'Involve subordinates in
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budget planning' &v David Lowe
• It was important to involve the lower strata of management in the preparation of budgets, a CM-sponsored seminar in London on Wednesday was told. The speaker, Mr R. H. Grimsley, a management accountant and taxation adviser, said that such people usually had a good practical knowledge of what was achievable, and budgetary planning was an opportune way of encouraging such staff to take an interest in performance measured against forecast.
A major question raised at the seminar was whether costs and earnings should be calculated for each vehicle or on a grouped fleet basis for each period. Mr Grimsley believed that each vehicle had to justify its own existence by earning more than its total operating cost, but where similar vehicles were employed on identical work a grouping of costs might be acceptable.
A haulier delegate said his variety of vehicle types and sizes was needed to meet varying customer requirements. Some small vehicles were operated merely at a service level, the bigger vehicles being the real profit-earners. He thought it mattered little what individual earnings were so long as the fleet earnings over a period were at the necessary level.
Mr Grimsley reiterated his belief that each vehicle had to be shown to be paying its way.
Should budget periods be divided into calendar months, four-weekly stints or, as one delegate suggested, the fortnightly period practised in his company? Delegates had their own views, but Mr Grimsley said it mattered very little what period was chosen. since some division of the annual budget figure had to be made anyway.
After hearing an outline of budget techniques, delegates were set group exercises in completing budget statements from basic figures provided in the speaker's paper.
The importance of looking at the forecasting and planning aspect of budgets under three main headings was stressed by the speaker in his written paper: namely, operating budgets, financial budgets and capital expenditure budgets.
With operating budgets, two questions had to be asked: what would be sold and what transport capacity would be needed? It was admitted that sales budgeting — or its equivalent — was difficult for a transport organization, but it had to be tackled because the volume and mix of anticipated freight was the aspect to which all other operating plans had to be geared.
Planning and controlling the liquidity of the business was the task of the financial budget. Where the operating budget was prepared in terms of revenue and expenses, these had to be translated into cash inflows and outflows. There had to be enough cash to operate the business, but not so much that it lay idle: The total funds required to run the business must be planned for.
Under the heading of capital expenditure budgets. Mr Grimsley explained, management must plan expenditures which would yield benefits to the company over a longer period. It was difficult to plan spending on fixed assets; one had to make decisions about the right assets to acquire, and then arrange for purchase finance to be available.
Budgetary discipline One of the great benefits of budgets, suggested the speaker in his paper, was that they imposed the discipline of expressing plans in quantitative and monetary form. But the speaker warned against concentrating so fixedly on the annual budget that longer-term planning was neglected.
In preparing a budget the first big problem faced by the manager was to establish a cost standard, said the author, and he then proceeded to show how such a task may be tackled — including the setting of performance standards for vehicles.
The paper showed three examples of these criteria, applied to a fictional transport company.
The paper suggested that most reputable firms could obtain trucks on lease, provided they could show enough likely revenue to meet leasing payments out of income. This left the manager with the choice of buying outright or leasing. A cost comparison of the alternatives, with a £3000 vehicle, was given in the paper. The example showed that while both methods were identical in cost and earnings, the use of discounted eash flow methods gave purchasing the better result.
Losses resulting from vehicle breakdowns were shown by examples in the paper, but Mr Grimsley pointed out that a big unquantified factor was the risk of losing customers through failure to meet promised delivery schedules. The paper provided a plan for maintenance, with annual, monthly and daily activities essential for putting it into action and keeping it going throughout the year.
Demountable modifications
• In the light of comments on its Translift equipment made in the CM series "Demountable Distribution", H. Clarke and Sons Ltd, of Lutterworth, has announced its intention to incorporate two modifications to the design. The angle of the "gathering" plates on the ends of the jacking beams is to be altered and a slot is to be machined in the bottom of each rear leg.
• Open today and tomorrow (Saturday) is a Leyland Redline Terrier exhibition at the Kenning Car Mart truck centre in High Street, Stratford, London E15.
• Common Market drivers' age and hours of work restrictions will apply in Britain from April 1 1973 —• at first for international journeys only, and from 1976 also for domestic journeys within the UK.