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7 FOR THE SMALL HAULIER COMPREHENSIVELY and completely, I dealt with systems of cost recording for hauliers and ancillary users in a series of articles commencing in the issue of The Commercial Motor dated December 21, 1934, and terminating in the issue dated April 5, 1935. That may seem, to some readers, to be rather a long time ago, but it is hardly sufficiently long to justify repetition as yet.
There has not, in the, interval, been any reason to modify it, except as regards the system of keeping check on tyre costs. So far as that is concerned. I have, in the interim, designed a more effective scheme which enables tyre cost per vehicle to be recorded to a fraction of a penny, notwithstanding what tyre changes are made.
In that series of articles I described a variety of
schemes. One was a complicated one with as many as 42 headings in the scheme for checking cost of vehicle operation only. That is necessary to meet the requirements of the large operator owning upwards of 50 .vehicles. In the second article I eliminated a good deal
of this complication (which, admittedly, is unnecessary, unless the fleet of vehicles be a large one) and reduced the number of items proportionately. I also outlined a much simpler scheme for the small haulier with two or three vehicles.
A short time after publication of this series of • articles I devised The Commercial Motor Operating Costs Record, which is particularly well adapted to the needs of
the small haulier and has been very well received.
Before I go any farther with this article, it may be as well to mention, once again, that a book of these records,
sufficient for two vehicles for a year, costs only Is. 3d. Actually, it is meant, as will shortly be shown, to be used to some extent in conjunction with The Ctimmercial Motor Tables of Operating Costs..
A copy of the latest edition of those Tables was given free with the issue 'of The Commercial Motor dated September 9 of this year, and further copies may be obtained for sixpence, post free, I understand that, where secretaries of associations would_ like to have these publications for their members, the Editor is. agrd.,.eable to allowing such applicants. to have a ;.dozen or more at a time at a much lower price.' Each and every one of the several systems, already mentiomd, had the same feature, the importance of which I have been stressing in recent articles, namely, that there is provision for estimated or budgeted expenditure, as well as actual.
The Commercial Motor Operating Costs Record, which is the main subject of this article, is, if I may use the term, emphatic in respect of the necessity of using estimates, since it cannot be used at all without such
procedure. The same book of cost records provides means, of course, for the other essential feature, namely, the entry of actual costs against which the estimates can be checked from time to time.
Generally, these records call for only three entries of actual daily or weekly expense. Therein, indeed, lies one of the many advantages of this system—the clerical work involved is reduced to an absolute minimum. A page from the publication itself is reproduced herewith. For the time being, I want the reader to disregard the upper portion and confine his attention to the lower portion. It is there that the actual costs are entered.
The usual and inevitable division is made, "running costs" and " standiug charges." It is convenient, in order to bring out and emphasize the points I have in mind, to deal with the standing charges first.
In considering -the standing charges of any commercial vehicle, it is important to realize that nearly all of them can be estimated almost precisely and that there will be no need to alter that estimate during the whole of the time the vehicle is in use.
There are only five items of standing charges and the remark I have just made applies to four out of the five— to the annual Road Fund tax, to the interest on the capital outlay, to a somewhat less degree to the annual insurance premium, and to the rent and rates of the garage in which the vehicle is housed.
The 12-ton Six-wheeler as an Example.
As an example. I am proposing to take a 12-ton sixwheeler. The tax may be £90 per annum. It may be more if the bodywork be heavy, and it is unlikely that it will be less. That amount, reckoning 50 weeks to the year, is equivalent to 36s. per week. Garage rent may be anything from 10s. to 15s. I will take 12s. For insurance I have taken £50 per annum. That is for a haulage contractor's comprehensive policy. It is equivalent to 20s. per week.
Finally, I come to the item of interest, which, as I know full well, many haulage contractors do not thoroughly understand. Most of them seem to think that it relates to the interest on hire-purchase contracts. It does not. It represents the income that would be earned if the initial amount spent on the vehicle had been invested in some reasonably secure moderateinterest-bearing stock. The rate of interest is usually assumed to be 4 per cent., and that is calculated on the first cost of the vehicle, after deducting the price of a set of tyres.
If, for example, the haulier paid £1,712 for this 12-tonner and the price of a set of tyres be 2112, then £1,600 is the net amount with which we are, at the moment, concerned. At 4 per cent., £1,600 would earn this)iaulier £64 per annum, and the point is that, if he had invested the money, he would be able to draw that £64, doing no work at all and taking no risk. Until that £64 is returned to him his haulage business is not showing him a net profit, because it is not bringing him in anything which he could not have earned in any case.
Reducing that £64 per annum to a weekly sum, we get £1 5s. 6d. The sum total of the four items, tax 36s., rent 12s., insurance 20s. and interest 25s. 64., is 93s. 6d. That is a sum which he can reckon as being chargeable against that vehicle every week throughout its life, so long as it be taxed and insured, and so long as he pays garage rent in respect of it.
Entries in the Operating Cost Record.
In The Commercial Motor Operating Cost Record that amount needs to be entered merely once per week, in the appropriate column, opelbsite the line "Tax + insurance + rent+ interest," as can be seen by reference to the page reproduced from the Record.
To complete the standing charges for that particular week, he must add the actual amount paid in wages. Note that this is the first actual cost to be entered. I have assumed that on this vehicle there are a driver and mate and that, including some allowances and including provision for three insurances, National Health, National Unemployment and Employers' Liability, the total is 147s. 94. The two items added make 241s. 3d. That is the total of standing charges for that vehicle for that week.
Obviously, it takes much less time to write those three figures down than it does to learn, from this page, how to arrive at them. Bear in mind that one of them, the 93s. 6d., is the same every week. The operator must know. what wages he pays each week and, after entering that, the rest is merely adding two figures together.
So much for the standing charges. With the running costs I must deal in a subsequent article. S.T.R.