the costing column
Page 52
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Sink to swim
• Few setting-up in business as road transport operators do so deliberately on the basis of a short-term exercise. Yet the continuity of a business—and likewise the livelihood it provides—are so often taken for granted.
Nothing is of more lasting importance to an operator in his endeavours to build up an expanding and successful business than continuity coupled with profitability. Continuity of successful business exercises, however, is not achieved by accident. It is deliberately planned.
Ensuring successful continuity of operation of a fleet of commercial vehicles is a combined exercise. Traffic must continue to be found to justify the exercise. Vehicles must be well maintained to ensure the services they provide are reliable. Finance must be available to permit vehicles to be first maintained and ultimately replaced on a planned basis.
'Sinking fund' One simple method for an operator of a small fleet to plan ahead as regards his future financial commitments is to set up a "sinking fund", Into this fund would be paid each week the amounts of deferred expenditure on operating costs detailed in this column last week.
To facilitate payment of the correct amounts into the fund a simple "sinking fund" form should be devised. For a small fleet there could be one form for each vehicle with entries being made on a weekly basis.
At. the top of the form there would be recorded two items—the amount of deferred standing costs per week and deferred running costs per mile (£13 2s. 6d. and 8.24d. respectively in last week's example]. The main section of this form is divided in two: Income and Expenditure.
The Income section has six columns headed (1) Date-Week Ending (2) Weekly Mileage (3) Standing Costs (4) Running Costs (5) Weekly Total (6) Total to Date.
The Expenditure section has five columns (7) Date-Week Ending (8) Description of Expenditure (9) Cost (101 Total to Date (11) Balance to Date.
Each week the appropriate mileage will be entered in column 2. The deferred standing costs (£13 2s. 6d. in this example) will be entered in column 3. The amount for column 4 is obtained by multiplying 8.24d. (i.e. the deferred running costs) by the mileage for that week.
Any payment made that week in respect of the seven items of deferred expenditure is likewise recorded. With appropriate additions of these amounts the operator is then regularly reminded as to the current balance in the sinking. fund.
Regular completion of this sinking fund form should prevent the illusion of "low cost" operation based on immediate expenditure only. It will also provide a salutary reminder as to an operator's ability to remain financially "in the swim".