Book-keeping for Beginners
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THERE arc one or two points I would like to make before proceeding to describe this simple system of book-keeping. First of all, there is nothing in the system which calls for expert assistance. It is devised so that those persons who are least familiar with figures can make use of it. It is not suggested that it should be preferred to any existing system, or substituted therefor.
Those readers who are already keeping records of their costs should stick to their present methods, provided that they are satisfied they are complete and accurate. It might be a good plan for them to read these articles carefully in conjunction with an examination of their own system, to check that their records are complete and accurate. In that connection I would like to stress the word complete, for it is there that so many go wrong.
The system is designed to help the man with no experience, and an examination of it will disclose that it is based on " ' The Commercial Motor' Tables of Operating Costs." It can, therefore, be used in conjunction with the Tables, so that the process of comparison between estimated and actual costs, which is recommended as a principal function of the Tables, is facilitated.
The second objective that I have kept in mind in preparing the system is the need which the haulier has for knowing his costs from day to day, and from the time when he first begins to operate his vehicles as a means for earning a living.
The main difficulty in the way of obtaining that essential information from the start, apart from making direct use of the Tables, is that the newcomer has no definite e.34 information as to the probable expenditure on tyres, or on maintenance; he is apt, too, to overlook the item of depreciation. It will be noted, and I shall indicate, that adequate provision is made against these eventualities.
Referring to the specimen fly-leaf (Fig. 1) of the book in which the actual operating costs are to be recorded, my article in The Commercial Motor for last week showed that there was plenty of food for thought• in that part of the recording alone.
The first thing to realize is that each vehicle must have its own separate book; there must be no attempt to economize by trying to make one book serve for several machines, for that is the way to complicate matters and make for inaccuracy in the records.
A complete description of the vehicle comes first, and the number it is known by. I have taken No. J in my example. Then comes the registration letters and number.
It will be observed that all the essential data are covered in the form, the make, capacity, unladen weight and description of the body. Next comes tyres and then the data which are really necessary for our particular purpose, that of keeping records of the cost of operation. Of these, the first is the original cost of the vehicle complete, and the second, the cost of a set of tyres. Then come the figures for the Road Fund tax and the levy.
The figures for insurance premiums and garage rent come next and, finally, the interest on first cost, calculated at 4 per cent. per annum on the initial outlay.
The next thing to do is to reduce these figures to a
form more directly useful to us, and in that way I have, first of all, made out an abbreviated table of standing charges, calculated from the foregoing data. I imagine that most readers will understand how these figures are
calculated. To make sure, I will illustrate with one example, that of the Road Fund tax, the annual amount being £35. Divided by 50 (assuming 50 weeks to the year) gives 14s. per week. Similarly, with the levy, £8 2s.
per annum is 3s. 3d. per week, to the nearest penny above the actual amount, which is 3s. 2.88d.
Certain of the running costs have to be calculated in a similar manner from the originating data, as I might call• the figures which appear at the head of the flyleaf, as shown in Fig. 1. Depreciation is one of them, and tyres another. The cost of a set of tyres, taken in this case to be 080, must be spread over the actual mileage, which, it is assumed, will be covered in the life of the set.
If 30,000 miles be taken, then the cost of tyres per mile is found by dividing £180 by 30,000, which is 1.44d. If 30,000 miles seems to be a high figure, then take 24,000 miles. which increases the cost per mile to 1.80d.
Similarly for depreciation. The net cost of the vehicle, I:2,180 less £1180 for tyres, is £2,000. Take away £200, the residual value, that is, the amount likely to be obtained for the vehicle when it is sold, and there is left £1,800. That is the figure on which depreciation must be calculated.
Divide that by the number of miles the vehicle is likely to run before that stage is reached and you get the amount to be reckoned as depreciation per mile. If that mileage be 200,000, then the allowance for depreciation is seen to be 2.16d. per mile.
There remains only maintenance, and because there are no figures available to the haulier concerning that item from which the allowance can be calculated, it is suggested that the reader assumes, for the time being, that the figures from the Tables apply. In that case a total of 2.00d. per mile should be allowed. These figures are set out in Fig. 2.
The haulier, reading these notes, will have observed that already, in the flyleaf of his book, there is information concerning eight of the 11 items of cost which are enumerated in "' The Commercial Motor' Tables of Operating Costs," leaving only three, namely, fuel, lubricants and wages, still to be accounted for.
Of these the first and second are running costs and the reason for making provision for daily entries concerning them may be obvious. Wages, however, as a standing charge, might have been thought suitable for inclusion amongst the items on the flyleaf. In fact, as most of my readers are aware, the actual amount of wages paid to drivers varies from week to week, being affected by overtime worked and/or by bonus paid on work done, Where neither of these conditions prevails the amount of the driver's wages may also be entered on the flyleaf in company with the other items mentioned, and treated in the same way.
.[here is one other piece of information which on no account must be missed and that is the mileage covered each day. When most of the work that is done is on contract of time as well as, or instead of, mileage, a note of the hours worked per day must also be kept. I have made provision for this in the schedule. Figure III shows how the page of this notebook should be ruled and I have inserted hypothetical figures to show how it should be used.
Each page of the book is set out to represent one week. There is one division for each day, with provision for entering the speedometer reading at the end of the day, the fuel and oil used and the hours worked. The mileage covered must also be entered; it can be ascertained by subtracting the speedometer reading of the previous day from that which is current.
At first glance the table may seem to be a rather forbidding document—anything but the simple form which I have promised. Actually, there is hardly anything in it for the owner to do. He has, at the most, four entries to make
per day, the speedometer reading, the hours worked, the fuel consumed and the oil used.
At the end of the week, on the Saturday evening, the summary at the bottom of the page will need working out. It can easily be done in 10 minutes. When it is completed, the owner can see at a glance whether or not the rates he is charging are showing him any profit.
If every haulier were to complete a page like this for a few weeks he would soon realize the wisdom of making a habit of it. He will, in all probability, consider increasing his charges. With these records before him he will realize that if he goes on for long charging only his present rates he will shortly be out of business. And he might as well be without work as to operate at a steady and continuing loss.
It may be that, at this stage of my argument, there will be a number of readers who would like to have some further explanation of the items of costs shown in Fig. III. I am afraid they will have to wait; I will give that explanation subsequently. I have afforded sufficient information to enable them to make a beginning in keeping their records of operating costs. That is enough to be going on with.
Those who arc commencing to operate the scheme will always have the Tables by them for reference. For the time being I want to proceed a little farther with the explanation of the balance of the scheme, and that I will do next week. S.T.R.