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THE PR CE S R GHT?
Page 50
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Effective costing systems can make or break a business. We check out a new step-by-step guide to accurately pricing transport jobs.
The latest publication from the Freight Best Practice Programme provides invaluable guidance on the accurate pricing of transport jobs to help ensure a business returns a prolit.The guide is designed to help freight operators of all sizes understand the principles of job costing and implement their own effective cost model.
Although many operators with larger fleets are likely to have established rate structures and systems for costing jobs, this is by no means the industry standard. Many businesses still price work by-gut feeling'. This is understandable because many owners, managers and traffic planners have a thorough knowledge of how the operations of vehicles will be perform under different scenarios. But is that good enough? How often do they look back and compare the actual cost of a job with what was quoted? When was the last time they used accounts information to calculate costs before pricing a job?
Cost models might sound complex and time consuming to set up, but they do not have to be and they are well worth the effort. For a company new to cost models, the Freight Best Practice guide An Introduction to Job Costing for Freight Operators provides a step-by-step guide to setting them up. For firms with cost models already in place, it provides casestudies that show how other firms have used them to increase operational efficiency And the guide won't ramp up your costs; it's free.
A good cost model can help a business in other ways. John Hix from the Freight Best Practice programme says good cost data allows a firm to respond more quickly to tenders." In a competitive industry such as freight transport, the time taken to provide a customer with a quote can mean the difference between securing and losing a job," he explains."A cost model will already contain the information you need to calculate any rate and you IA will be able to respond quickly. Without that information to hand, you could lose potential work."
The cost model can also provide information that can help improve a firm's overall financial position.
There's little margin for error in the road haulage market, where one small oversight can cancel out any profits.The cost model looks at distance-related costs such as tyres and fuel through to timerelated costs such as driver wages and jobspecific costs such as toll or ferry charges. All this information can be used to target areas for improvement.
Mike Farmer from The Road Haulage Association says: "Having spent many years trying to establish the importance of sound costing systems, I am very pleased to support this contribution by Freight Best Practice, with its clear statement of principles and practicalities. I commend it to the industry" Cost models can be fairly advanced computer packages, a more basic system based on a spreadsheet, or even a manual procedure based on paper records and forms.The guide looks at the pros and cons of each model type to help the reader establish what is right for his or her business.
CONTACTS
To request a copy of the guide, log on to www.lreighlbestpractice.org.uk or call the hotline on 0845 877 0 877