Accounting for Odd Items
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CONTINUING consideration of overhead costs, it has already been explained that such expenditure is incurred in the running of a transport business as a whole in contrast with operating costs arising from the running of individual vehicles. Whilst all 10 items of operating costs will have to be met whatever the type and size of Vehicle employed, the composition as well as the extent of each item of overhead , costs can vary substantially.
For this reason, and because of the spasmodic occurrence of many of these items, it is an advantage to devise a standard list of overhead costs as a check that all such expenditure, however miscellaneous, has been accounted for. Despite the miscellaneous nature of some of the items, a substantial proportion of overhead costs can be usefully and logically arranged in groups. It has already been recommended that eight such groups should be formed under the headings of management, office, garage and stores, warehouse, branch depots, sales, professional services and auxiliary fleet, together with miscellaneous items.
The first five groups have been dealt with in previous articles and consideration of expenditure on sales is now continued. It is significant that in many otherwise efficient transport organizations, the sales department is,a relatively weak link in the chain. Where this is so, it is an omission in organization which particularly needs rectifying in 1964 when possible changes in the overall pattern of transport might bring competition from unexpected quarters.
The first of the five items in this sales group is devoted to representatives' salaries and commissions. In small organizations, obviously the duties of managerial cunt' and contact with customers may well be the combin duty of the proprietor, or transport manager, but even it is as well to recognize that this function of sales has be provided for. Particularly does this apply to an expan ing organization if a marked addition to costs is to avoided when the time comes to appoint full-time s'a representatives.
Hauliers' customers, whether retailers, manufacturers particularly when they are transport managers, are usua themselves busy men who expect prompt and factual reph to their inquiries. They have no time to spare for potent carriers of their goods who display ignorance of t _peculiarities of the traffic they are offering to move.
As with a sales representative of any other trade industry, a traffic canvasser must obviously have at finger tips the extent of the service he can provide and t range of rates applicable to the particular traffic under combinations of circumstances. Here, incidentally, is o of the greatest assets of road transport--namely, the abili to give an immediate reply to a customer's request regal ing traffic movement coupled with an equal ability to r words into action immediately a quotation is accepted.
Therefore, it would be singularly unfortunate if this ve real and attainable asset was lost through the failure the road transport operator to recognize the need for adequate sales force and to plan his organizati accordingly.
The Representative's Work
Whilst the securing of new and additional traffic wot seem the major function of sales representatives, regul contact with senior personnel in the organization of existi customers is not only a commercial courtesy but can oft lead to advance information about future developmen Such visits would, of course, be in addition to the da contact at a lower level with dispatch and traffic clerl To facilitate the work of the sales representative t provision of a staff car would be a virtual necessity, alternatively provision for payment for the use of privately-owned car, and this expenditure would be includ as an overhead cost in the sales group. Also included this group would be. expenditure incurred on advertisir entertaining and gratuities.
With few exceptions expenditure will be incurred on pifessional services by all operators regardless of the size their organization. The exceptions might include ancilla users where such professional services were already pr vided for the main organization, although this would n prohibit some apportionment should this be consider justified on the basis of the amount involved. Thr common items under this heading are bank ehargi auditor's or accountant's fees and legal fees and expensi This latter item, in addition to matters concerned wi company formation and legal obligations, would al include fees in connection with applications for iicenc before traffic courts where appropriate to the operation.
A common query raised by many readers in connectii
th the practical application of operating costs concerns tithenanee and the provision of spare or relief vehicles. cepting the reasonable assumption that most operators ve undertaken to provide a reliable and regular service ✓ their customers, then even the planned withdrawal of hides for preventive maintenance (in contrast with Escheduled disruptions of a service because of breakaNns) cannot be undertaken unless spare vehicles are ailable to take their place. In the course of the year, r example, there will be a number of days when a vehicle not available for service and spare vehicles will have to provided. It is on this account that the query is then ade a; to how the cost of providing the spare vehicle ✓ such interim periods can best be accounted for. cidentally, replacement by vehicles of identical size may by no means regular practice. If so this would add a rther complication if a literal allocation to each vehicle the cost of providing a replacement was attempted. The solution to this problem can be conveniently solved having a group of items under overhead costs entitled suxiliary fleet ". Three items could be included in this oup. In addition to the main item of replacement vehicles, presenting possibly 10 per cent of the basic fleet, there auld he the almost inevitable expenditure on the maid-all-work—the service van—and, where the size of the ganization justifies it, breakdown recovery vehicles.
Miscellaneous Items
A dozen or so miscellaneoug items remain to be dealt th as they do not readily fall into any of the eight groups ready dealt with. Although the second group was headed 3ffiCe -, there will be many instances where other departents, such as the garage and stores, warehouse and branch !pots will have occasion to incur expenditure direct or ake use of supplies of stationery, postal, telephone and leprinter services. Accordingly such expenditure could
usefully considered as miscellaneous items as otherwise e office. as such, might be disproportionately charged with e whole of the expenditure.
Another miscellaneous item could be devoted to expen
ture involved in travelling. Such expenses would be stinct from staff car expenses and would relate to fares Lid on public transport by operating staff collecting :hides from manufacturers, bodybuilders or agents and, here the system applies, drivers proceeding to or from mange-over points.
In addition to public service vehicle operators, food stributors, amongst other goods vehicle users, are increasgly providing their drivers and other operating staff with tiforms. Accordingly, a separate item could be included overhead costs to cover this expenditure.
Under the group heading of "garage and stores" was eluded the item of equipment, and correspondingly in the 'oup warehouse" such equipment could include loadg devices as part of the permanent structure. In some pes of operation, such as the movement of sugarbeet ops. for example, it is worth while to provide external ading equipment to speed up the turn-round of vehicles a shuttle service from the farm site to the beet factory.
s these might be of a type not convenient for use at the !pot, a separate item of overhead costs could cover such tpendilu re.
Subscriptions
Subscriptions to trade associations such as the R.H.A., .R.T.A. or P.V.O.A., would constitute another item of verhead costs. With the transport industry continuing to
in the forefront of political controversy it is imperative at the interests of road transport should be adequately resented at top levels. Correspondingly a subscription to
the trade Press provides operators with the sole means of keeping fully informed of events and changing trends in this industry. Subscriptions on hoth these accounts could constitute a further item of overhead costs, Other miscellaneous items would be dues such as parking, weighbridge, ferries and other tolls, bad debts and the inevitable sundries.
Finally, although interest, depreciation, maintenance and insurance have all to be accounted for when dealing with the cost of operating vehicles, it might be considered convenient to include the four items again for corresponding expenditure not directly chargeable to vehicles. This would relate to office and garage buildings, and their equipment and also goods-in-transit insurance premiums.
As stated earlier, adjustments. additions or deletions may well be necessary in individual circumstances to this recom,-.15 mended standard list of overhead costs. But there will remain the common problem of how best to apportion the total overhead costs of a fleet to individual vehicles.
Assuming, as will undoubtedly apply with most fleets, that a variety of types of vehicles is employed, then obviously a straight division of the total operating costs by the number of vehicles in the fleet would not result in a fair proportion. But even so, to go to the other extreme and allocate overhead costs in proportion to the payload would also be unfair, as it could hardly be claimed that a 16-ton 8-wheeler incurred eight times as many overhead costs as a 2-ton van. There might, in fact, be more separate c( signments in the smaller vehicle than the larger with corr ponding reflection on administrative expense. Nor caul( be substantiated that overhead costs had direct relation the mileage run.
For the purpose of compiling The Commercial Mo Tables of Operating Costs " it is considered a fair reflect' of all the factors to calculate the apportionment of overh€ costs as a percentage of the total operating costs. By doing recognition is given to not only the size of vehi but also to the extent to which it is utilized.