Fishing for Dollars: Your AR

During my early years as BUSGuy the thought of landing big tour accounts was almost as good as catching fish. The adrenaline peaked like setting the hook on a nice striped bass. When fishing season ends, I am left with a freezer full of fillets ready to grill. But when tour season ended, Accounts Receivable were high and cash was short. Then came the collection process, intimidating to say the least. The customer was better at shaking off my hook than I was at filling my cooler. Later I overcame most of this angst and simply demanded prepayment. And the fishing became easier.

Enough of the fishing metaphors. The truth is that all operators need to extend some customer credit. Most student, military and government travel will not proceed without it. This article is not a lesson on extending credit to your customers; it is about the mechanics of managing those credit accounts you already have.   

Everyone has some customers who are “slow pays.” How do you manage those accounts receivable? Like all things that are to be managed, regular monitoring and action are important to keep the accounts from getting old,  going sour or even bad. Writing off a bad debt is not an expense you want to incur.

Run your accounts receivable aging reports regularly to quickly identify potential delinquencies and begin collection activities. Know how to access your aging schedule. Perhaps your accounts receivable information is in your dispatch software and not in your accounting software. Wherever it is located, it is very important to record all information accurately and timely. By keeping this information current you can monitor who owes money and who might have refundable credits should they cancel their charters.

Be sure the initial invoice goes to the correct person so that it does not sit on the someones desk waiting for attention. Know the customer’s payment procedure and don’t be afraid to follow up early to be sure the process is being carried out correctly. This is your money; be tactful, but do not be shy.

Key steps to monitor and collect accounts receivable include:

  1. Run your aging report. Most programs will allow you to run a report in summary form or in detail. The summary report will allow you to know the total balance owed by each client. The detailed report will identify the amount owed by invoice.
  2. Identify which clients to contact. Look for the largest or oldest amounts first. This will focus your efforts to make sure your efforts receive the greatest yield.
  3. Contact the clients. Some will respond to phone calls; other to emails.  . When calling record the date of the call, including “no answer” or “left voice mail.” Sort emails into a collections folder for quick access later. Determine which method of contact works best and set follow dates.
  4. Keep specific notes! Once contact has been made, keep notes on their responses. For example: “the purchase order and invoice have been forwarded to accounting and will take ten days to process.” If payment is not received as noted, follow up with their accounting. Others may tell you that the payment will be sent tomorrow. Follow up. 
  5. Should you have continued difficulty getting paid, you may want to contact a supervisor or the owner to get the issue resolved. You may also want to evaluate suspending the client’s credit privileges with your company and require full prepayment instead. If necessary, pursue legal actions. Your software may have an invoice type for delinquencies you can use with your personal email delivery. Consider having email templates your staff can use at various levels of delinquency.
  6. Repeat the process at regular intervals.

Customer Deposits in Accounts Receivable

Many clients are required to make deposits or prepay charters in the weeks or months before a trip is scheduled to run. The deposits and payments may not be earned until the trip has been performed. These amounts represent the company’s liability to the client should the trip not run. Depending on the size of your fleet and your deposit/payment policy, this can be a significant amount. It is important to understand that in most cases that money is not yet yours and may, under certain circumstances, may be refunded. Customer deposits in accounts receivable can reduce the total balance in that account. Knowing how much the credits are can help you determine the amount of money that is ready for collection.

For those who like to use Excel…

It may be helpful to export your accounts receivable report to a spreadsheet program. Spreadsheet programs like Excel can make it easier to monitor money owed for completed trips as well as prepayments for future trips. Once the report is in that format, the data can be sorted to assist in collections activities and to isolate receivables from owed credit amounts. The data sort command will allow you to sort all data by a column of your choice. 

Our recommendation is to sort total accounts receivable balance or past due accounts receivable from largest to smallest. This focuses collection activities such as phone calls, emails, etc. on the largest or most problematic of customers. In addition it allows you to easily access individual customer balances. This same spreadsheet can be used to keep the notes we discussed earlier.

As a final thought, if your terms are net 30, do not wait until net 45 to begin the collection process. Start calling at 31. Depending on state regulations, consider applying interest to past due accounts. The credit card in your wallet certainly charges you when you are late one day. When extending credit, do you have a policy prepared for the customer to sign? Possible legal action will be less painful if you do. And think of this, when is the last time your favorite airline let you pay AFTER you landed safely on the ground?

Next month the BUSNerd will feature a how-to-video showing the process turning your accounts receivable report into an Excel spreadsheet. This format will assist your staff in turning your Accounts Receivables into cash. And with more cash in the bank, there is more time for fishing.

Let us at BUSBooks help get your accounting in order! Together we can make YOUR accounting more meaningful.

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.


“Accounting is a useful tool to help your company meet its financial goals” is a theme you may have picked up by now reading the Nerd. This month, I want to touch on a framework for establishing goals. Somewhere in sunny Southern California, while studying to be a a master Nerd, I learned about SMART goals. Let me share and present it to a Busgirl, or guy.

Below is a list of goals your transportation company may have:

  1. Make more money
  2. Increase sales
  3. Control expenses
  4. Increase profitability
  5. Improve cash flow
  6. Increase line run revenues by 20% for 2019 (over 2018)
  7. Increase revenue per mile by 5% by June 2020 as compared to calendar year 2018
  8. Increase revenue per day to $1,200 for the calendar year 2019
  9. Increase line run ridership by 15% for summer 2019 (over summer 2018)
  10. Keep administrative expenses at or below 6% of net sales for 2019
  11. Increase profitability to 15% of net sales by April 2020
  12. Increase sedan utilization to 50% during 2019
  13. Maintain fuel expenses at $100,000 for the year

Specific – Make sure your goals are specific. Define what it is the company would like to achieve. Goal number 1 is very vague. What does this mean? Is the goal to increase cash? Increase the dollar amount of net income? One would have to guess or ask additional questions to really know. Goal number 2 is more specific than goal number 1, but numbers 6 through 13 are much more specific.

Measurable – Make sure your goal has an appropriate metric that can be measured. Sometimes goals are measured in dollars. Some may best be measured as a percentage of sales. Still others, as in examples 9 and 12, are measured by non-financial metrics such as utilization and yield. Creating a productive staff is vague, but decreasing absenteeism by X% over last year is a metric that can be measured.

Attainable – Are you setting goals that are reachable? If the goal is set too high and there is no way to reach it, it is not reasonable to set it as a goal. Goal number 13 may be an unattainable goal. Fuel is a large variable cost that rarely remains stagnant as a company’s revenues eb and flow. Therefore, measure the cost of fuel as a percentage of net sales instead of a dollar amount. During a period of increasing fuel prices, raising your rates may be the action required to attain a consistent fuel cost percentage. Our goal becomes “keeping our fuel cost at a X% of net sales by increasing our rates X% over the next six months.” Understand that here we are looking at rates and not volume. You may increase rates and decrease your utilization, all in keeping with the same bottom line. The point is that an attainable goal can involve multiple action items and results.

Relevant – Is the goal you are setting relevant to your overall business plan? A goal can be set for office supply expense, but that does that really have a significant effect on the company? Make sure the goal is worthwhile. Do not waste time on goals that have little to no affect on your finances, company culture, or personal well-being.

Time Bound – Set a specific time that the goal is to be completed in. A goal without a time frame in which to complete it leaves a company floundering as to the planning steps necessary to get there and hard to determine when you had reached or failed to reach your goal.

Include your team and have them buy into the goal. Allow you supervisors a chance to create goals with you. If you pass the responsibility on to a supervisor, be sure the goal is clear and well understood, and that you provide support. How do they benefit from achieving the goal? Can you incentivize them? How does your line staff benefit? Many times they are the ones that will determine the success of your goal.

Finally, seek encouragement from your non-competing industry peers; friends wish you to succeed and the synergy can be tremendous! In any event, there is always room for improvement and SMART goals are just that, smart.

Let us at BUSBooks review your financial picture and help you set your own SMART goals. Together we can move you further down the road!

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.

What Ever Happened to the Two Martini Lunch?

A long, long, time ago I worked in food service hustling drinks and huge plates of food to luncheon guests. I was always amazed at how much these guys could consume and continue working the afternoon! Who knows if any really did?

At that time business meals where 100% deductible as a taxable business expense. Under President Reagan the Tax Reform Act of 1986 changed that and the deductible percentage dropped to 80%. The food service industry went into a tizzy believing that their business would drop accordingly with the change in tax law. (That year I abandoned the food and beverage industry, purchased a 12-year-old Model 5 Eagle, and went into the bus business!) The Revenue Reconciliation Act of 1993 under President Clinton brought the deduction to 50% as of January 1, 1994. Not much has changed since then until President Trump passed the Tax Cut and Jobs Act of 2018.

So, what happened to the Martini Lunch? It most likely became the Craft Beer or Cabernet Lunch as tastes have changed. However, while assisting industry bookkeepers with their work a question still is asked, “Can we expense that pepperoni pizza?” I will let the Nerd fill you in on how this recent Act has changed what business meal, travel and entertainment expenses are tax deductible and what bookkeeping procedures you should put in place to properly record them.

Thank you, Mr. Bus Guy. The good news is that business meals are still partially deductible. Meals in which one conducts business with current clients, potential clients, networking sources, and meals while traveling for business are all still 50% deductible*. The IRS cautions these costs should not be “lavish” or “extravagant.” However, entertainment such as baseball games, concerts, and similar types of events are no longer deductible. Those are now reported for income tax purposes as “non-deductible expenses” and do not decrease the taxable income of the entity**.

Let me make another distinction here. Sometimes when food is provided, the entire expense can be written off. Meals provided as a part of an employee training event or meeting are fully deductible***. Additionally, meals and food provided for the convenience of the employer are also fully deductible. Do you keep beverages and snacks in the office for employees? Do you buy pizza for the staff when they are working late? Fully deductible!

To keep from having to look at this in detail at year end, I recommend tracking the three types of expenses separately during the year. Generally, this means having three different accounts:

  1. *Entertainment – not deductible for tax purposes
  2. **Meals – 50% deductible for tax purposes
  3. ***Meeting Meals (or just include with general meeting costs) – 100% deductible for tax purposes

This will have your books in order and ready for reporting Meal and Entertainment expenses properly to the IRS.

Let us at BUSBooks help you set up your books, giving you the peace of mind to manage your business! Together we can make your accounting more meaningful.

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.