Problems of
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THE HAULIER
AND CARRIER
J'AVING got this haulier friend on the run, so to speak (I am referring to the man Who was carting timber from Bristol to Manchester at 17s. ed. per ton and who had left many important items out of his cost sheet), by demonstrating to him that he was losing at least 1id. per mile on maintenance alone, I decided to go the whole hog and let him know exactly how he stood.
"Let me see," I continued, "you were telling me that you took no account of depreciation. Why?"
"Because I have bought the vehicle on hire-purchase and am paying instalments on it."
"But what on earth has hire-purchase got to do with depreciation?"
"Only. that I don't see how I can allow anything for depreciation as well as pay the instalments under the hire-purchase contract."
"I can't see the connection at all."
"Well, I'm paying 116 a month under the hirepurchase agreement, and shall be doing so for another 18 mouths. It will be time enough when I have finished that to consider depreciation."
Heading for Disaster. "If you go on as you are doing you won't need to pay £16 a month for 18 months, or anything like that," "Why? What do you mean?"
" You won't be able to pay anything at all, and the lorry will be seized by the company who financed the purchase. You are not making sufficient profit to enable you to carry on."
"Making any allowance for depreciation won't help me, anyhow."
" Why do you think that?
" Because the Rent', depreciation, ,after all is only a booking account, and in cases like mine would involve n48 me in putting aside each week a certain sum of money against the time when my present vehicle will be too old for further economical service. As things are at present, and until I have finished paying for my present vehicle, I can't put that sum on one side." "You have the right idea about depreciation, at any rate, and I see what you mean." I did see, and I saw more; I saw that I was going to be up against a difficult problem if I was not careful.
"But your lorry will be depreciating all the same, and you will eventually want money to buy a new one, otherwise you will just go out of business."
"Yes, I know that all right, hut I can purchase a new one in the way in which I bought this—by hirepurchase—and if I must save up for the initial payment I shall surely have plenty of time to -do that after , I have finished paying off these instalments."
"You know, my friend," I said, "you are by way of being a bit of a nuisance."
He grinned. " Why? "
A Difficult Explanation.
"Well, you're so nearly right in the "Way you have worked things out in your own mind that you make it extremely difficult for me to explain to you just how you are wrong, and yet you are hopelessly wrong, so that I don't quite know how I am going to deal with you. In any case, it's always particularly difficult to persuade a practical man, practical in the handling of vehicles and goods, how essential book-keeping is. However, let's go back a bit. "" Von spend 21d. per mile on petrol, 1-20d. per mile for oil, and you are already putting away lid. a mile for tyres. You have just agreed with me that it is a mistake to overlook maintenance altogether and in future you are going to lay aside ltd. per mile for that. Altogether, therefore, that means you must bank 5id. plus 1.-20d. for every mile that you run."
" Yes, I agree to all that."
You"make £8 on, each round trip between Bristol and Manchester, and you are doing such journeys twice every week, so that you are making £16 from that job. You "tell me that you are doing 800 miles a Week, so that means you cover 160 miles on short
runs. I assume that you are making money at the same rate on the other 160 miles, you are making a total of £20 per week in all."
"No, that's not quite right. There are one or two sound paying jobs in that 160 miles, and my average total takings are between £24 and £25 a week."
"Well, BOW, 5i-d. 'plus 1-20th per mile for 800 miles per week amounts to £18 10s., leaving you a gross • profit. of 16 per week and, out of that, £4 per week goes for the hire-purchase, leaving you only £2 a week for yourself. There's not a lot in that, is there?"
That's what it will be from now on, but you have forgotten that up to' now I have not been making any allowance for maintenance, and that is equivalent to £4 a week, so that really I've been having £6 a. week for my own use."
Allowance for Depreciation Vital.
" Yes, it is going to make a difference and, in the face of your figures, I must admit that I cannot see how you are going to be able to put anything on one side for depreciation until you are through with your hire-purchase contract. • -" At the same time, for your own sake, it is vital that you should never forget that allowance ought to
be made for depredation. What I recommend yet to do is to keep accurate accounts of your operating costs, including something for every single item in Thc Commercial Motor Tables of Operating Costs, and tc set down, each month, the amount you are actually paying for hire-purchase. You will then at least know how you stand, and will not be going on. as you have been doing up to now, imagining that yOu're in Easy. Street, whereas all the time you have been laying up for yourself a lot of trouble in the way of bills for repairs and maintenance, overhauls, painting, and so on, for undoubtedly you would have found yourself in that trouble if we had not had this little chat and if I had not been able to show you how important it was for you to make provision for maintenance,
"You must realize that a man like yourself, in the haulage-contracting business, canvassing for work with a shabby, ill-painted, down-at-heels lorry is handicapped in his search for work in just the same way as a commercial traveller is when his clothes are shabby and his boots are down at heel."
A Lesson to Hauliers.
I also took up with this inquirer the other matters of making provision for licences and garage rent, besides impressing upon him how important it was that he should take out a comprehensive insurance policy.
There is at least, I feel sure, a lesson in all this for those hauliers who have not yet realized the importance of keeping track of their operating costs and of making provision for future expenditure on items of cost which have not, as yet, presented themselves. There is no possible way of evading any one of the items shown in The Commercial Motor Tables of Operating Costs, and the first thing a haulage contractor should do when setting up in business is to make provision for
keeping proper accounts. S.T.R.