1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172 
Keeping a Sinking Fund
Page 142
Page 145
If you've noticed an error in this article please click here to report it so we can fix it.
T HE curious thing about standing charges is that some of them are more controversial than running costs, although there should be nopossibility of this. What is more -unexpected, the arguments develop not about the " sinking-fund" items, but concern the " current-eXpendilure " items.
The chief argument arises in connection with the ownerdriver, who can .see no reason whatever for paying himself a wage. .1. dealt with diYe aspeet a this matter at the close of my, previous article, • Having put forward the view that drivers Wages should be included in the _operating costs, I made two arguments which I thought would impress the owner;chiver. The first of : these was that an owner driver has' to 'Work Much harder than the man who is working for somebody else and receives a, wage. The employed, driver is paid for 44 hours a week and given over time for anYthing• he does above that, The owner-driver works as a .driver for 50-60 hours and when he goes home lie has to work on his .hooks, Maintain the vehicle and, so on. His working day can easily be .twice as long as the ordinarily employed driver.
Prizing Independence The answer to this is that owner-drivers are content. to accept the equivalent of a driver's wages but not to charge it as a cost item. They'regard the amount as profit and, above all, they prize their independence. The 'other argument I used does occasionally stir even this type of ownerdriver. It was to the effect that whilst it may be practicable to ignore the wages in the case of an owner-driver, he will meet trouble when he takes an opportunity to enlarge the scope of his business by acquiring a new lorry and engaging a driver. As soon as the second vehicle is bought wages will have to be paid and the rates chargeable for work done with it will have to be higher than those which obtain in
connection with the first lorry.
The prospect of developing his business to the point when
he becomes the proprietor of a small flea is usually sufficiently attractive to make him see reason. On the whole, however, the difficulties remain and owner-drivers can be a stumbling block in the way of agreement upon rates for haulage. There is a special considerPi.ion which sometimes upsets the calculations of those who arc willing to accept the equivalent of a driver's wage as profit, and this is payment under hire-purchase contracts. I will deal with this in a later article. The other item of current expenditure among the standing charges which involves difficulty is equally liable to be discovered in connection with the owner-driver. I refer to the provision for garage rent. Many operators, because they can park the vehicle outside their own front door, or make use of a shed which is their own property, can see no reason why they should make any allowance for garage rent in their schedule of standing charges. It is, however, possible to bring reason if I point out that if there were someone else willing to pay 5s. or more a week for that accommodation, that amount should be debited against the vehicle.
Interest on Capital
The other three items of standing charges are not so controversial. The annual tax has to be paid, every vehicle has to be insured and, notwithstanding all that is sometimes said to the contrary, it is essential to debit the haulier's vehicle with an amount in respect of interest on capital involved in its purchase.
In the case of a vehicle costing £2,000, that sum, securely invested, might he expected to bring in a revenue of E80 per annum or El 12s. per week. It is therefore not right to assume that the vehicle is earning a profit until it has first brought back the amount which would have accrued in interest.
There is a point concerning insurance which is worth considering. There are two extremes in this matter: on one hand there is the premium involved in a comprehensive policy and, on the other, the bare minimum just sufficient to cover third-party risks. The second method has never seemed to me a practicable proposition, especially in the case of a man whose capital is limited. In his case a bad accident resulting in the wrecking of his vehicle may in the absence of proper insurance result in putting him out of business altogether.
I have often been asked if it is wise to accept the rebate of premium which the insurance 'Oompanies offer when the insured will agree to pay the first ES, flO or more of the loss resulting from any accident. , My objection to such a course is this: there may be a saving if the haulier has only one small accident a year, for his expenditure on repairs may be less than the reduction in premium. If, however, he has several accidents his expenditure is likely to be greater than the saving in the premium. Experienced haulage eontractors do, however, tell me that with
reasonable care and an ordinary incidence of risk, they can show a saving in accepting this condition from the insurance companies.
The actual amounts quoted in Table II, published last week, are not in themselves of great importance. It is the principle that matters. The total, according to those figures, is £10 2s. per week and the equivalent standing charge per hour, the above total divided by 44, is 4s. 7d. With the figure of 4s. 7d. per hour and the one given in the previous article for the total of the running costs, 9.00d., the haulier can, with a minimum of calculation, assess his actual operating expense for any job.
The method of making that calculation is simply to take the total time, including waiting time, and assess it on the basis of 4s. 7d. per hour. To the result must be added the figure for mileage at the rate of 9d. per mile. As an example, take the conveyance of market-garden produce to a big town or city. Let me assume that the distance from the garden to the market is 30 miles and that only i-hour is necessary to load but that 3 hours are lost in waiting at the market plus a further f-hour for unloading. 1 will take it that the time occupied on the journey is 1,1 hours each way. The total time is ,1-hour at the commencement,
31 hours in the market and 2i hours travelling, a total of 61 hours, costing the operator LI 9s. I0d. for time alone. In addition, his vehicle is travelling 60 miles at the cost of 9d. per mile, that is £2 5s. The total cost of operating the vehicle is thus £3 14s. 10d.
One of the objects of this series of articles is to draw attention to those items of expenditure which are called for only occasionally. Among the running costs they are expenditure on tyres, maintenance and depreciation, and among the standing charges licences and insurance. These items are often overlooked; often the operator assesses his costs only on those items which come frequently, such as fuel, oil and rent, and in so doing lays himself open to making a loss.
Providing A Reminder
In the previous article, I suggested that a way to deal with the infrequently experienced items of expenditure is to establish a sinking fund which can be drawn upon when these expenses occur. This sinking fund is to he drawn -upon for expenditure solely on those items which only crop up from time to time. My method is to provide what 1 might term a reminder. One example of this reminder is shown in Table IV. It applies to an ordinary 6-ton oil-engined lorry with a platform body and high hinged sides. 1 give figures for the operating costs for a vehicle of that size and the data on which the figures in Table IV are based have been taken direct from the current issue 'of "The Commercial Motor" Tables of Operating Costs. In that way I assess expenditure` on tyres as I.80d per mile, maintenance 1.80d., and depreciation 2.71d. The sinking fund on account of licence is 14s. per week, and for insurance £1 per week.
There is no point in working to two or three decimal places in building up the sinking fund. The object is to make sure that there is put by a sum of money which will enable all these expenses to be met as and when they arise. It will be seen, for example, as regards tyres that I have taken the figure of 15s. per 109 miles. That is exactly what the provision for expenditure on tyres comes to. basing the calculation on 1.80d. per mile. Maintenance is the same, but depreciation at 2.71d. per mile is 271d. per 109 miles, and I have taken 2s. 60. as sufficiently accurate. I recommend the haulier to draw up for himself a form on the lines of Table 1V. If he is operating a 6-ton oiler, the figures at the top of the Table, those to which I have just referred, will apply in his case and he can work to that rate exactly. For other sizes and types of vehicle it is suggested that he take his data from "The Commercial Motor" Tables of Operating Costs. When the haulier has drawn up this form, he should keep it next to where he keeps the statement of account at the bank, bringing it up to date at the end of each week.
It will be noted that the totals to date for each item are shown in the Table. That is the most useful way to keep check on the figures, as the operator is able at any time to see how much is standing in the fund for tyres, maintenance, depreciation (against the time when a new vehicle is needed), licence or insurance. The grand total indicates how much should be in the bank on account of the sinking fund. This is the way in which the Table IV is made up. In the first week, ended October 4, 360 miles were covered. The amounts to be deposited for each item are shown, the total being £10 19s. 6d. The reader may note here that there Is an apparent discrepancy. The amounts for tyres and maintenance are the same, 15s. per
• 100 miles, yet amounts quoted in the appropriate columns differ. The debit for tyres is £2 14s.,othat for maintenance • is £2 9s. 6d. The reason tor this is shown in the column •• headed "Spent." During that week the vehicle was washed and polished at a cost of 4s. 6d. and this is deducted from £2 14s. as washing and polishing are regarded as an item of maintenance.
Deducting Expenses In the next week 380 miles were covered and the same procedure was followed. A total of 380 miles at 15s. per 100 miles is £2 17s., and so on. Whenever any expense is incurred in connection with one of the five items referred to in this Table it must be deducted from the fund. For example, during the week ended November 15 there were two items of maintenance involved. There was the usual washing, including polishing, at 4s. 6d.. and a decarbonize which cost £2 10s. A sum of £2 14s. 6d. can therefore be deducted from the total for maintenance.
The next week, ended November 22, a new tyre coverwas fitted at the price of £24 19s. That was allowed for in the appropriate column, and it should be noted that the sinking fund available on account of tyres went down to 10s. If the operator keeps these figures up to date he will know that of the sum lying to his credit in the bank, some £79 13s. 6d. of it is assumed to be set apart to meet expenditure in connection with the sinking fund. If he does that he will avoid any mistaken ideas as to the profit he is making; more importantperhaps is that money will always be available for essential maintenance.
A sinking fund such as is described here does not presentany great difficulty in being kept up to date, and 1 particularly recommend it to smaller operators. The entries may be made in an accounts book bought for the purpose, or even in an exercise book suitably divided into columns. Only a few minutes of the haulier's time need be devoted
to it each week. S.T.R.