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Revenue and Cost Allocation

Last Updated: Dec 13, 2017 12:06PM PST

Moving freight can be a complicated business, and between the demands of customers, the day-to-day minutia of operations, and the challenges of transporting each individual load, it can be easy to lose track of a crucial question: are we making a profit? Tracking the profitability not just of your business in general, but of specific shipments and dispatches, can be the key to identifying opportunities – to moving freight more effectively, seeking out more of the best and most efficient routes, and avoiding those that just aren’t worth your trouble.

To help you identify these opportunities, Tailwind provides a number of different reports, which can help you get a better sense of where you’re making the most money. But reports are only as good as the data behind them, and driving all those reports are Tailwind’s Revenue and Cost allocation tools.

 

Is Profit Really That Complicated?

If your company mostly runs simple one-pick one-drop routes, determining the profitability of your Orders is pretty straightforward, and Tailwind’s default configuration should have you covered.

The tools described in this article are for the more complicated cases, where you are fulfilling Orders with multiple Shipments, putting Shipments from different Orders on a single Dispatch, or moving single Shipments over multiple Dispatches. In situations like these, you want to make sure that Tailwind is distributing your revenue and costs in a way that matches up with the operation of your business.

 

Configuring Your Default Allocation

Whenever you have an Order with multiple Shipments, or a Shipment that is moved across multiple Dispatches, Tailwind has to make a decision about how to allocate the Costs and Revenues associated with those records. By default, these decisions are controlled by a number of settings, accessible through the Configuration menu. To access the settings, click on the at the top right and select ‘Configuration’. The settings in question appear under 'Operations', in either Orders or Dispatches.

 

Order Settings - Shipment Share of Order Revenue

 

The Shipment Share of Order Formula setting determines how much revenue is allocated to each Shipment in an Order. You can have the revenue split evenly between all Shipments, or split it based on the weight of the Shipments or the mileage on their respective Dispatches.

 

Order Settings - Order Share of Dispatch Costs

The Allocate Dispatch Costs setting controls how Expenses flow back from Dispatches to the Order. This is relevant if you have a single Dispatch that is moving Shipments from more than one Order: by default, Tailwind will allocate the Costs using a percentage based on your configuration setting. This percentage will either be based on miles traveled per Shipment, the weight of the Shipments, or the revenue allocated to each Shipment.

 

Dispatch Settings - Dispatch Share of Shipment Revenue

The last default to set is the Allocate Revenue setting under the Dispatch settings. This default controls how Revenue is assigned to Dispatches, in cases where a single Shipment is being moved over multiple Dispatches. You can split the Revenue based on relative mileage only, by mileage plus weight/length, or you can assign all the Revenue to the Dispatch that makes the final delivery.

 

Which Defaults To Choose?

How you decide to configure your defaults depends primarily on your business process and workflow. Consider which revenue and cost-splitting situations are common in your business, and which are less likely to come up – and for those that are common, think about which default will distribute the revenue or cost accurately in the majority of cases. Defaults can always be over-ridden in unusual cases, but hopefully the available options will have you covered most of the time.

Consider also that some defaults require you to track certain information more closely than others. If you decide to allocate your Revenue by Shipment weight, then you should also make sure you are recording the weight of individual Shipments as accurately as possible!

 

Viewing Revenue Allocation

Of course, every load is different, and sometimes you will want to check to make sure that Tailwind is allocating your Expenses and Revenue correctly. To view how revenue is being allocated within a specific load, start by opening the Order in question. Then click the ‘More’ button at the top right, and select ‘Revenue Allocation’. This will open a consolidated view of how revenue is being allocated between the Shipments on this Order.

 

Editing Revenue Allocation

If you would like to override the default allocated percentage, you can simply click the edit button found at the top of the window. This will allow you to adjust either the amount or percentage to the desired value. Note that you will not be permitted to save if the total amount is greater than 100%.

If you’ve dispatched this shipment to more than one truck or carrier, you can also adjust the amount associated to each trip by clicking on the arrow to the left of each shipment. This will expand the section under the shipment with another edit button, allowing you to adjust the allocation directly.

(The above example shows a shipment which has been moved on 2 trips, each getting 50% of the allocated revenue.)

 

Viewing Cost Allocation

A similar view is available if you want to see how expenses are being allocated to Shipments on a Dispatch record. Open the Dispatch record in question, click the ‘More’ button, and select ‘Cost Allocation’. This will display a view detailing the profitability of the trip.

(In the example above, the cost allocation is showing that we’re moving two orders with total revenue of $52.50 and total costs of $100.)

 

Editing Cost Allocation

If you’re moving more than one shipment on this trip and you would like to adjust how the cost is being allocated, you’ll need to click the arrow to left of the payee. This will expand the section under the expense, displaying an edit button that will allow you to adjust the amounts currently allocated.

 

Reporting On Profit

Ensuring that your Revenue and Expenses are being accurately assigned across your Orders and Dispatches will allow you to take advantage of a number of Tailwind's reports. Reports are available under the Tools section of the left navigation, and are an invaluable resource for any business. Reports like Profit by Customer and Profit by Tractor will more accurately reflect the reality of your day-to-day operations — and that will make it easier for you to ensure that you are getting the most out of your available resources.

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