Simplify Accounting and Maximize Profits for Logistics Companies

In the world of logistics, efficient accounting can be the difference between thriving and merely surviving. During a recent discussion with accounting expert Matt Hicklin, key insights were shared about the specific benchmarks logistics companies should strive for to optimize their operations and improve their bottom line.

Understanding these key performance indicators (KPIs) is crucial for business owners who want to streamline their accounting practices and maximize their profits.

The Importance of Regular Bookkeeping

Before diving into the specific KPIs, it’s essential to highlight the importance of regular bookkeeping. Matt emphasizes not putting off your books for months at a time.

To effectively monitor your margins and make informed decisions, maintaining up-to-date financial records is necessary. This discipline is particularly vital in the logistics industry, where unforeseen expenses, like unexpected vehicle repairs or employee turnover, can significantly impact your financial health.

Key Performance Indicators in Logistics

Understanding the right benchmarks allows logistics companies to assess their current financial health and identify areas for improvement. Here are some of the critical KPIs to monitor:

• Wages: For Package Delivery (P&D) operations, aim to keep wages at around 50% of gross settlements. This includes all payroll taxes. If wages exceed 55-60%, it’s a signal to reassess your financial strategies.

  For Class A operations, your wages should be closer to 40%

• Fuel and Repairs: Fuel and repairs should ideally be 10% or less of your revenue for P&D or around 20% for Class A operations.

• Profit Margins: At the end of the day, you should strive for a 15% profit margin above and beyond a reasonable wage for yourself.

  Matt believes that you work way too hard and risk way too much to have a profit margin under 10%.

Practical Steps for Improvement

Compare and Benchmark: Start by identifying your current numbers in each KPI category mentioned above. This allows for a clear comparison to industry standards, helping highlight where you may need to adjust your spending so you can get to the root cause of the issue if your profit is not where you’d like it to be.

Accounting is not always the most interesting and exciting topic, however saving money and making a larger profit is. By following some of these simple tips from Matt, you should be able to increase your profit that you are left with at the end of the day.