A delivery business can look busy and still lose money. The van is on the road twelve hours a day, invoices go out every week, and yet the bank balance does not move. In transport, profit hides in three places: vehicle costs, driver costs and unpaid or underpriced work. Good bookkeeping makes all three visible.
Who this is for
- multi-drop courier firms working for parcel networks or retailers;
- same-day and specialist couriers (medical, documents, high-value goods);
- small hauliers with HGVs and operator licences;
- removals firms with crews and storage.
Vehicle costs: the biggest line in the accounts
Split vehicle spending so it can be read per vehicle, not just in total:
| Cost | Treatment |
|---|---|
| Van or truck bought outright or on hire purchase | fixed asset; capital allowances, usually full relief for vans through the Annual Investment Allowance |
| Contract hire or lease | rental cost; under FRS 102 most longer leases now go on the balance sheet |
| Fuel | expense; VAT reclaimable on business fuel |
| Repairs, tyres, MOT, servicing | expense |
| Insurance (goods in transit, fleet, public liability) | expense, prepaid and spread over the policy year |
| Tolls, congestion and clean air zone charges | expense; penalty charge notices are not deductible |
Tag each cost with the registration number (as a tracking category or cost centre). After a few months you can see which vehicle is costing more per mile than it earns.
Fuel and VAT
VAT on fuel for vans and lorries used for business is reclaimable in full. For cars with private use, the business either reclaims VAT only on business mileage or reclaims it all and pays the fuel scale charge. Fuel cards make the evidence easy: the monthly fuel card invoice is a valid VAT invoice for all the fills on it.
Drivers: employees or owner-drivers
Many courier firms use self-employed owner-drivers who bring their own van. They invoice the business, and the cost goes to subcontractor costs, not payroll. The status must be genuine: if the business controls when and how drivers work, supplies the van and does not allow substitution, HMRC may treat them as employees. The Construction Industry Scheme does not apply to transport, so there is no CIS deduction to make.
Employed drivers go through PAYE as normal, with overtime, night work and holiday pay calculated from the hours actually worked. Keep timesheets or app logs; they support both minimum wage compliance and drivers’ hours rules.
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Pricing, fuel surcharges and margin per job
Rates are often agreed per drop, per mile or per day, with a fuel surcharge that moves with diesel prices. Record surcharges as a separate income line so you can check they actually cover fuel cost increases. A simple monthly report of income per route less fuel, driver and vehicle cost per route shows which contracts are worth renewing.
Getting paid
Contract customers often pay on 30 to 60 days, while fuel and wages go out weekly. Keep a close eye on aged debtors, invoice on completion with proof of delivery attached, and consider invoice finance only once credit control is under control. Late payment interest can be claimed on business-to-business invoices under the late payment legislation.
VAT on transport services
Domestic transport of goods is standard-rated. Freight transport connected with an export or import can be zero-rated in some cases, and the place of supply for international transport services to business customers follows its own rules. Passenger transport has different VAT liabilities altogether, so check the rules before quoting.
Month-end routine for a courier firm
- Import the fuel card invoice and match it to the vehicles.
- Post owner-driver invoices and check them against the job sheets.
- Reconcile the bank and the card payments from customers.
- Review aged debtors and chase anything past terms.
- Review margin per vehicle and route.
For the vehicle side in more depth, see fixed assets in the chart of accounts and leasing accounts; for driver status, employment status.
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