Owners of trucking companies may not have a background in finance, but it’s important to have a basic understanding of accounting. Even if you have a professional bookkeeper or accountant handling your books, you should be familiar with basic accounting terms and principles. This knowledge will help you understand the health of your business and warn you of problems that may be on the horizon.
Accounting Terminology You Should Know
In order to better understand your finances, it helps if you’re familiar with the terminology. The following are some accounting terms that are relevant to your business.
Cash flow is the amount of cash that comes into and leaves a business. The term is most often used, however, to measure money coming in.
Gross and Net Profit
Gross profit is the amount a business makes before considering business expenses. Net profits are what is made after calculating expenses such as payroll, fuel, and all other operating costs.
Assets and Liabilities
Assets are everything that adds value to a business, including cash, property, trucks and other equipment. Liabilities detract from the value of a business. These include debt, wages, taxes, and money owed to suppliers and others.
Equity is total assets minus total liabilities.
Understanding Financial Statements
The above terms are essential for clarifying financial statements. Two of the most common and important types of financial statements are income statements and balance sheets.
- Income statements, also known as profit and loss statements, are the summary of all profits or losses over a period such as a quarter or year. This includes revenue, expenses, and all transactions going in or out of the business.
- Balance sheets, which have a broader scope than income statements, are used to assess a company’s overall value. A balance sheet includes all assets, liabilities, and equity over a given period.
The Benefits of Bookkeepers and Accounting Software
Using a bookkeeper or accounting software can simplify understanding and managing your business’s finances. There are several user-friendly programs that make it easy for anyone to track key metrics. Benefits include:
- Provides timely and accurate information about all financial data.
- Gives you accurate and up-to-date inventory data.
- Quickly generate reports such as balance sheets and income statements.
- Makes it easy to manage payroll.
- Simplifies filing taxes.
Consider Freight Factoring to Improve Cash Flow
You don’t need to be an accounting expert to know that healthy cash flow is fundamental to the health of any business. Like all industries, trucking companies have been impacted by issues such as Covid-19, inflation, rising fuel costs, and supply chain problems. With many businesses including shippers and freight brokers suffering from cash flow problems, invoice payments may be delayed. One solution is to use freight factoring, which lets you collect payment for freight bills on a regular schedule after delivery, even if your clients are late in paying. Freight factoring helps many transportation companies improve their cash flow in all economic climates.
Riviera Finance has more than 50 years of experience with transportation factoring and freight bill factoring. To find out how freight factoring can improve your trucking company’s cash flow, contact Riviera Finance online.