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Chris learns the form on running costs
Page 118
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One of the less attractive aspects of being an ownerdriver and running one's own business, Chris realises, is the necessity to record and analyse information relating to the business. For this reason he has resolved to do this regularly every week.
He knows that if he does not, the amount of information to be recorded and analysed will become, so great that it will probably never be dealt with.
Despite his natural reluctance to get involved in a lot of figures, Chris has been persuaded that he must do so. For instance, his accountant has pointed out that he has no solid information about how much his vehicle is going to cost him to maintain. He has been told by the garage that routine preventive maintenance will cost about E20 every three weeks.
This does not take into account any repairs or replacement of faulty components. Chris has made every effort to make an accurate guess about how much these will cost by finding out the average cost of maintenance for a similar vehicle.
One comforting thought for Chris is that his standing costs —licences, wages, insurance, garage rent and interest on capital—are already forecast for the year and have been worked out on a weekly basis, It is, therefore, only his running costs which must be carefully monitored, To do this he must record his weekly mileage, how much fuel and oil he buys, if he has to buy new tyres, and the amount he has paid for maintenance. This last item must include the expenditure on both routine, preventive maintenance inspection and repairs and renewals of components.
Sunday work
To help him record all this information he has designed a simple form which he intends to complete every Sunday.
Because of the way he has quoted his rates on a time and mileage basis it is not so important for Chris to keep a careful eye MI his mileage run each week as it would have been had he been compelled to quote an "all in" rate per mile.
If he has to quote on the latter basis for any future customer he realises that this must be monitored carefully.
Quoting on a mileage basis means that the weekly standing costs incurred have been divided by the weekly mileage to obtain a standing cost per mile. To this would have been added the running cost per mile and after adding a percentage for profit.
Chris realises that if he fails to achieve the anticipated weekly mileage, he will be undercharging the customer.
As it is, Chris has quoted a standing charge per day to which has been added a daily running charge arrived at by multiplying the running cost per mile by the daily mileage and adding the profit allocation.
Thus any great variation in mileage run will have little effect on the rate he has quoteed.
With the mileage recorded each week Chris will be able to work out his fuel consumption. So he also has to record the fuel gallonage bought and its cost.
Cost per mile
Chris can then keep an eye on his fuel consumption, and if this varies considerably this warns -Chris that the vehicle probably needs some attention.
By dividing the weekly ex penditure by the weekly mileage he can check that the fuel cost per mile built into his costing system is accurate. If this deviates greatly from the fuel cost per mile originally estimated, he will have to investigate the reason for this, and ensure that the effect on his revenue is corrected.
Although the expenditure on lubricating oil might not be a significant factor in compiling vehicle costs, this also must be recorded. Tyre expenditure will not occur every week, nevertheless provision must be made for this on the form.
It is always a good idea to detail maintenance costs and make some distinction between what is spent on labour and what has been paid out for components and other material. Including the cost of maintenance already estimated on the form enables a quick comparison between estimated and actual expenditure to be made.
With the weekly expenditure detailed on the form and the total weekly revenue inserted, a quick calculation will confirm the total weekly costs. After all, this is what Chris is in business for.
Next week: Chris takes delivery of his vehicle and makes a careful check of its condition. He also ensures sufficient equipment is carried to enable him to deal with minor incidents.