American Trucking Associations’ seasonally adjusted Truck Tonnage Index rose 0.5 percent to 160.3 in June. This followed a revised 1.5 percent reduction in May. Year-to-date, compared to the same period in 2003, truck tonnage was up 7.2 percent, after increasing just 3.0 percent for all of 2003. “June’s data shows that the trucking industry continues to deliver a robustly growing economy,” says ATA Chief Economist Bob Costello. “Even more impressive than the month-to-month increase is the strength from May 2003.” The baseline year for the index is 1993.
The Freight Transportation Services Index has risen the past four months to a level of 126.1 in May, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics. The May level, which is a record high for the 14-year period covered by the index, was 7.5 percent higher than in May 2003. The baseline year for the experimental index, which was launched in March, is 1996.
Internal Revenue Service issued Revenue Ruling 2004-80, which declares that a truck matching certain specs that can carry cargo on the chassis as well as tow trailers is a tractor for purposes of the retail excise tax imposed by section 4051. The truck can pull trailers exceeding 35 feet with GVW ratings of 20,000. IRS ruled that the vehicle’s physical characteristics, which maximize towing capacity at the expense of carrying capacity, establish that it is designed primarily to tow a vehicle, such as a trailer or semitrailer, rather than to carry cargo on its chassis. For the details of IRS’s ruling, visit this site and search for Rev. Rul. 2004-80.
If you have a typical trucking operation, you probably have plenty of freight. You may even be beating customers off with a stick. Yet despite the brisk business, chances are that the president or chief financial officer is stressed because of weekly cash flow crunches. That situation probably is due to misunderstandings of financing basics that I call “The Immutable Laws of Finance.” If you ignore them or try to bend or break them, you will suffer.
Law No. 1: You can’t always make it up in volume. Trucking operates on razor-thin margins. Taking care of five really good customers and working with them to achieve the right pricing will always beat serving 10 or 20 lousy contracts at rock-bottom pricing.
Law No. 2: You always must have a certain volume. Everyone has quotas to meet, and they generally aren’t set on a whim. You must have a certain number of good customers so that none can dominate you. If you stick with “below breakeven” or a single, dominant customer, bad things happen.
Law No. 3: You must have a down payment. If you never contribute capital up front, you never will get ahead of the game. If you are constantly on razor-thin monthly payment margins, you always will get pneumonia every time a major customer sneezes or the economy dips.
