PROBLEMS OF THE HAULIER AND CARRIER.
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Business Expenditure and its Allocation. What are the Overhead Charges of a Haulage Business—Small or Large ?
JUDGING by the number of letters received from transport users who are in a small way of business, there is much uncertainty about overhead charges, establishment expenses, or whatever may be the term preferred by individuals for those sums of money which have to be paid, and fall neither under the heading of running costs nor standing charges for any particular vehicle.
To the limited company who must keep properly audited accounts, the problem is merely one of finding capable bookkeepers and auditors who are accustomed to this class of work. To the proprietor of a one-man concern, however, or the owner of a few vehicles, the job is rather more complicated, as he very often runs his business from the point of view of a driver and mechanic, rather than from that of a business expert or a financier.
With the object of explaining some of the points for the uninitiated, I propose dealing with the specific types of charges one by one, considering in the first case matters concerning the business premises, offices and so forth.
• Rent and rates, naturally, loom large in the eyes of the business proprietor. It is necessary at this juncture to point out that, at the present time, we have no connection with the rent of the garage. This item is dealt with under operating costs, the total rent of the garage space being divided and allocated among the vehicles of the fleet in proportion to the size of each—or, of course, charged to the one vehicle alone, if this is the total, number of chassis employed. For the moment, we are concerned with the other buildings used for such matters as office accommodation, stores or repair shops, if any.
Making a Fair Charge for Office Rent.
Naturally, the office rent could not be definitely put down as a charge against any one vehicle ; it Is indispensable to the running of the business, and is a debit against the concern as a whole, irrespective of the size of the fleet. In many cases, one or more rooms of the owner's private house are used as the haulier's offices ; therefore, a proportionate charge must be made in the books of the company which the person who pays the house rent should receive from the haulage business. In a similar manner, the total amount of rates must be proportioned according to the areas allotted for private and business purposes. It is altogether wrong for the haulier who thus works from his private house, to charge nothing for office rent to his business. If he does so he is led into the error of underestimating his costs and of undercharging for hig services. The insurance of the offices is also an establishment charge, and although not usually a large amount, it must not be overlooked.
Heating and lighting for the premises have to be paid for, and in the case of a private house-cumoffice arrangement the quarterly electric current, gas supply, coal or paraffin bills must be divided according to circumstances and the books of the concern debited.
Office furniture and fittings depreciate usually at the rate of 10 per cent. per annum, and account must be taken of this item, both for the sake of arriving at correct establishment charges and in order to furnish a proper figure when the end of the financial year comes round, and a statement has to be made out as to the value of stock in trade and the assets of the business.
The Emoluments of the Proprietor.
Turning now to those items which are more particularly connected with the personnel, salaries absorb a large amount of money in the majority of cases, and it will be well to deal with the manager's salary in the first instance. If the proprietor of a business is not actually driving, but is supervising the affairs of the concern, he draws, or should draw, a salary as manager ; this, of course, is an establishment expense, as his activities profit all the vehicles comprising the fleet. If it is a one-man buSiness and the proprietor is acting as a driver, he should draw the wages of the driver, which are included in the weekly standing charges, in addition, of course, to drawing the profit which accrues.
Employees other than vehicle drivers_have to be paid according to their work, and their salaries also fall under establishment costs. These include secretarial staff', office boys, messengers and other persons, whether working full or part time for the concern. If any one of them works partially for another branch crf the business or for another employer, his total salary must be divided between the two sections or employers in proportion to the time spent in the service of each. Health and unemployment insurance contributions should not be overlooked in connection with salaries.
The wages of fitters in the workshop should not, however, be put down as establishment costs when they are working on any particular vehicle, as time-sheets should be kept, and the proportionate amounts debited against the vehicle which, of course, will be put under the maintenance heading i as a running cost. When a fitter, however, s spending his time making up tools for use in the garage, or doing similar work which could not rightly be debited against any particular chassis, the sum in respect of the time should be entered as an establishment charge against the business. Postal expenditure, telephone rents and call fees must be recorded carefully, and the total put down every week, In a similar manner, stationery, the printing of small billheads, and such items, are all classed as establishment expenses.
Advertising, particularly in the case of fleets consisting of more than one or two vehicles, is usually an expense of fair proportions, and a record must be kept of all payments for newspaper advertising or any other form of publicity. In connection with printing, that which is carried out for the purpose of advertising must be kept separate from stationery printing, in order to arrive at the annual total expenditure for pushing the business, because the printing of posters is strictly advertising, but the printing of billheads, time-sheets and the like is a matter of internal economy.
The proprietor and other members of the staff from time to time have to travel about in the execution of their various duties, and a careful record must be made of all hotel bills, railway fares, etc. As any man who has been in the hauling or carrying trade for any length of time will tell you, it is almost impossible to avoid legal expenses, although, of course, much may be done to keep out of the hands of the legal fraternity. It often happens that litigation is forced upon a proprietor of a concern, and, therefore, allowance must be made for it in advance, and income tax should be classed In a like manner as an establishment expense. The purchase of plant, tools, etc., and their maintenance in the workshop are a direct charge against the business as a whole, but spare parts for one particular chassis are purchased for that vehicle alone, and they should be debited against the maintenance account of that vehicle.
When a haulier or carrier has added up his total of establishment expenses, either for the week or for any other period, the question arises : How shall I proportion it to each vehicle, or shall I simply divide the total by the number of machines I own? It is hardly fair to debit, say, a 5-cwt. parcel car with an amount equal to that charged against a 5-ton or 7-ton wagon which occupies much more space and to which considerably more time must be given by all members of the staff in securing its efficient operation.
Roughly speaking, establishment charges generally work out in the following manner :—Vehicles up to 7 cwt. capacity, 10s. a week ; Vehicles up to 15 cwt. capacity, 15s. a week ; vehicles up to 2 tons capacity, £1 a week ; vehicles over 2 tons capacity, 11 10s. a week. As an instance of how the proportion works out, let us assume a fleet including one chassis of each type mentioned above and addince6 up the sum we find that £3 15s. will be the weekly establishment cost. Split up in proportion, therefore, we get 2-15 of the total for the 7cwt. parcel ear, 1-5 for the 15-cwt. van, 4-15 for the 2-ton lorry, and 2-5 for the 3-tonner. It is quite a simple matter to arrange the proportion sum and to work it out on the same lines for any particular number of vehicles of various capacities.
S.T.R.