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Great
Minimum
Play verses Purposeful
Drivers get into the independent operator industry for different reasons. Most will say it is because they want to make more money. National averages on this issue are too inconsistent to provide a clear answer as to whether they are right or not. The Independent Operator industry is rather transient. 5-10% of all Operators who are driving today will not be driving in 12 months. Then, 5-10% of the industry in any given year hosts brand new operators. This means that turnover affects the question; “do Operators make more money than Drivers”. Some years they do, and some years they don’t. It depends on how many ‘new’ Operators there are verses how many seasoned ones still exist.
It’s very important to differentiate between ‘make more money’ and ‘increased cash flow’. Without a doubt, being an Independent Operator increases cash flow (on average). Drivers have the full amount of income taxes taken off their check while Operators don’t. Drivers don’t get GST/HST refunds on their business purchases in Canada; Operators do. So, when someone becomes an Operator, they go from a paycheck of $4-5,000 per month as a Driver to $10-14,000+ per month. That is a doubling or tripling of the cash flow and it can be exhilarating, even dopamine
Robert D. Scheper
encased. However, after a truck payment, repairs and future taxes are set aside… there is little difference to make mention of. With one major exception.
Using non-taxable benefits in your business eliminates $12,000+ of income taxes annually from your year over year cash flow. It is the ONLY thing that truly can be shown to save Operators AFTER TAX CASH FLOW. If it wasn’t for NTB, the net cash flow for being an Independent Operator (National Averages) would be ZERO… until the highway tractor is completely paid for. This fact is supported by the research I wrote about in my second book “Making Your Miles Count: Choosing a Trucking Company”. Using data from 1996 and 2012 I showed that the statistics on increased income from being an Operator only comes into effect once the truck is paid for. The data showed a lot more than just that, but this article is only dealing with why Drivers become Operators, not a range of other industry issues.
If an Operator sets his business up properly from the start, by the time the first wave of maintenance begins to eat up the cash flow (approximately 2 years into a new truck) the $25,000 in tax savings
comes in handy. Over a 6-year period, non-taxable benefits saved $72,000 in taxes (on average). That level of cash flow advantage is difficult to walk away from… yet Operators do it all the time when they rush into their new business. NTB is more work than what accountants normally are used to, but the return on investment is bizarrely high for the Operator. The onus is on the Operator to demand, not the accountant to provide.
When a Driver gets the ‘Operator bug’, too often they do what the surrounding infrastructure tells them to do… sign here, buy that, choose this. The advice givers almost universally know nothing about NTB, because it’s not their area of expertise and they usually just try and move equipment off their yards. Too often they have little concern for the long-term survival of that move. It sounds predatory, and to some it may be, but usually it falls under the ‘Buyer-Beware’ category of business. It’s up to the Operator to find the system that is best for him or her.
If you are an Operator and your accountant asks you “how many days did you drive in Canada and how many in the USA” … you are using the TL2 simplified method. You are NOT using NTB! You can change but your accountant must teach you to use it, learn how to apply it to CRA returns and then defend it. Do your research, find out how to save $12+K a year on taxes. It seems so simple, especially in a short article like this, but 99% of all Operators in
Canada are NOT using NTB; they are using the TL2 simplified method and therefore paying too much in taxes. Our firm has kept track of all our clients’ tax savings, and this year overtook the $75 million dollar barrier in tax savings (since 2006).
Check out our PODCASTS or call us. We can walk you through understanding Non-Taxable Benefits. It separates the purposeful Operators from those who just play in the business.
About the Author:
Robert D. Scheper is a leading Accountant and Consultant exclusively serving the Lease/ Owner operator industry in Canada. His first book in the Making Your Miles Count series “taxes, taxes, taxes” was released in 2007. His second book “Choosing a Trucking company” is the most in-depth analysis of the independent operator industry today. He has a Master degree (MBA) in financial management and has been serving the industry since he and his wife came off the road in 1993. His dedication, commitment and strong opinions can be read and heard in many articles and seminars. You can find him at www.makingyourmilescount. com or 1-877-987-9787.
CHECK OUT THE PODCASTS AT “YOUTUBE.COM/@MAKING YOUR MILES COUNT”
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SAFETY DAWG
Chris Harris
Paying by the Mile is Obsolete
I frequently search for new topics when I am writing these articles. While glancing at the news headlines, I came up with this month’s topic. In fact, it was two different headlines that caught my eye. First was “Nearly 13% of Inspected Commercial Vehicles Taken out of Service During Break Safety Week”, and the ATA headline stated: “70% of Truckers Forced to Violate Hours of Service to Find Safe Parking”.
Both headlines got me thinking that every year we have far too many vehicles put out of service during the break inspection week. And everyday, truck drivers push the hours of service to their absolute maximum and beyond because they drive to the 11th hour (13th in Canada) and then look for a place to park.
This got me thinking. Why are drivers not doing a complete and thorough
vehicle inspection and why do drivers feel that they must squeeze every possible minute out of the hours of service to make money?
I believe this all comes down to how some truck drivers are paid. Too many truck drivers are paid per mile, and they feel that they are not compensated adequately for their time spent doing a great vehicle inspection. Let’s be honest, a great vehicle inspection will take much longer than the five or 10 minutes many drivers who are paid by the mile take to perform their vehicle inspection. Being paid by the mile encourages the driver to get the truck moving as quickly as possible. And because they are paid by the mile, the driver often feels they have to get 10.5 to 11 hours of driving time in every day or else they are ripping themselves off.
The common denominator in both problems I believe, is that the drivers are paid by the mile! Drivers feel they are only compensated when the truck is moving and therefore try to get the truck moving as soon as possible and take less time to perform a vehicle inspection. And to keep the truck moving for as long as they possibly can, they wait until the last moment to look for parking to maximize their driver pay. And honestly, I don’t blame anyone for maximizing their driver pay. We all owe it to our families and loved ones to work hard, to work honestly, and to bring home the most amount of money that is possible in our role.
I certainly don’t blame the truck drivers. It is the system.
So, what is the solution?
Some companies have started to pay drivers by the hour. Oh, by the hour! What a unique concept. In today’s world, do we really need to continue to pay the drivers by the mile?
In the old days before GPS and ELD systems, the management of trucking companies had no idea if the truck driver was working or not. That’s not the same in today’s world. With all
the tracking solutions available to trucking companies today, they always know if the wheels are moving. If the wheels are moving, the driver should get a fair compensation. The driver should also receive compensation for performing vehicle inspections. The driver should get compensation for waiting at loading docks. The driver should get compensation for driving in heavy traffic.
I think you see where I’m going. Paying truck drivers by the mile is an old-fashioned way and does not promote safety. It does promote drivers to take shortcuts whenever possible so that they can maximize their pay.
What are your thoughts?
Be Safe
Chris Harris
Top Dawg, Safety Dawg Inc. 905-973-7056
chris@safetydawg.com @safety_dawg (twitter)
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In Flanders Fields
BY JOHN MCCRAE
In Flanders fields the poppies blow
Between the crosses, row on row, That mark our place; and in the sky
The larks, still bravely singing, fly Scarce heard amid the guns below.
We are the Dead. Short days ago We lived, felt dawn, saw sunset glow, Loved and were loved, and now we lie, In Flanders fields.
Take up our quarrel with the foe: To you from failing hands we throw The torch; be yours to hold it high. If ye break faith with us who die We shall not sleep, though poppies grow In Flanders fields.
