A truck can be busy all week and still not be making much money.
That sounds strange at first. Loads are being delivered, invoices are going out, drivers are on the road, and the fleet is moving. But once you add up fuel, wages, repairs, tolls, insurance, and all the other costs that come with running trucks, some routes can turn out to be far less profitable than they looked from the start.
This is where route profitability comes into the picture.
Instead of looking only at how much a customer paid for a load, transportation companies can look at what was left after the trip was completed. That gives owners and managers a much more realistic view of which routes are working and which ones need another look.
What Does Route Profitability Actually Mean?
In simple terms, route profitability tells you how much money a particular trip or route contributes to the business after its related costs have been covered.
Say a company gets paid $3,500 for a long-haul delivery.
But imagine the truck burns $1,000 in fuel, the driver costs $700, tolls come to $250, and another $500 is allocated for maintenance and other trip expenses.
The company isn't really looking at $3,500 of profit. It's looking at what remains after the truck has done the work. That's the whole point of route profitability analysis for trucking.
This information can be useful when setting rates, deciding which loads to accept, reviewing customers, and figuring out where operating costs are getting out of hand.
Why Revenue Alone Doesn't Tell You Much
Transportation companies can sometimes fall into the trap of focusing heavily on revenue. Revenue is the number everyone sees first.
Two routes bringing in the same amount of money can have completely different results.
For example, imagine one trip brings in $4,000 and costs $2,900 to complete. Lets say another trip brings $4000 revenue but costs $3600.
Both loads generated the same revenue, but the amount left after expenses is very different.
This is why route profitability analysis for trucking should go beyond the amount shown on the freight invoice. You need to know what it actually cost to complete the job.
Fuel Is Usually One of the First Places to Look
Anyone running a fleet knows how quickly fuel bills can add up.
Fuel prices change quite often nowadays, trucks don't all get the same mileage, and driving conditions can make a noticeable difference. A truck hauling a heavy load through traffic is going to use fuel differently from an empty truck cruising on a highway.
For that reason, fuel expense tracking for trucking companiesdeserves close attention. You can start with a few basic numbers: miles driven, gallons purchased, price per gallon, miles per gallon, and fuel cost per mile.
Suppose a truck travels 1,000 miles and averages 7 miles per gallon while another trucks averages 5 miles a gallon. It may seem like a small difference, but fuel costs add up over several trips.
Fuel records can also point to unusual changes in truck performance. If a truck is suddenly using too much fuel, it could be due to a mechanical issue worth investigating. Tracking your expenses regularly is a key component of mastering your financial reporting.
Pay Attention To Driver Costs
Drivers could be paid per mile, hourly, have a fixed salary and so on. Driver time is also worth considering. A driver paid for a five hour trip may ask for overtime if the customer keeps him waiting three hours. This also means your truck is sitting idle these three hours instead of earning revenue elsewhere.
When you review route profitability, those situations can help explain why a route that looks good on paper isn't performing as expected.
Maintenance Costs Are Easy to Underestimate
Maintenance is one of those expenses that can sneak up on a fleet.
You may not have a $5,000 repair bill every month. Instead, the costs are spread across oil changes, tires, brakes, inspections, parts, and occasional repairs.
One practical approach is to calculate maintenance cost per mile. For example, assume a truck spends $20,000 on maintenance during a year and travels 100,000 miles.
That's:
$20,000 ÷ 100,000 = $0.20 per mile
An 800-mile trip would therefore carry about $160 in maintenance cost using that average.
It's an estimate, actual repair costs won't arrive exactly at $0.20 for every mile. But using a reasonable average gives you a way to include maintenance in your numbers.
This is one area where cost per mile accounting for trucking can be especially useful.
What About Deadhead Miles?
Here's another number that can make or break a route: empty miles.
A truck might travel 600 miles while carrying freight and then drive another 300 miles before picking up the next load. Those 300 miles aren't free.
The truck is still burning diesel. The driver is still working. Tires are still wearing down, and the vehicle is still being used.
So if you're calculating route profitability, looking only at loaded miles can give you an overly positive picture.
How to Calculate Route Profitability For A Transportation Company
There doesn't have to be a complicated formula. Start with the revenue from the load or route. Then subtract the costs associated with completing it.
For example, imagine a route brings in $5,000. Fuel costs $1,100, driver costs are $800, maintenance is estimated at $300, and tolls and other trip costs add another $350.
That leaves an estimated route profit of $2,450.
You can take the analysis one step further by looking at profit per mile. If the truck traveled 1,250 miles, the profit would work out to about $1.96 per mile.
That number can be handy when comparing routes with different distances.
A 500-mile trip and a 1,500-mile trip aren't easy to compare just by looking at total profit. Profit per mile gives you another useful reference point.
Don't Forget the Smaller Expenses
Fuel, wages, and maintenance get most of the attention, but there are plenty of other costs involved in running a fleet.
Depending on the company, these might include tolls, parking, permits, registration, insurance, lease payments, trailer costs, loading and unloading charges, and so on.
The important thing is to know what you're including and use the same approach from one reporting period to the next.
Look at Profitability by Truck, Route, and Customer
Once the basic tracking is in place, the numbers can tell you more than whether a single trip made money.
You can start noticing patterns.
Maybe one truck has much higher repair costs than the others. Maybe one route consistently has expensive tolls. Maybe a certain customer pays a decent rate but has long loading delays.
This is where detailed transportation accounting becomes useful. Good records allow you to break down the business instead of treating the entire fleet as one big bucket.
That gives you information you can actually use when reviewing operations.
How Often Should You Check Route Profitability?
There's no single schedule that works for every transportation company.
A small fleet might review route performance monthly. A larger operation with lots of loads and changing fuel prices may benefit from looking at the numbers more frequently.
The important thing is not to wait until something has gone wrong.
Regular reviews make it easier to spot changes. If fuel costs increase, you can see which routes are being affected the most. If a customer's loads are taking longer to complete, you can see whether that extra time is affecting the margins.
Where Transportation Accounting Fits In
Route profitability depends on having reasonably accurate financial and operating information.
If you have messy books, fuel receipts are missing, driver costs aren't recorded properly, or maintenance expenses are sitting in the wrong accounts, the final calculation won't tell you much.
This is one reason some trucking businesses use transportation accounting servicesinstead of DIY accounting.
Fleet accounting services can help keep track of your books, such as bill pay, invoicing support, financial reports etc.
Transportation Accounting Services With AccountiPro
A transportation company doesn't make money simply because its trucks are moving and customers are paying invoices. What matters is what remains after the cost of doing the work is paid.
That's why route profitability is worth tracking. AccountiPro is a professional transportation accounting services provider using modern bookkeeping and accounting tools to enable easy access to your route profitability and other essential insights. With our expertise, we are able to provide you with guidance on your financial reporting, taxation, and profitability. To steer your business to success, give us a call now so that we can discuss how our support can positively impact your company.
