The Automobile Storage Battery Part 42

Every battery service station proprietor is eager to build up his business, and improve the character of his trade, because this in turn means that he will be a.s.sured of larger sales to a good cla.s.s of customers. And it is at once evident that there are a number of requirements that affect this question of building up a business, one of the first in importance being that of purchasing.

One of the first things with which the battery man is faced is the question of what, where, and in what quant.i.ties to purchase. The philosophy of correct purchasing consists in getting the right materials, in proper quant.i.ties, at a low price, and with as little cost for the doing of it as possible. The purchasing problem should be a most interesting and important subject to the proprietor of every service station, because the policy pursued with regard to purchasing will not only largely govern the economy of all his expenditures, except rent and payroll, but it will also control his selling policies. Goods are sold, and services rendered only because some one wants to buy. The customer's purchasing problems govern the proprietor's selling problems. To sell properly, it is necessary to meet the requirements of those who buy.

Correct purchasing is not merely a matter of "buying." The buying itself has but little to do, after all, with the question of real economy in this part of the business. The proprietor's purchasing policy should not cease when the purchase order is

[Fig. 186 Stock Record]

made out, but should continue after the goods have been delivered, received and inspected. He should see that they are properly stored, that they are put to the use intended, and that they are used efficiently. This can be accomplished to good advantage by the use of the Stock Record ill.u.s.trated in Fig. 186.

When goods are received, each item should be entered on these Stock Record cards, keeping in mind always that the requirements of a "perpetual" or "going" inventory of this kind are that a separate account be kept with each kind or cla.s.s of stock, and not alone with each cla.s.s, but with each grade of each cla.s.s.

For example, if a quant.i.ty of batteries were received, it would not suffice to have one card only for the entire quant.i.ty, unless they should happen to be all of the same type and make. It should be understood that these cards are a record of all articles coming into stock, and all articles going out of stock in the way of sales or otherwise, with an individual card for each kind, grade, style or size of stock carried on hand.

From the purchase invoices covering stock received, an entry is made in the column headed "Received", to the proper account, showing date, order number, quant.i.ty and price.

Each sales tag is used to make the entries in the columns headed "Disbursed", in which the date, tag number, quant.i.ty, price, and the balance quant.i.ty on hand are shown.

If this is done daily, for all the sales tags of the particular day, and the cards on which the "disbursed" entries were made are kept separate from the balance of the cards, it is an easy matter to arrive at the cost of all sales for each day, The advantage of having this daily information will be explained and ill.u.s.trated in following paragraphs.

The Use and Abuse of Credit.

The question of the proper use of credit is closely allied with the purchasing of goods. A great many business failures can be traced directly to overexpanded credit. Any battery service station proprietor who does not place a voluntary limit on the amount of credit for which he asks is, to say the least, running a very great business risk. The moment he expands his credit to the limit, he leaves himself with no margin of safety, and a sudden change in business conditions may place him in a serious situation.

Commercial agencies usually call this condition a lack of capital. The real cause, however, is not so much lack of capital as it is too much business on credit. This does not mean that credit should not be sought; or that all business should be done on the capital actually invested in the concern. Credit is necessary to commercial life. Very few business concerns are so strong financially as to be able to do without credit.

Credit should be sought and used intelligently, and it is not a hard matter for any battery service station proprietor to keep his credit good. All that is necessary is to take a few precautions, and observe in general the principles of good business. The first requisite, of course, is to accept no more credit than the business will stand.

Sometimes it is possible to secure enough credit to ruin a business.

Its present condition and future prospects may appear so good as to warrant securing all the credit possible under the circ.u.mstances.

It requires courage to limit the growth and the temporary prosperity of a business by keeping down the credit accepted. It is very hard to refuse business. It is difficult not to make extensions when there is enough business in sight to pay for the extensions. But the acid test of whether or not you should extend and borrow is not the amount of business that can be done, but the amount of money that can be spared.

The mere fact that you have the money or can get it does not in the least mean that it should be spent.

And the reason for this is that, in order to keep your credit good, you must meet all obligations promptly. Nothing has a more chilling effect on any business than failure to meet all indebtedness when due.

As soon as additional time is requested in which to meet obligations, your credit rating begins to contract; and if, at the same time, your credit has been overexpanded the business is placed in a most difficult position. More than one concern has gone to the wall when faced with this combination.

Proper Bookkeeping Records.

The princ.i.p.al difficulty in this matter of the proper use of credit will lie in poor bookkeeping records, making it impossible for the proprietor to know very much about his financial position or operating condition day by day and week by week and month by month.

Many service station proprietors figure what they owe once a year only, when they inventory, and many do not keep a permanent record even then; and usually those who are neglectful in this regard are the ones who owe the most, proportionately, who do not take their discounts, and who do not progress.

The following table covers the average discounts allowed in various lines. If you study it, and find out how much it costs you to lose discounts, you will at once realize the necessity for the proper sort of bookkeeping records.

1. 1% cash, 30 days net . . . . . . . . . . . . . . . . . . 12% per year 2. 2% cash, 30 days net . . . . . . . . . . . . . . . . . . 24% per year 3. 3% cash, 30 days net . . . . . . . . . . . . . . . . . . 36% per year 4. 5% cash, 30 days net . . . . . . . . . . . . . . . . . . 60% per year 5. 8% cash, 30 days net . . . . . . . . . . . . . . . . . . 96% per year 6. 1% 10 days, 30 days net. . . . . . . . . . . . . . . . . 18% per year 7. 2% 10 days, 30 days net. . . . . . . . . . . . . . . . . 36% per year 8. 3% 10 days, 30 days net. . . . . . . . . . . . . . . . . 54% per year 9. 5% 10 days, 30 days net. . . . . . . . . . . . . . . . . 90% per year 10. 8% 10 days, 30 days net. . . . . . . . . . . . . . . . 144% per year 11. 1% 10 days, 60 days net. . . . . . . . . . . . . . . . 14.4% per year 12. 2% 10 days, 60 days net. . . . . . . . . . . . . . . . 28.8% per year 13. 3% 10 days, 60 days net. . . . . . . . . . . . . . . . 43.2% per year 14. 5% 10 days, 60 days net. . . . . . . . . . . . . . . . 72% per year 15. 8% 10 days, 60 days net. . . . . . . . . . . . . . . . 115.2% per year

Then there is the matter of expenses; rent, wages, insurances, taxes, depreciation, freight and express, and all the other miscellaneous items that go to make up the total of your cost of doing business.

Expenses eat up a business unless controlled. They ought to be so a.n.a.lyzed that you are able to place your finger on items which appear too large, or uncalled for, or which need explanation.

A Daily Exhibit of Your Business.

In order to accomplish this, you ought to keep a record similar to that shown by Fig. 187--a Daily Exhibit of your business.

The advantage of this record is that it will give any battery man daily information as to the following facts of his business:

1. The amount of stock on hand.

2. The amount of gross profit.

3. The percentage of gross profit.

It will give monthly information as to:

1. The expense and percentage of expense.

2. The actual net profit.

3. The percentage of net profit.

Such information will help you to locate exactly when and where your losses come; during what months and from what causes. It will enable you to turn losing months this year into profitable months next year; to tell whether your losses were due to a too great expense account, or to too low gross profits.

The percentage columns on the sheet are the most important, because only by percentages can you make proper comparisons, and know just how your business is headed. You cannot guess percentages; you must have a way of knowing continually what they are, in order to be certain of getting the right return on your investment.

[Fig. 187a "Daily Exhibit" form]

[Fig. 187b "Daily Exhibit" form, continued]

In a.n.a.lyzing this Daily Exhibit, you will note that it is ruled for five weeks and two extra days, in order to provide for any one and all months of the year. The various columns are provided so that the entries in them will give a clear-cut story of the actual state of your affairs, daily, weekly, and monthly. Each column will be considered in the order in which it appears on the form.

First Column--"Merchandise on Hand."

In starting this record the first day, the figures entered in this column must be an actual physical inventory of your stock on hand, priced and extended at cost. Do not total this column.

Second Column--"New Goods Added to Stock."

The figures entered in this column should be the total value of all new goods received from manufacturers or jobbers on the particular day. If you return any articles to the seller immediately upon receipt, and before putting them into your stock, deduct such goods from the invoices and enter only the net amount in this column. This column should be totaled every week and every month.

Third Column--"Goods Returned by Customers;--Deduct from Sales."

The total value of all goods returned by customers extended at the prices charged customers should be entered in this column daily. Every week and every month this column is totaled.

Fourth Column--"Cost of Goods Returned;--Deduct from Cost of Goods Sold."

The cost of all goods returned by customers should be entered in this column. The cost prices can always be secured from the Stock Record cards, as previously explained. Total this column every week and every month.

Fifth Column--"Goods Returned to Manufacturers."

Sometimes there is occasion to return merchandise after it has been put into stock. In such cases, the money value of the articles sent back to manufacturers or jobbers should be entered in this column.

This does not mean such goods as were returned on the day received, and were deducted from the seller's invoice, and at no time have appeared in the second column, "New Goods Added to Stock," but only to such merchandise as was originally entered in the second column, and later returned to the manufacturer. This column should be totaled every week and every month.

Sixth Column--"Goods Sold, Less Goods Returned."

Enter here total of selling prices on sales tags for each day, after deducting amount in the third column. Total this column every week and every month.