient route can cut down on the operating costs of fuel, gas emissions, engine wear, and the time it takes to complete deliveries.
Faster routes aren’t always the ones with the fewest miles. Your team might find that a route that is slightly longer is more efficient because it has reduced traffic. With the various websites and applications available, planning a route that is efficient, close to gas stations, and without major delays is easier than ever.
Shop Around For The Best Truck Insurance Company
Commercial insurance is one area that you can’t necessarily cut from your budget but makes a large part of your operating expenses. Make sure you explore different insurance companies from time to time to get a good truck insurance quote. You could end up saving thousands of dollars a year by simply shopping around.
Of course, not all truck insurance companies are the same. Make sure you find one that specializes or at least understands your industry. It’s also worth noting that costs aren’t the only thing to consider when looking for an insurance company, but it’s a great place to start.
Frequently Asked Questions:
How can I reduce fuel expenses for my trucking company?
To lower fuel costs, consider practices like optimizing routes, maintaining proper tire inflation, investing in fuel-efficient vehicles, and promoting fuel-efficient driving habits.
What are some strategies to control maintenance and repair costs?
Regular preventive maintenance, prompt repairs, proper driver training on vehicle care, and monitoring maintenance schedules can help control maintenance and repair costs.
How can I manage insurance costs for my trucking company?
Shop around for competitive insurance rates, consider increasing deductibles, implement safety training programs for drivers, and maintain a good safety record to help manage insurance costs.
What can I do to reduce driver-related expenses?
Improve driver retention through competitive compensation and benefits packages, implement driver training programs to minimize accidents and violations, and optimize driver scheduling to reduce idle time.
Are there any technologies or strategies to improve operational efficiency?
Utilizing telematics systems for real-time tracking, implementing route optimization software, and using data analytics to identify areas for improvement can enhance operational efficiency and reduce costs.
Go Forth and Be Profitable
While there are plenty of ways to reduce operating costs or increase sales, there are some key areas that make the biggest difference. Start with tracking your budget to ensure you know where your money is going. Even reducing your operating cost a little bit can make a huge difference.
If you’d like to learn more about getting the right truck insurance quote, contact us at SoCal Truck Insurance today.