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the costing column
Page 63
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Professional and auxiliary services
• Operating costs can be conveniently analysed in two groups of five items each, namely standing costs and running costs. Moreover, they can all be directly allocated to the operation of individual vehicles and are equally applicable whatever the type of vehicle or class of traffic.
Road transport operators, however, will incur other items of expenditure which cannot be directly attributable to individual vehicles and which are referred to as overhead costs. Unlike operating 'costs they do not necessarily arise at regular intervals or form a common pattern.
Precisely because of this it is helpful to draw up a list of possible overhead costs and check this against actual expenditure to ensure that none are omitted. As stated previously in this column, a total of 50 or more such items of overhead costs can be sectionalized under the headings of management, office, garage and stores, warehouse, branch depots and sales.
Another section could include expenditure incurred in obtaining professional services. Many small operators need the advice of an accountant to complete, at least, their annual tax return. When an organization is too small to justify an internal accounts department, assistance and advice at more frequent intervals may well be necessary.
The industry has to conform to a large number cif statutory regulations in the interest of public safety and excellent advice is given by trade associations. But sometimes operators require professional legal advice and, as with accountant's charges, legal fees can conveniently be dealt with as overhead costs.
Other expenditure which constitutes another group of oyerhead costs concerns the auxiliary fleet of an operator.
If a reliable service is to be provided to meet the increasingly exacting demands of customers, then vehicles must be well maintained. While excessive preventive maintenance must be avoided, pre-planned maintenance is to be preferred to unscheduled and often hurried work following a breakdown.
Provision of pre-planned maintenance by the engineering department, however, must' be matched by pre-planned replacement services provided by the traffic department. The cost can readily be spread over the whole fleet by including it as an overhead cost.
Similarly, with a service van—the charging-out of each journey separately would generally be impracticable—the expenditure can be spread over the whole fleet by allocating it to overhead costs. The same procedure applies to the cost of operating breakdown recovery vehicles when the size or type of operation justifies this.