Does Your Flee
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Its Way?
THE chief object of keeping cost records is to be able to check that one's business is being conducted efficiently. Many opportunities for saving money may be revealed in the process of compiling such records. Comparisons of present and past results can provide established operators with pointers for future economy. Adequate costing is also essential if profitable rates are to be quoted to customers. Only by knowing the cost of running their own fleets can ancillary users determine whether hiring vehicles would provide a cheaper alternative. Also, unless accurate records are kept, cross-subsidization could easily pass unnoticed where transport operation was secondary to other activities, and so give a false impression of efficiency. Good practice is to put down expenses on individual sheets for each vehicle. A specimen sheet is reproduced.
The main section of the form is intended to be compiled weekly, but before this is done the appropriate data should be filled in by the headings at the top. According to the user's individual requirements, each sheet could cover a period of, say, 26 or 52 weeks.
Under "Vehicle Data," basic information about the vehicle, its unladen weight, payload and purchase details, are inserted. All these facts should be easily available from the registration book, manufacturers' specification .or purchase invoice.
Both actual and estimated costs have to be used before final figures can be completed. The items mentioned so far are actual, but the life of the vehicle in terms of miles can be assessed only on the basis of the operator's own past experience or from other sources. He should take into account not only the type of vehicle but also the standard of maintenance which he will be able to provide and, possibly, the conditions of operation.
The second heading refers to tyres, and here again the first three items should be readily obtainable but the estimated life is again dependent upon any past records that may be available. It is recommended that the value of the spare tyre should not be included in the cost of the set, as otherwise the recorded mileage life per set could be artificially inflated. In any event, many operators now adopt as standard practice the procedure of removing the spare tyre when a new vehicle is delivered and transferring it immediately into stock.
Completion of the data in these two groups permits the necessary calculations to be made, under the heading " Estimated cost per mile," for tyres, maintenance and depreciation. The cost of tyres is obtained by dividing the total expenditure on a set (excluding the spare) by the number of miles it is expected to last.
lessment of depreciation, however, requires more conation. A good ease could be made for calculating depreciam either mileage or time, but provided that due allowance de when exceptional periods of standing time are incurred, considered that, the mileage method is better for most of operation.
obtain the depreciation cost per mile, it is first necessary duct the cost of the original set of tyres from the price vehicle. The price of the tyres will be accounted for as arate item. After a further deduction for the estimated tal value, the balance will be the amount to be written off. eel by the estimated vehicle mileage life, this will give the elation cost per mile.
der "Standing costs," . the item " Tax" refers to the e duty payable under the Vehicles (Excise) Act, 1949. ince premiums to provide cover on the vehicle are next led. The garage rent, or an apportionment when a fleet used, is then entered, followed by the interest charges would be payable on the capital outlay necessary to re the vehicle, majority of these standing costs will be rated, and )Iy paid, annually. For this reason it will facilitate if the yearly amount is first recorded, followed by the priate weekly cost. A point of confusion could arise This weekly cost should be obtained by dividing the 1 total by 52 and not 50, as often recommended in this of articles. Here we are dealing with actual costs and diturc which have to be accounted for according to the on which they are incurred.
en estimating future costs, or formulating charges, howit is prudent to make some allowance for the time the e will be off the road during the course of a year and thus not be earning revenue. A 50-week year is .ble when making such estimates to ensure that the whole annual standing costs arc set against the charges for the carried.
ler the totals of annual and weekly standing costs, provis made for the entry of the total establishment costs the operator will incur on his business as a whole.
are distinct from expenses which can be directly ted to individual vehicles, and can include outgoing.s on items—management. office, garage and stores, warehouse, 1 depots, professional services and so on.
first inspection, the main section of the sheet may appear complicated. However, it will soon be found easy to use as it has been carefully and logically arranged. Before I deal with each of the 23 columns, 1 should emphasize that the underlying policy is to use actual costs when these can be obtained. Where these are not available, the best estimates that can be made should be entered.
After recording the appropriate date, total mileage operated by the vehicle during the week is recorded, followed by the consumption of fuel and oil in columns 3 and 5. These items would be transferred from either the statutory daily log sheets (if provision had been made on them for this purpose) or from the operator's own weekly sheet. The relative costs of fuel and oil are then calculated and entered in columns 4 and 6.
A reasonable balance has to be kept between simplicity and absolute accuracy. Because of the zoning of fuel prices and variable discounts, it can be surprising how many different prices can be paid for fuel used by a long-distance vehicle during a single week. For practical purposes some averaging would be justified to facilitate entries in column 4.
Entries relative to tyres are made in columns 7 and 8. As it would obviously he impossible to estimate the exact cost of tyre wear during the course of a week, the cost is assessed by using the estimated cost per mile already calculated. Nevertheless, account also has to be made of actual expenditure on tyres, and this is done in column 8. After a suitable period, the total obtained by the addition of entries in this column will provide a check of the original estimate.
Tyre Debit
It should not be overlooked when making out a cost sheet for a new vehicle that the cost of the initial set of tyres should be debited in column a. A similar procedure is adopted for recording maintenance costs in columns 9-12. Actual day-today expenditure is separated as between labour and materials, and totalled in column 12. Details may be obtained either from job sheets or the invoices of a public garage. The cost of depreciation for any week is again obtained by multiplying the figure of weekly mileage by the cost per mile already estimated.
The total expenditure on wages is analysed into the amount received by the driver, National Insurance contributions and any payment that may be made to cover employer's liability and industrial injuries. The total standing charges for the week already totalled in the heading are then entered in column 17.
The addition of running and standing costs provide the total operating cost, and this is obtained by adding the amounts already entered in columns 4, 6, 7, 9, 13, 14, 15, 16 and 17. The cost per mile for the week can then be obtained by dividing this total by the mileage.
Establishment costs have still to be added to expenditure which can be directly attributed to individual vehicles, and provision for this is made in column 20. This amount is added to the total operating cost, as shown in column 18, and gives the total weekly outlay, If the revenue earned by the vehicle is recorded in the next column, the profit or loss for the week can he conveniently shown in column 23.
S.B.