I started my transportation career as a full time in-house accountant for a regional LTL carrier located in Sioux Falls, SD. While working part time on the dock, I completed a degree in accounting at the University of Sioux Falls. After graduation I returned to full time work with the company’s newly formed perishable division. This truckload division transported perishable products originating in South Dakota, Iowa, and Minnesota to destination states of Illinois and Ohio returning to nearby Illinois and Ohio freight terminals to haul LTL freight back into Midwest freight terminals.
My first assignment was a costing project to design a standardized system of cost accounts for the division. I worked extensively with the Interstate Commerce Commission’s Bureau of Accounts uniform system of cost accounts, reporting rules and accounting guidelines used to support the ICC’s decision-making and rate approval processes. Current, accurate and complete financial statements and financial data had to be prepared in accordance with the uniform system of costs accounts and standardized cost accounting principles which were mandatory at that time. Financial statements had to support the full cost of transport necessary to receive rate approval increases from the ICC. The goal of rate making regulation was to keep freight rates low yet allow transport carriers to recover the full cost of transport that included a fair and reasonable return on invested capital.
Working with the national CPA firm of Peat Marwick and Mitchell, the Bureau of Accounts developed and maintained an extensive uniform system of cost accounts and standardized cost accounting principles. The system was well documented with an accounting manual that prescribed where substantially every financial transaction and transport activities had to be classified, recorded and summarized into an accounting system. With the passage of the Motor Carrier Act of 1980 and deregulation of the rate making process, the uniform system of cost accounts and the Bureau of Accounts was phased out with all records archived in June of 1983 and scheduled for destruction in 1987.
Starting from the original uniform system of costs accounts, I designed the original chart of cost accounts for the division. After completing the project, I left two years later to enter public accounting working for the national CPA firm of Coopers & Lybrand and obtained my CPA certificate in 1972. I started my own firm in 1972 and have been specializing in accounting, auditing and taxation of transport carriers for over 40 years.
As a CPA, consultant and prior owner of a truckload carrier, I continued to further modify and perfect the chart of cost accounts into a full-fledged managerial cost accounting system. A system where a transport carrier could always know where they were at financially, but more importantly could always generate a balance sheet and income statement that could help improve and measure future performance. The final uniform system of cost accounts consists of the four key transport cost segments discussed in this handbook.
In 1987 the managerial cost accounting concept of transport margin dollars available was incorporated into the chart of cost accounts model. Calculating transport margins is the process of determining how many dollars remain after subtracting over-the-road costs from gross transport revenue. Now transport margins available is built right into the chart of costs accounts system.
The model accounts can be adapted to any accounting system with a flexible chart of accounts system. Available transport margins allow transport carriers to quickly calculate breakeven revenue points and target profit points right from a current, accurate and complete balance sheet and income statement generated on a percent of revenue or per mile basis. By revenue and miles driven all the breakeven and targeted profit formulas are included in this handbook. The second part of the model chart of cost accounts covers the measuring and managing of the three remaining key costs segments: fixed line haul, shop and general and administrative costs, to calculate breakeven and targeted profit revenue points. Transport carriers can use the available transport margin concept and the managerial tools in this handbook to turn unprofitable operations into profitable ones and profitable ones into more profitable ones. Used effectively, I can guarantee improved financial success in provisioning transport services.
In 1987, I designed and developed Truckwin Dispatch and Accounting Software, the first computerized management system, with the uniform system of cost accounts and available transport margins built right into the design of each Truckwin module. The built-in chart of cost accounts contain the four key cost segments covered in this handbook. With this chart of cost accounts model, coupled with the use of Truckwin Dispatch and Accounting Software modules to generate current, accurate and complete monthly balance sheets and income statements, on a percentage of revenue and per mile basis and with the right management decision making success in transport can be assured.
Motor carrier transport is and will remain a regulated utility. Raw materials and products must move throughout the country and transport services are essential to our national economy. As in regulated days, that served the transport industry well for over 50 years, the focus of this handbook is to help transport carriers return to a uniform system of costs accounts to generate current, accurate and complete balance sheets and income statements. Within this process will be the measurement of transport margins needed to cover all the remaining cost segments to include a targeted profit.
The motivation for this handbook is the desire to help transport carriers determine adequate freight rates, make right management decisions, develop operating strategies that continually generate adequate profits to yield a fair and reasonable return on invested capital and stay in the business for the long-haul.