Greenbell Co., Ltd. Releases Management Paper to Prevent Transportation Business Bankruptcies for Free

Greenbell Co., Ltd., which has 20 years of experience supporting the transportation business, is freely publishing this guideline that clearly breaks down the deficit structure of the transportation business and outlines countermeasures to prevent bankruptcies. The purpose is to support the sound growth and expansion of struggling transportation operators.

■ The Reality of Bankruptcies in Data

Year | Number of Bankruptcies | Year-on-year | Background
---|---|---|---
2019 | 241 cases | ― | Falling freight rates, rising labor costs
2020 | 195 cases | ▲19.1% | COVID-19 pandemic, government support
2021 | 187 cases | ▲4.1% | Continued COVID-19 support
2022 | 216 cases | +15.5% | Soaring fuel prices
2023 | 337 cases | +56.0% | Repayment of zero-zero loans + fuel costs
First half 2024 | 189 cases (378 cases annualized) | +12.4% | Cash flow shortage, rising interest rates

Source: Teikoku Databank "National Corporate Bankruptcy Compilation" various editions

The sharp increase in 2023, coinciding with the full-scale repayment of "zero-zero loans" from the COVID-19 pandemic and soaring fuel prices, was widely reported in the media. However, this paper points out that behind these superficial causes lie "triple structural distortions."

■ The True Causes of Bankruptcies: Three Factors for Bankruptcies in the Transportation Business

1. **Tax System Issues:** Discrepancy between Statutory Useful Life and Actual Conditions
Depreciating a truck with an actual economic useful life of 15 years over a statutory useful life of 5 years is the biggest factor leading to bankruptcies in the transportation business.
Profitability for transportation operators often only comes after the 6th year following capital investment after depreciation, and many operators cannot engage in financial transactions during this period.

2. **Tax Accountant Guidance Issues:** Confusion of Tax and Accounting
Accounting by tax accountants is extremely dangerous, as there is a tendency to confuse accounting and tax matters, and a major issue here is that tax accountant guidelines promote tax accounting.
By processing depreciation at its maximum speed (statutory useful life), the actual asset value becomes the book value for tax (and accounting) purposes, reducing the asset value to 1 yen in 5 years, which creates excessive depreciation and makes transportation operators unprofitable.

3. **Financial Institution Business Evaluation Issues:** Deteriorated Financial Statement Scoring
Banks, seeing these deteriorated financial scores, make lending decisions based on assessment scores, and the deficit caused by excessive depreciation by tax accountants significantly impacts the transportation operator's access to finance. Correct accounting reflects the company's corporate value and must evaluate the market value of its owned trucks.

[Most Important]
To correctly evaluate a transportation business, at least a 10-year business plan must be evaluated. (Evaluation of expected profit recovery after depreciation)

■ Transportation Companies Face a "10-Year Barrier from Founding" - Three-Stage V-Shaped Recovery Model

This paper's proposed "Three-Stage V-Shaped Recovery Model" shows that the balance of income and expenditure for a transportation business can only be properly evaluated over a 10-year period.

Phase | Period | Profitability Status | Greatest Risk
---|---|---|---
Phase 1: Investment Period | Years 1-5 from founding | Annual deficit of ▲9% continues | Continuing without knowing it's a "structural deficit"
Phase 2: Difficult Period | Years 3-6 from founding | Accumulated deficit reaches ▲45% | Starting to rely on high-interest loans/factoring
Phase 3: Recovery Period | From year 6-10 onwards | Annual surplus of +11% continues | High-cost contracts incurred during the difficult period hold back recovery

An operator with annual sales of 50 million yen incurring an accumulated loss of 22.5 million yen over 5 years is not a "failure" but a "structure." Knowing this structure beforehand and being able to make the right decisions at the turning point of the difficult period is what separates survival from bankruptcy.

■ Five Practical Methods to Prevent Bankruptcies

* **Review of Cost Calculation:** Adopt methods that proportionalize truck depreciation costs to mileage or treat one year's depreciation as current period's depreciation if planned for 10 years of use (e.g., production-proportional depreciation).
* **Restructuring Leases:** Revising lease agreements in the 3rd to 4th year of a 5-year lease can reduce monthly lease payments from 400,000 yen to around 150,000-180,000 yen (refinancing).
* **7-Item Cost Management:** Classify costs into 7 categories: personnel expenses, fuel costs, vehicle costs, insurance premiums, repair costs, highway tolls, and indirect costs, and identify priority improvement items by comparing them to national averages.
* **10-Year Income and Expenditure Plan:** Present a 10-year income and expenditure plan to banks, including truck replacement schedules and lease expiration dates, to facilitate loan approvals even during difficult periods.
* **Daily Income and Expenditure per Vehicle:** Record daily mileage, fuel costs, and highway tolls per vehicle to quickly identify unprofitable routes or clients. This can be started today with a free web app.

The continued existence of transportation operators is also a social issue from the perspective of the sustainable function of logistics infrastructure. This paper is earnestly hoped to be utilized as a basic resource for business owners, tax accountants, financial institutions, and policymakers to develop a common understanding of the structure of the transportation business and contribute to the sound development of Japan's logistics industry.

■ Research Paper Now Available for Free

The research paper "Preventing Bankruptcies in the Transportation Business," which forms the basis of this press release, is now freely available.