WE ALL SEEM TO HAVE DIFFERENT WAYS OF TACKLING THIS JOB. SOME SAY AS LONG AS I'M GETTING 1.80 PER MILE I'M 'O.K., BUT WHAT IF HE IS CONTRACTED ALL DAY AND AND ONLY DOES 80 MILES? OTHERS SAY I NEED £300 PER DAY BUT THEY ARE EITHER LOSING BECAUSE THEY ARE DOING A LOT OF MILES OR THEY ARE PRICING THEMSELVES OUT OF THE MARKET!!

SO LET'S TAKE A CLOSE LOOK AT HOW TO COST YOUR LORRIES.

FIRST LETS LOOK AT THE OVERALL PICTURE. THIS CAN BE BROKEN DOWN INTO IT'S VARIOUS CATEGORIES.

OVERHEADS.

This section is made up of establishment cost's. I.e. office staff wages and employers contributions., Telephone, rent, rates, plant and equipment costs, (be sure to include depreciation, insurance, repairs, in this category, which is a separate costing exercise.) Office equipment, buildings maintenance, repairs and renewal's. Also you need to take into account company car expanse's, including: servicing, insurance, deprecation, tyres, fuel (where appropriate) staff pension schemes, gas, water, electric, oil if oil fired heating, driver subsistence, driver and other staff training, i.t costs, depreciation on all office equipment and buildings. Financial charge's legal and professional fees, bank charges and interest. Plus any software maintenance. Also it is a good idea to include driver mobile phone costs in this category, commercial combined insurance (i.e. employers and public liability, etc.).

IT IS IMPORTANT TO ADD ON A PERCENTAGE TO YOUR FIGURE IF YOU ARE USING LAST YEARS ACCOUNTS, 5%-OR SO AT THE MOMENT IS A GOOD GUIDELINE DEPENDING ON YOUR SUPPLIER GROUP. THE NEXT THING TO TAKE INTO ACCOUNT IS YOUR DEPRECIATION FIGURE.

MOST ACCOUNTANTS WILL DEPRECIATE YOUR FIXED ASSETS (i.e. lorries , office furniture computer eqpt., Buildings,company cars etc.,) AT 20% per year. Now lorries and trailers, and some other assets have a residual value. So lets take lorries. Lets assume that they will be depreciated at the rate of 20% per year. (known as reducing balance depreciation) Now, it is obvious that if a lorry costs 50k the first years depreciation is 10k but that equates to £200 per week!! now we all know that is not going to work because your first years costs are too high and you wouldnt be able to afford new lorries. The thing to remember is that your assets, unless you keep them for their entire useful life, will have a value when you have finished with them. The solution is to divide your depreciation figure by the life of your lorry or trailer, or by dividing the total depreciation figure over the life, or, the time you expect to keep your lorry, evenly by the number of years you intend to keep it. The table below shows the residual value of your equipment as a percentage of its new price if it ie depreciated at a rate of 20% per year.

So lets say that you intend to keep a lorry for 5 years, the original cost of which is £50,000. At the end of year 5 its residual value is 32.76% of its original cost, (for the benefit of accounts boffs) although in many cases you would be able to sell the lorry for more but beware the taxman!!.Your 50k lorry is now worth about £16,380 Now deduct this from your original £50k and you have left £33,620 total deprecation left to divide between the last 5 years. This is about £6724 per year. or about £135 per week.This method is known as straight line depreciation.

Trailers are slightly different but if you depreciate them at 10% per year and use the formula above. You wont go far wrong.

Do not include lorry & trailer depreciation in the total overhead's as calculated below. Thes are a direct cost and come in later.

now total up these costs and divide them by 218 (the number of days your lorries are available for work). More of this a little later.

DIRECT COST'S

This section is made up of costs which relate to the vehicle whether it moves or not. Excise license, drivers flat rate wage's, employers contribution's. Holiday pay, vehicle depreciation, insurance, goods in transit insurance, trailer cost's, (separate section) operator's license's test fee's and anything alse that relate's to the vehicle while it is stationary.

now total up these costs and divide them by 218 (the number of days your lorries are available for work). This will be made clear later.

ROLLING COST'S

These are the costs involved as soon as the lorry starts to move. First is obviously diesel, then tyres, maintenance, drivers bonus, and lubricants.

FOR COSTINGS HELP AND INFORMATION PLEASE CALL

09064 016667

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