Covering all Costs
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Hauliers Must Not Ignore the Expenses Incurred in Running Their Office Premises, States "The Commercial Motor" Costs Expert, Who Continues His Advice to Potential Entrants to the Road Haulage Industry
RAVE not yet explained to the reader how he can find
the information which is required to complete the
analysis sheet. Let me run through the items one by one and explain the method as I go along. The first is " fuel." In the beginning I shall proceed on the assumption that the operator who is concerned with these figures is content to use the estimated data, and .1 shall show, how to find the actual figures.
For information about fuel consumed the operator should be able to get all he wants from the drivers' log sheets. Not all of these log sheets have space for the amounts paid for fuel and oil. Many of them, however, provide for the entry of these useful figures. One such log sheet is reproduced, in part, with this article. There is provision for entry of all fuel used by the vehicle, also of oil used. There is also provision for entry of gear oil and paraffin, but those
items rlo not concernus at the moment. .
Driver's Log Sheet
Below these items is space for the entry of miles run during the day. It is essential that the driver be ordered to complete that part of the log sheet as well as the information about fuel and lubricants. It is from the log sheets that the operator takes the data which are entered in columns Nos. 2, 3 and 5 in the analysis sheet. The actual cost of fuel and oil he must obtain from his books: at a later date I may, if opportunity allows, deal with the problem of checking the .fuel and oil consumed; for the moment I am keeping firmly fixed in my mind that I must keep the process of collecting and entering this information as simple as possible.
I come next to deal with tyres and the way to enter the expenditure on them. For the time being I am going no further than to recommend the reader to enter all monies spent on tyres fitted. or repaired in column No. 8. I have already told how to arrive at the figure of 3d. per mile as entered in column No. 7.
Next comes maintenance. In The Commercial Motor Tables of Operating Costs, the total of maintenance (d) and maintenance (e) is taken as the entry in column No. 9. In Table V, the amounts are for maintenance (d), 0.88d. per 'mile, and for maintenance (e), 1.64d. Adding those two together gives me 2.52d. per mile which I have amended,
B28 in the analysis sheet, to 21d. as being a figure which is cm; to deal with when • multiplying by the weekly mileage ti get the amount which must be entered in column No. S The alteration does not really affect the accuracy of th resultant figure, because there are no figures for cost whicl are accurate to within two places of decimals.
For the time being I suggest that whilst the operato should enter in the column provided in the analysis shee any actual data on the subject of maintenance with th. object, later, of amending the estimated figure to bring i into line with the actual cost, he should continue to us. the estimated figure when making out any quotation for ; job.
The next item is depreciation. Take first the cost of tb. machine when new. The amount is stated in the upper par of the sheet to be £2,880. The tyres. .cost £300 per se
any another technical advance, the basically simple. In place of filterind elements, the Glacier harnesses ugal force (at a thousand times the f gravity) to do the job better. Look sectional diagram, and you will see 3 oil itself drives a rotor which flings t to the sides of the bowl, while the 11 flows unchecked through the hole base.
EST OF EFFICIENCY
mple to work ? The proof lies in igefficiency. The Glacier Centrifugal ter has been submitted to exhaustive nd cannot be faulted. If oil is cleaned sing through a filter medium on the de of a strainer, efficiency at best is
• e: the Glacier Centrifugal intercepts .?.s that will -pass through the mesh of est strainers in use. Many strainers, ver, progressively lose efficiency as ecorne clogged with the dirt they are
10. That should be deducted from the £2,880, leaving 580. Next deduct what is termed the residual value, 1 is what the operator would be likely to get for the tide when it needs replacement.
It has become the practice, while awaiting the time when .rket values become normal, to assume that the residual are should be about one tenth of the value of the vehicle s tyres, that is the amount just set down at £2,580, so it the net value becomes £2,200; (£2,580 less £380). I ume that the vehicle has a useful life of 240,000 miles d I divide that into £2,200, giving me the 2.20d. which 1 ve already shown at the top of the data sheet.
There is nothing to explain about the figures entered der the heading of wages, neither about those for insurces. It may be as well to emphasize that the figure for ges is the gross amount: there have been no deductions account of P.A.Y.E. or for the workers' payments for ttional Insurance.
"Easy Money?"
So far as the standing charges are concerned, the method arriving at the £8 10s. which appears at the top right-hand rner of the sheet is, I think, self-evident. .
I have already, in my previous article, dealt with the ures for total cost and cost per mile. ,There is one mment I should like to make he for the benefit of the it tyro, and especially those who imagine that the haulage iustry is "easy money." 1. should like to draw the ention of those who are trying to follow this system up the point of using the figures as a basis for quotations. ley should note that the bare operating cost of the vehicle, th no allowance for either .establishment costs or profit, about £55 per week.
I should like to wager that the reader who sees these ures for the first time will find them hard to believe. I pe that he will do so, as that may serve as a preliminary Lrning that he has not covered the cost of operation when has allowed for expenditure on the fuel and oil conmption of the vehicle.
We now come to establishment costs, and this item of sufficient importance for me to deal with it at some lgth. When assessing his rates on a "cost plus profit" sis it is essential that the operator be sure that he has sluded in his costs allhis expenditure. He has not done at if he includes only vehicle operating expenses, as we ye now done, for, in addition, there are what are variously med as overheads, administrative costs, or establishment sts.
. Cost of Running Business Without trying to confuse the subject by adding yet Lother title, I try to ensure the reader's appreciation of what mean when referring to overheads by describing them as e " costs of operating the business" so that in assessing s total expenditure he has to take into consideration, first, e operating costs of his vehicle and, second, the operating ists of his business.
Moreover, to segregate the two, I have always insisted at in any recording system there should be, first of all, -ovision for entering the 11 principle items (formerly 10 it increased to 11 by the addition of the " levy "). These are enumerated in a previous article. I provide for such !tries in the analysis sheet. Any item of expense which innot be debited to one of the 11 is what I call a business aerating cost and may be referred to as an establishment ■ st, overhead. or administrative cost.
In the sample analysis sheet I made provision for estab;hment costs as a separate item, and I assessed them as sing £3 17s. 6d. per week for the 10-ton vehicle which being used as an example. At the same time I emphasized at the figure was a reader's estimate and in my opinion as insufficient. Now I propose to deal in some detail with iese establishment costs, at the same time demonstrating ie insufficiency of the amount already mentioned. The al figure may surprise some readers.
1 do not propose to suggest the use of an analysis sheet n. establishment costs: the reader is at liberty to devise ne himself after reading this article, and will have no ifficulty in doing so if he takes the items in the accompany ing table as headings for his analysis sheet. He will then need an analysis sheet with 31 columns, as against the 23 which are necessary for the vehicle operating costs.
My own recomniendationwould be that expenditure other than that on the vehicle operation should be entered into an ordinary ruled cash 'account bbok, carried forward from page to page and totalled at the end of the year.
Operators are notoriously careless about making entries of expenditure. They forget to do so or, as individual items are small, they think that such expenses are not of sufficient consequence to record. That is a serious mistake, because the total of establishment costs is made up of a large number of small expenses:the sum is often quite high, certainly more than the £3 17s. 6d. suggested by a reader in reference to' this 10-tonner.
try to obviate this forgetfulness by drawing up a schedule on the lines of that accompanying this article, with a strong recommendation to the operator that he finds some amount to set down opposite each item, as only in that way can he ensure that nothing is omitted.
There is ample justification for the stress that 1 am laying on this aspect of costing, for 1 know from experience that many operators think that their establishment costs are so small that there is no actual need to take the amount into account. I shall demonstrate that in the case of a fleet of five 6-tonners, the total-of establishment costs must be at least £400 per annum. It may exceed £1,000 and is likely to average £750.
I will now go through the items in the accompanying table, indicating the probable minima and maxima, then striking a mean. The figures I shall give will relate more to local haulage than to long-distance operating or to parcels carrying, for both of these are more expensive as regards establishment costs than local haulage. For example, both these types of business require the establishment of depots at various centres.
I begin with office rent, which, in the case of a small operator may be a room at home, or a partitioned-off space in the garage. The minimum allowance for this accommodation is 5s. per week. Alternatively, the operator may require an attractive office in which to meet his customers, in which .case an allowance of not less than 10s. per, week must be made. The minimum office rent is thus £12 10s. and the maximum £26 per annum, with the probable average of £15.
Next comes lighting and power. I think the figures I have set down—a maximum of £17 10s. and a minimum of £7, with an average of £12—will generally be accepted • as reasonable. The larger figure includes provision for driving light machines of some sort, and, of course, the amount to be spent in that way may .vary, making it difficult to set down a provisional figure.