How Costing Systems Vary
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A Method of Qperating, cost Recording Used by a Successful Haulier 0 NE of the peculiarities of accountancy in connection with road transport is that each operator (among that minority that troubles to keep accounts at all) appears to have his own ideas as to what is most suitable for the purpose. Only rarely do different hauliers have the same idea. The exception is where the same guiding hand has suggested the method.
One of the interesting experiences which has come to me in going about the country and meeting hauliers of all kinds, has been that of discovering in a particular neighbourhood, the influence of some kind friend of the industry, in the accountancy methods of the hauliers in that district. Apart from that, every haulier has his account book "made to measure."
There are several reasons which go to account for this peculiar state of affairs. The principal one is that the necessities of the case vary according, to the circumstances of the individual. A haulier in a large way of business finds it necessary to go more closely into detail with his accounts than does the owner-driver.
Between those extremes there are almost as many gradations as there are hauliers and each particular grade seems to have its own corresponding specification for accountancy detail. it is, indeed, a common experience that the complication of the requisite accounts increases with the size Of the business. A simple system with a minimum of headings is all that is necessary in the first place. Then, as the business grows, the operator finds himself in need of more and more information. He adds headings to his account book and that, in effect, is the way road hauliers' accountancy methods are evolved. .
Another reason, one which runs the foregoing close as regards its importance, is that there is such a variety of haulage work. Whilst it is possible to devise a scheme which, in its essentials, will coverthe requirements of the many there is still a large number which will require the scheme to be modified.
Obviously, for example, the forms and account books needed in connection with the business of parcels carrying must be more numerous and more complicated than those required by the haulier whose sole business is, say, the cartage of sand, gravel and roadstone.
One difficulty is undoubtedly that the professional accountant is not sufficiently well acquainted with the inside details of the industry to be in a position to give the haulier the right kind of advice in this matter. There are, of course, exceptions to this general rule, notably those accountants who have specialized in the subject and whose business is, in the main, largely in connection with haulier clients. Even there, as might well be expected, the recommendations of one accountant are not likely to be precisely on the .same lines as those of a fellow in the profession and consistency in this matter throughout the industry is, therefore, not thereby enhanced.
Needless to say, this is no reflection on the profession of accountancy, the concern of which is not usually with those interior details that I have in mind, but with
broad principles of accountancy and with the results of a year's working.
Assistance in this matter has been fully and frequently rendered by The Commercial Motor. The subject has had reference in these columns from the earliest days of the industry. In addition, the weekly post bag of answers to inquiries generally contains several replies in which suggestiona relating to that matter are embodied.
An important series a articles dealing with accounts for Toad transport operators appeared in the early months of last year. A perusal of that series will be sufficient to impe8ss the reader with the complication of the subject and with the difficulty of meeting, in one scheme, the requirements of all types of operator. A complete analysis sheet for keeping fully detailed records of vehicle operating costs alone involves, as was shown in that series, no fewer than 40 headings, excluding provision for establishment costs of the business itself, or for the essential information concerning work done, accounts rendered, receipts, revenue and profit (if any).
A simplified scheme, also embodied in the same series of articles, reduced the number of these headings to 12. This end was achieved largely by including several items under one heading. That is possible and even advisable where the business is not particularly extensive. In both these systems it was shown to be necessary to deal with establishment costs, maintenance and tyres as separate accounts, only the summary of which is set down in the main analysis.
In the same series of articles were also included forms for the entry of details of establishment costs, of drivers' daily records (log sheets), particulars of actual expenditure on maintenance, stores dockets, tyre records and tyre history, a specimen of a day book and three different types of order form for work to be done or work done.
A feature of these systems—one which is essential in any method 61 operating-cost records if it is to reflect with accuracy the current operating cost of the individual vehicles of a fleet—is that provision is made for estimates of cost per mile in respect of specific items, notably maintenance and tyres. In the fully comprehensive analysis there are also columns for actual expenditure on those same items by which -the estimated figures may, from time to time, be checked and, if necessary, amended.
The Commercial Motor Operating Costs Record, first published in the early part of this year, provides a system which reduces to an absolute minimum the work
needed to ascertain cost of operation. Like those described above, it provides for estimated, as well as actual, expenditure in respect of those items in con nection with which such provision is advisable. It meets the needs of the large operator as well as the small, and its principal advantage is that only four entries of the simplest nature ate needed daily. All four can, as a rule, be ascertained directly by inspection of the driver's daily log. The costs are summarized so that both cost per hour and cost per mile can quickly be ascertained for each week of operation.
The Commercial Motor Operating Costs Record, com
prising sufficient pages to enable records to be kept of the cost of working two lorries for a year, embodying also instructions for use and rulings whereby actual expenditure on materials and labour, maintenance and tyres can be recorded, is obtainable from the offices of this journal at the price of 1s. 3d. by post.
It is always of interest to see how the other man does things, although it may be that his procedure seems to be open to criticism. That is my justification for placing before my readers the accountancy methods of a haulier friend of mine. The interest attaching to this scheme of keeping track of operating costs is in no way diminished by the faot that this particular haulier has made a success of his business—and he does not cut rates to obtain traffic.
His system necessitates the use of four different account books. Actually, he does not use books at all, but makes up sheets separately and has them punched for inclusion in loose-leaf folders. The four sheets will appear in subsequent articles as Figs. 1 -to 4. Figs. 1 and 2 will be published next week. • S.T.R.