HOW TO MAKE U ',ECORD BOOKS
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Solving the Problems of the Carrier
Importance of Keeping Separate Records for Each Vehicle : How to Use Cost Figures : Total Mileage the Key to Calculations of Profit
AHAULIER has written to me to say that he treats depreciation as a standing charge instead of. as I recommend, a running cost. He also states that he reckons maintenance and tyre expenses as establishment• costs. His object, he tells me, is to reduce to a minimum the labour of calculating charges. By putting depreciation as a standing charge and including maintenance and tyre costs amongst his establishment figures, he arrives at a steady weekly debit, comprising establishment costs and standing charges, which is easily calculated to show a cost per day per vehicle.
On to that total he need add only the running costs for petrol and oil, the figures for which are well known to him in connection with each of his vehicles, to arrive at a total, so that the calculation of the cost of any particular job is facilitated. This procedure is not unknown to my readers, although I have never come across it being carried as far as this. I should, perhaps, explain it to readers who have not hitherto come across it, and I can do that best by example. .
Assume that, as the outcome of this method of accountancy, this inquirer obtains a figure of £22 per week for the total of establishment costs and standing charges. He can regard £4 per day as the cost of operation, irrespective of his mileage for which, according to his figures for consumption, he is put to an expense of 5d. per mile.
If he is now asked to quote for a run which involves 240 miles and he knows, from experience, that the time involved, because of delays in loading and unloading, will be a full two days, the actual cost to him will be, first, for two days at £4 per day, £8. For the 240 miles at 5d. per mile he allows £5, so that his total cosi is £13. To earn a profit of £2 he must charge £15. That is equivalent to £3 per ton for a one-way load. (The figures are hypothetical.) From some points of view, this man's system of accountancy is quite all right. At least he is keeping accurate and complete accounts which, as I have so often emphasized, is the main thing. It is, however, open to this criticism. He has no check upon the maintenance and tyre cost of individual, vehicles, and I regard that as essential to economical working.
Figures for garage rent should be those actually incurred. This is in answer to another inquirer, who states that he is paying only £13 per year for garaging three vehicles. This, he points out, is much less than T estimate.
The same reader tells me that he is paying only £20 tax on each of three 30-cwt. vehicles, whereas "The Commercial n24
Motor Tables of Operating Costs" show £25. There again it is the actual payments which should be recorded in that matter and not the printed ones. The difference between his figures for tax and those printed in the Tables is brought about by the fact that he is operating those lighter types of 30-cwt. vehicle which come within the limit of the £20 tax.
It should always be kept in mind tflat the Tables are meant to be used as guides and are not to be taken as arbitrarily defining the limits of cost of operation as between one vehicle and another; the figures are averages and there may be a wide margin, in particular cases, between actual data referring to vehicles of the type and capacity named. The Tables are not to be taken as suitable for replacing actual records.
In this connection I would emphasize that whilst there is no need for disturbing existing systems of accountancy, there is every need to check those systems to make sure that they are complete records of expenditure. I would again emphasize that it is preferable to keep separate records of individual vehicles, for only in that way can performance he checked.
Another inquirer aAs me to be more explicit concerning the size of page in the four books which I suggest are all that arc necessary for the operation of this costing system. In the first of the series of articles. I suggested exercise books and certainly had in mind books with pages approximately 10 in. by 8 in. which is technically known as "crown quarto." Here, according to a correspondent, is a snag.
Saving Space
• A crown quarto page, he writes, is not deep enough for the purpose. A foolscap page is necessary and even that is hardly large enough for the operating costs record book. It must be narrow-lined and it may be necessary to make a slight modification to Fig. III (see .issue dated October 7). The modification consists of putting the name of the day at the side instead of at the top of each description of the day's work. It will be appreciated that the alteration saves at least seven lines.
Further, I suggest that the summary at the bottom of the page be altered, with the same object in view. It will save a few lines at the bottom of the page.
In this revised form, Fig. III will go nicely into a foolscap page, provided it is narrow-ruled. The best sort of book will be that made up in loose-leaf form: the size must still be foolscap and it must be narrow-ruled.
One or two minor queries arose in connection with the original Fig. III. They arc chiefly matters of arrangement. In reading the diagram, some of my haulier friends have found a difficulty in understanding the figures. For instance, one reader was puzzled by the figures for speedometer readings. On Monday the speedometer reading was given as 8,300 and the mileage for the day as 157, whilst the speedometer reading on -Tuesday was 8,348. He had the idea that the speedometer reading on Tuesday should be 8,457, which is 157 more than 8,300. He did not appreciate that the procedure is for the speedometer reading to be taken at the end of the day. Subtracting the previous day's reading from that figure gives the total mileage for the day in question. That return goes down next. Referring again to Monday's reading of the speedometer, 8,300 would be noted on Monday evening. Subtracting the previous day's reading, 8,143 from 8,300, gives 157, the mileage of that day. After that the hours worked and details of fuel and oil are to be entered as shown.
The book for the entry of work done and receipts should also be foolscap size, for the reason just outlined. The book for the entry of expenditure on maintenance can, as previously explained, be quarto, narrow-ruled and cashruled: That for recording establishment costs really involves using two pages at a time, the ruling going right across from one edge of the left-hand page to the other edge of the right-hand page. It may be found convenient to add another column to those already given for the book for recording establishment costs, namely, a column for totals. Such a column will serve at a cross check on the figures, so that besides a total for vertical entries, a cross total will he available. That in any case is necessary to find the grand total of expenditure on all items for any week.
Two Pages a Month
The extent to which this column or this book will be used will vary according to the type of business and on the arrangement of the owner's establishment. In the ordinary way probably one double page will suffice for entries for a month, although, of course, the summaries must he made weekly for transference to the receipts book.
From talks which I have had from time to time with hauliers abOut this and other systems, it seems as though the weekly analysis, to go at the bottom of each page. is not completely understood, and it is clear that a little further explanation will be appreciated.
This W6elely analysis, shown in the issue dated October 21 (Fig. VI); should be considered in this way. The weekly analysis set out in the bottom half embodies four columns, each cash-ruled. The first two of these relate to the figures for the week, to which the. details on that page apply; the other two are for totals to date.
Dealing first with all the figures for the week, of the two sets of cash rulings devoted to that, the first is for expenditure and the second for receipts. The second also contains figures for the net profit If the actual figures given in the example shown in Fig. Vf are examined, it will be found that the operating costs. amounting to £38 5s. 81, are transferred from the operating costs record book. The establishment costs are assumed. They will have been totalled from the establishment costs book. Actually, when dealing with establishment costs, I did not give figures.
Total costs, the third series of figures in this column, are calculated merely by adding the operating . costs and establishment costs.
In the second column the figure for earnings, £52, is from the details above. By subtracting the total costs, namely £41 5s. 8d. from the earnings, £52, the net profit,per week of £10 14s. 4d. results. That is set down in the appropriate space.
In order to arrive at the profit per mile, 6d., £10 14s. 4d. is divided by the total mileage per week, 657. The figures in the other two columns showing results to date are arrived at in a similar fashion. Establishment coSts are assumed to be taken from the corresponding book and give a total Of expenditure entered in tha:t book to date. The total cost, given as £477, is the sum of the operating costs and the establishment costs.
The earnings, £529, are from the total of earnings on the same page. The figures for net profits are obtained by subtracting the total costs, £477, from those earnings, giving £52, and the profit per mile, by dividing £52 by the total mileage to date, 5;657, which figure is to •be found on the page fOr the corresponding week in the opee4ting costs record book.
Here,is a point of special interest to which I have, to a certain extent, drawn attention in the figures that appear below the weekly analysis of operating costs and profit. The net profit per mild is given on the total mileage covered by the vehicle, and that differs from the total of miles covered in profit-making business.
The totals, as may be gathered by reference to thq figures above, is 430 for the week and 4,853 to date. That means that there is a dead mileage for the week in question of not less than 227 and, to date, of 804. It is of no use to calculate profits on mileage run in connection with particular jobs. The total mileage is what counts in the operating costs of a vehicle, and it is on that "total; according to my opinion, that the profit per mile must be .calculated. cannot see that it is sound not to include mileage involved in running to and from the garage, particularly as in the course of a week the figure may quite well be large.
I suggest that these total mileages and revenue-producing mileages be included .in the weekly analysis, so that the operator may have before him, continuously, a reminder of the distance he is running, which, considered by themselves,
represent a loss. S. T. R.