Start the New Year by Reviewing These Five Operational Resolutions
The beginning of the New Year is a good time to review certain operational aspects of your business. Take some time to examine these five areas to ensure you begin the year on the right track.
1. Burden Costing
Are you under-applying or over-applying your burden cost?
Fleet management systems give users the option of applying burden to units and jobs. The burden represents the overhead of your company; it can be composed of management salaries, insurance, utilities, advertising and a whole host of other expenses that keep your business running.
The burden is applied to your units and jobs based on a combination of the following calculations: a percentage of labor or material dollars, a multiple of hours worked, or a multiple of hours paid. The basic procedure will require you to forecast your overhead expenses and then forecast the base unit or driver (wages, materials or hours). Once you have derived your factor, simply key it into your system. Now your profit and loss reports will give you an idea of how different units and jobs contribute to covering your overhead and hopefully increase your profits.
The beginning of the year is the right time to examine your burden as key factors like tax and insurance rates fluctuate on a calendar year basis. Using fleet management software makes it easy to maintain this information because it is held in a central location. Running reports to determine where your cost should be can be done with a few keystrokes. Burden costs get passed onto your customer, to stay competitive and increase profits, it is important that they are accurately reflected and maintained.
2. Workers’ Comp Rates
Whether you are a small, medium or large-size company, one of the most basic costs of doing business is insuring your employees against injury on the job. Most workers’ comp rates run on a calendar year basis, so understanding where your business stands in January can help you in job forecasting, budgeting and projecting profits for the upcoming year. If you forget to update your workers’ comp rate, your profit reporting will be off.
3. Revenue by Customer
Reviewing revenue by customer from the previous year can prove extremely useful in examining your operation. By using fleet management software’s reporting capabilities, you can easily see how your customer mix changes from year to year. You can tackle critical planning questions early in the first quarter such as:
- Do we need to diversify our revenue base?
- According to our revenue base do we need to add equipment to our fleet to supply a growing need or shift in business?
- Would our company benefit from adding personnel with specialized knowledge or skills based on where the bulk of our revenue is sourced from?
When January begins your company should have business secured for the first quarter and you should already be looking ahead. By using business intelligence provided by fleet management software, you can direct time and money efficiently and earn a competitive advantage to drive profits.
4. Sales Tax Rates
Applying the correct sales tax rates is necessary to accurate invoicing. Accurate invoicing is not only billing for the proper amount of labor, equipment and cartage, but sales tax as well. Most heavy rental equipment companies will be applying destination-based taxes (where businesses tax customers based on the location where equipment is being sent) opposed to origin-based tax laws (where customers are taxed based on the location of the business).
This can get very complicated for companies that do business in multiple states. Many states, for example have rates that differ from county to county. It is important to understand and apply these rates accurately. Although making sure the changes to state sales tax rates is initially time consuming and complex, a central fleet management system makes maintaining them extremely easy.
For fleet managers in the heavy equipment rental industry, having the right people on the right job is critical. Your staff must maintain a variety of certifications to enable them to operate different types of equipment, or even to operate at certain job sites. This varies from state to state and company to company, but having an operations system that tracks and stores employee information in one place makes the safety director’s or dispatcher’s job much easier. Reports can easily be run to determine which employees have to renew their certifications and when. Starting off the new year with a clear view of your employee’s availability ensures you are the reliable service provider you strive to be.
January is the perfect opportunity to take a top down look at important operational concerns that will affect your business. Start the year off right by ensuring your fleet management system is up-to-date with your correct business information.