Business Health Check – Road Transport

The Business Health Check – Road Transport provides accounting firms with a comprehensive collection of industry-specific resources for evaluating the financial and operational performance of a road transport business.

The package supports the complete advisory engagement — from identifying the client’s needs and gathering detailed operating information through to KPI analysis, financial evaluation, benchmarking, scenario modelling, reporting and the development of agreed priorities with the client.

Industry-Specific Road Transport Business Health Check Workbook

At the centre of the product is the Road Transport Business Health Check Excel workbook. It contains linked Data Required and Key Performance Indicator worksheets specifically developed around the operating characteristics of road transport businesses.

The Data Required process gathers information across areas including:

• Trading days and operational interruptions
• Customers and new customers
• Sales and payment methods
• Own-truck and subcontractor sales
• Customer and market segments
• Back-loading income
• Kilometres travelled
• Number of trucks
• Types of cargo carried
• Gross profit
• Working owners and principals
• Drivers, mechanics and other employees
• Stock and inventory
• Balance Sheet information
• Operating expenses
• Profit and Loss information
• Major supplier expenditure

Road Transport Key Performance Indicators

Information entered into the workbook flows through to the linked Road Transport Key Performance Indicators report, allowing your firm to analyse the commercial and financial drivers behind the client’s results.

The KPI report covers areas including:

• Sales analysis
• Sales dissection
• Customer analysis
• Gross profit analysis
• Business analysis
• Wages analysis
• Expense analysis
• Profitability analysis
• Staff analysis
• Supplier analysis
• Costs per kilometre
• Productivity
• Cargo and product analysis
• Ratio analysis
• Broader financial analysis

This gives your adviser a structured basis for discussing not only the final financial result, but the operational factors that may be producing that result.

Own Trucks and Subcontractor Performance

A major strength of the workbook is its ability to distinguish between activity generated by the client’s own trucks and work performed through subcontractors.

The resources can help your firm examine:

• Sales generated from own trucks
• Sales generated from subcontractor trucks
• Gross profit from own-truck operations
• Gross profit from subcontractor activity
• Subcontractor costs as a percentage of sales
• Subcontractor costs relative to subcontractor-truck income
• Kilometres travelled by own trucks
• Kilometres travelled through subcontractor activity

This can help identify whether different parts of the transport operation are contributing appropriately to the overall result.

Cost per Kilometre Analysis

The road transport workbook includes a dedicated cost-per-kilometre section so your firm can examine the costs associated with operating the fleet in a form that can be readily discussed with the client.

The analysis includes measures such as:

• Labour cost per kilometre
• Subcontractor cost per kilometre
• Fuel cost per kilometre
• Tyre cost per kilometre
• Repairs and maintenance cost per kilometre
• Other truck expenses per kilometre
• Traffic fines per kilometre
• Total truck operating expenses per kilometre
• Net profit per kilometre

These measures can help your firm demonstrate how changes in fuel, labour, repairs, tyres or other fleet costs can flow through to profitability and pricing decisions.

Sales, Customer Mix and Back Loading

The resources allow the client’s sales to be examined from several road-transport-specific perspectives rather than looking only at total turnover.

Analysis can include:

• Sales growth or decline compared with the previous period
• Daily sales
• Sales per full-time-equivalent person
• Sales per total hours worked
• Average sale
• Sales per kilometre
• Back-loading sales as a percentage of revenue
• Back-loading sales per kilometre
• New customers and average sale to new customers
• Customer mix across major companies, small businesses, consumers, government, defence, mining and other categories where relevant
• Sources of enquiries, complaints, returns and customer suggestions

Cargo and Product Analysis

The Data Required workbook allows different types of cargo to be identified so that the contribution of individual transport activities can be examined.

This gives your firm an opportunity to discuss whether particular cargo categories, customer groups or transport activities are producing stronger or weaker results and whether the business mix should be reviewed.

Gross Profit, Wages and Operating Expenses

The KPI report brings together gross profit, wages and operating expenses so that the client can better understand the cost structure behind the business.

Areas available for analysis include:

• Gross profit percentages for own trucks and subcontractor activity
• Drivers’ wages as a percentage of relevant sales
• Mechanics’ wages as a percentage of relevant sales
• Working-owner salaries relative to sales
• Subcontractor costs
• Fuel and energy costs
• Lease and hire-purchase costs
• Repairs and maintenance
• Tyres and truck expenses
• Insurance
• Travel and accommodation
• Total overhead costs

Staffing, Safety and Productivity

The resources also provide measures relating to the people and productive capacity of the transport business.

The analysis can include:

• Drivers and mechanics relative to working owners
• Total staffing levels
• Accidents per full-time-equivalent person
• Absenteeism
• Resignations
• Staff training hours
• Staff training as a percentage of total hours

The workbook also records days lost to events such as floods, cyclones, rain, bushfires and other work interruptions, allowing the impact of operational disruption on productivity to be examined.

Working Capital, Stock and Work in Progress

The package includes a dedicated Working Capital Evaluation to help your firm examine how cash is tied up in the day-to-day operation of the business.

The review can consider:

• Debtors and debtors’ days outstanding
• Stock and inventory investment
• Stock turn and stock days
• Work in progress and WIP days
• Creditors and creditors’ days outstanding
• Bank balances and available facilities
• Loan and hire-purchase commitments falling due
• Overall working-capital requirements
• Current ratio and relevant banking requirements

This can provide a foundation for discussing whether improvements in collections, stock, work in progress, creditor management or funding arrangements could strengthen the cash position of the business.

Break-Even and Profitability Analysis

Break-even resources are included to help your firm determine the level of sales required for the business to cover its fixed costs.

The analysis can be used alongside the road transport KPIs to discuss the relationship between:

• Sales
• Gross profit
• Fixed and variable costs
• Fleet operating expenses
• Break-even sales
• Net profit before tax
• Profit relative to total hours worked
• Profit per kilometre

Ratio Analysis

The product includes a Data Required to Complete Ratio Analysis form and a Ratio Analysis Report, supported by reference papers explaining Profit and Loss and Balance Sheet ratios.

This enables your firm to extend the Business Health Check beyond operational KPIs and examine the broader financial structure, liquidity and performance of the road transport business.

Road Transport Benchmarking

A dedicated Road Transport Services Benchmarking Report Guide identifies the types of information that can be maintained and compared when suitable external benchmarking data is available.

The benchmarking framework includes measures relating to:

• Vehicle-related expenses
• Fuel, oil, registration, insurance and repairs
• Subcontractor and staffing costs
• Income per person
• Income per freight-carrying vehicle
• Income per kilometre travelled
• Vehicle-related costs per vehicle and per kilometre
• Gross profit measures
• Drivers and staffing levels
• Average kilometres travelled per vehicle
• Debtors’ and creditors’ days outstanding
• Interest cover

The package provides the benchmarking guidance and reporting framework. Your firm can then apply suitable current external benchmark data available to the practice when preparing a client comparison.

“What If” Sales and Profitability Scenarios

The included “What If” workbook provides a practical way to demonstrate how changes in key assumptions can affect the future financial result.

Scenarios can be modelled around:

• Changes in customer numbers
• Changes in average sale
• Changes in frequency of transactions
• Changes in gross profit percentage
• Alternative sales targets
• The resulting effect on projected profitability

This helps turn the Business Health Check from a review of past performance into a forward-looking discussion about what may need to change to achieve the client’s financial objectives.

Future Maintainable Profits and Business Valuation

Where valuation forms part of the agreed engagement, the subscriber resources include tools for calculating future maintainable profits and considering the value of the business.

Supporting papers provide background on traditional business valuation concepts as well as valuation methodologies relevant to emerging businesses and businesses that have developed new products, processes or services.

Identify the Client Need First

The package includes the SME Needs’ Analysis Questionnaire, which can be used during an initial one-on-one client discussion to identify the areas in which the client is interested in receiving further advice.

This helps your firm establish which components of the Business Health Check are relevant before preparing the proposal and quotation.

Scope, Quote and Manage the Assignment

The Business Health Check is designed to be delivered as a defined professional engagement rather than an informal discussion.

Practical engagement-management resources include:

• Procedure Control Form
• Work Programme/Budget/Quotation Form
• Work Programme Timetable
• Business Health Check proposal template
• Road Transport Assignment Control Form
• Data-gathering forms
• Sub-report planning
• Allocation of work to team members

These resources help your firm define the work to be undertaken, estimate the time required, calculate the fee, communicate the proposed approach and timetable to the client and allocate responsibility within the practice.

Business Health Check Report

The package includes a Business Health Check Report template for bringing together the findings from the individual analyses.

The report provides sections for:

• Executive Summary
• Key Performance Indicators
• Ratio analysis
• Break-even findings
• Working-capital findings
• Benchmarking
• Business valuation
• “What If” analysis
• Action planning

This provides a structured way to present the findings to the client and document the priorities agreed following the review.

Supporting Technical Guidance

The subscriber resources include supporting papers to help your team understand the analysis behind the Business Health Check.

Guidance covers topics including:

• Key Performance Indicators
• Performance measures
• Break-even analysis
• Working capital
• Debtors
• Stock management
• Work in progress
• Ratio analysis
• Benchmarking
• Business valuation

A Repeatable Road Transport Advisory Service

Together, the resources give your firm a practical framework for delivering a specialised Business Health Check to road transport clients.

Rather than developing your own transport KPI workbook, cost-per-kilometre analysis, financial tools and engagement process from scratch, your team can use a coordinated set of resources to gather the information, analyse operating performance, identify issues and opportunities, report the findings and establish clear priorities with the client.

This creates an opportunity to move the conversation beyond taxation and historical accounts and provide commercially focused advice based on the actual drivers of a road transport business.