A Simple Successful Costing System
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CONTINUING the series commenced in last week's issue, I come now to explain in detail the four analysis sheets which my haulier friend uses in his successful accountancy system. I should point out that one of the most important and commendable features of the whole scheme is that each lorry has its own series of cost record sheets. The headings of each provide for the entry of the lorry number, as will be apparent by reference to Figs. 1 to 4. (Figs. 1 and 2 are published this week and Figs. 3 and 4 will appear with the next instalment.)
The first is described as a "Daily Report." It is shown in Fig. 1. It would seem that a summary of daily reports would be a more accurate description, because on the two sides of one of the loose leaves of the account books there is room to enter daily reports covering six weeks of operation. Fig. 1 shows one side of one of these sheets and there are some typical entries embodied.
It corresponds almost exactly with the upper half of The Commercial Motor Operating Costs Record and calls for the same four entries. There is, of course, a column for the date, one for the mileometer readings, one for miles actually Covered in the day and another for hours which the vehicle works in that day.
There are then columns for petrol and oil. Here there is a divergence from The Commercial Motor Operating Costs Record, in that the expenditure on petrol and oil is entered daily, instead of recording merely the
quantities daily and the total expenditure weekly. . For each week there is a space for the entry of sundry expenditure, such as ferry charges, tolls and similar
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items. These would normally be treated as establishment coets, but, as will be apparent as this article proceeds, the establishment costs are covered in a particular way which leaves it necessary to record special items of this description after the manner typified.
This daily report is useful, in that it enables a day-byday check upon expenditure on oil and petrol to be maintained. Experienced operators have found this check to be essential, inasmuch as it ensures that any tendency for the consumption of either to increase or to depart from the normal is discovered as quickly as possible. The daily report provides for recording all the items that call for daily entry. The 'form is thus aptly designed to be of maximum use in return for minimum labour.
Fig. 2 is a weekly summary of the costs of operation. It is ,of interest for several reasons. The first point to note is that it is numbered "page 14." This form is really the key form of the series : a reference to this page number is made on the other two sheets embodying operating costs. It is thus easy, at any time, to check backwards or forwards from one to the other if any particular entry appears to be in doubt, or if reasons for variation in cost are being sought.
The second point to note is that one page, printed on both sides, serves for entries relating to one vehicle covering a period of a year. This is commendable, because of the saving of time when making references. It is most convenient to be able to check over the cost of operation and the performance of a vehicle in respect of its consumption of fuel and oil, maintenance cost and the like, yet needing to refer to only two pages of accounts, at the most, in-order to be able to obtain all the requisite information.
The operating costs are divided, strictly in accordance with The Commercial Motor methods, into standing charges and running costs. The items in each are the same and bear the same meaning as they arc given in The Commercial Motor Tables of Operating Costs. There are, however, two extra items in the standing charges and these lend particular interest to this part of this haulier's scheme of accountancy.
The first of these additional items is "obsolescence." Readers of this paper will recall how, from time to time, the subject of depreciation and its effective recording as an item of operating cost have been discussed. For average conditions—indeed, for the majority of cases— depreciation is best regarded as an item of running cost. It is necessary to diverge from that practice only when the annual mileage is low. Then the tendency is for the vehicle to last so long in point of time that it becomes out of date before it is worn out.
This particular haulage contractor recognizes that factor by making a small allowance for obsolescence in his accounts and he debits each vehicle with. 5 per cent. per annum obsolescence, besides assessing depreciation as a running cost on the usual basis, as recommended in The Commercial Motor Tables of Operating Costs.
The other heading is "office." That is, in effect, • a total of establishment costs. It makes provision for office rent, for management and all the sundries of which establishment costs are comprised. A fixed amount is debited per vehicle each week.
The running costs are in part estimated and in part actual. Actual expenditure on petrol and oil is put down, as also are the figures for the consumption of those two commodities. The ,necessary data are derived from the daily report (Fig. I). In order to simplify this explanation, I have taken figures-for petrol and oil from those which appear in Fig. 1. It should be noted that the number of miles covered in that week also appears in this summary and is copied from the daily report.
The amounts set down for tyres, maintenance and depreciation are estimated in accordance, approximately, with the figures quoted in The Commercial Motor Tables of Operating Costs. A simple calculation shows that for the 258 miles covered, the item tyres, at 15s., is equivalent nearly to 0.7d. per mile. The same applies to depreciation, whilst maintenance, at El. is. Gd., costs exactly 1d. per mile.
The standing charges are totalled and so are the running costs. Again, there is a total cost which is the sum of those two. In the line of figures given in Fig. 2 it appears that the total of standing charges, including the allowance for establishment costs, is £8 4s. Gd. per week. The total of running costs is E5 Gs. and the aggregate cost of operating this particular vehicle for 258 miles is £13 10s. 6d. per week. This sum is equivalent to is. 0.6d. per mile, as is set down in the last column of the summary.
One point arises that exemplifies most clearly a peculiar feature of individual systems of cost .recording to which I referred in the previous article, namely, that every haulier is liable to wish to have his cost system "made to measure." He wants results in the shape of information which will be a guide to him in quoting, and the class of work in which the haulier is interested has a bearing on the way in which he will desire to be able to quote. S.T.R.