Trucking companies always need to be cognizant about the rules on taxes such as the GST, but owner/operators also have a role to play in ensuring they run a proper business to keep a healthy cash flow...
Trucking companies always need to be cognizant about the rules on taxes such as the GST, but owner/operators also have a role to play in ensuring they run a proper business to keep a healthy cash flow.
“Cash flow and owner/operators; this is a huge issue,” said Ray Haight, CEO of financial service provider ATBS Canada.
“One of the first things we do at ATBS is try to educate on what cash flow is, how it’s not the enemy and it’s not nuclear science. We have a process whereby owner/operators can figure out what their cash flow needs are on a monthly basis. Once you have it on a spreadsheet, it’s an eye opener,” said Haight.
“I encourage trucking companies to screen new owner/operators on where they need to break even. If they’re just breaking even, and they have one breakdown, they’ll probably be borrowing from the trucking companies,” he said.
In Ontario and British Columbia, the path is now clear for the implementation of the harmonized sales tax, called “long overdue” by the Ontario Trucking Association.
The federal HST bill passed by a vote of 253-37 in December, enabling the provinces to harmonize their sales taxes with the federal GST. Both Ontario and B.C. plan to combine their provincial sales taxes with the federal goods and services tax on July 1.
“Moving to harmonize the provincial sales tax (PST) and the Multi-Jurisdictional Tax (MJVT) with the GST has been a key recommendation of virtually every OTA pre-budget submission since the early 1990’s,” said OTA president David Bradley.
The Canadian Federation of Independent Businesses says harmonization will save business $100 million a year. Businesses could save a further $500-million a year on the costs of administering a single tax instead of two.
While the HST tax is zero-rated, meaning it can be claimed back by owner/operators, with a higher tax rate, both trucking companies and owner/operators will need to ensure that transactions don’t create cash flow constraints.
“As far as I’m concerned, the education should happen before anyone buys a truck, with regard to the credit risk they’re taking on, the business plan and the cash flow, and being aligned with a company that will produce monthly profit and loss for them,” said Haight.
“If you think about a company driver, there is motivation to get as many miles in as possible. The owner/operator has the same motivation in terms of getting miles in, but also controls all the expenses on the trucks. They could drive all the efficiencies out of that unit. The owner/operator has a closer relationship with the expenses of that truck, and so much opportunity to save money,” he said.