Ill.) American School (Lansing.

Cyclopedia of commerce, accountancy, business administration ... [microform] online

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Fig. 7. Record of Sales of a Department Divided as to Oommodities



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BUSINESS STATISTICS 15

merit, in order that the total operations may be seen at a glance.
All of the essential facts are shown on the department report, Fig. 7,
but a properly constructed trading statement aflfords an opportunity
for valuable comparisons. While the fact that a department has
made a net profit of $7864.20 this month is interesting, these figures
take on added interest when compared with last month's profits.

A form for a monthly departmental trading summary is shown
in Fig. 8. In this form, the trading statement for the current month
is entered in the two columns headed trading. First, the total
amount of sales is entered in the credit column; then the value of
stock on hand at the beginning of the month is entered on the next
line, in the debit column. When the profit-figuring department is
organized, it is necessary to have an accurate inventory in each de-
partment that this trading statement may be started correctly. If
started on a correct basis, the record becomes perpetual. To the
amount on hand is added the value of goods received, as shown by
the merchandise received reports. Fig. 1. From the total, the value
of the inventory at the end of the month is deducted, the remainder
being known as the turnover — the cost or inventory value of goods
sold. To find the value of the inventory an actual count of the
goods on hand is unnecessary. The value may be found by deduc-
ting from the total the value, at cost, of goods sold, which is the foot-
ing of the total cost colunm, Fig. 7. This inventory is, of course, the
amount shown as on hand at the beginning of the next month.

The difference between the turnover and sales is the gross profit
— being the amount necessary to balance the debit and credit columns.
The gross profit is brought down and entered in the credit column.
Sales expense is entered in the debit column, the difference between
this amount and gross profits being net trading profit, for the current
month.

The three columns at the right are for comparative figures.
In the column headed to date is entered the total sales, turnover,
gross profits, expense, and net profits from the beginning of the
current fiscal year to date; in the two columns next following, the
same facts are entered for last month and last year.

As a rule, these monthly trading statements for each depart-
ment give the manager just the information he wants; but, when
there are a large number of departments, it is sometimes advisable



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MONTH LV TRADING SUMMARY


MONTH ^^




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1 TRADING.


TO
DATE.


LAST
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Fig. 8. A Fonn for a Monthly Trading Summary



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BUSINESS STATISTICS 17

to tabulate these statements, giving one complete record. A form
for such a report is shown in Fig. 9. No detailed explanation of
this report is necessary, the columns being arranged for the same
information as given on the department statement The only ex-
ception is the inventory column, which is intended for the current
inventory only. In the three comparative columns at the right, net
profits only are entered. This statement gives a history of sales in a
nut shell.

Customers' Profit Records. To know the value of each customer,
as measured by the profits on his business, is as important as a knowl-
edge of the value of each salesman. It is for the purpose of obtain-
ing this information that columns for calculating net profits are added
to the statistical department's copy of the invoice, Fig. 2.

Detailed records of purchases of each customer, divided by
commodities, are unnecessary, but there should be a summary show-
ing total purchases and profits. Detailed information about in-
dividual shipments and separate commodities can be obtained from
the invoice copies.

Fig. 10 shows a form for a customer\s record on a 4-in.X6-in.
card. This form provides for monthly records only. At the end
of the month the total purchases and total profits are obtained from
the invoice copies, and the amounts entered on the card. The card
is ruled for a two-years' record.

These cards should be filed geographically, the name of the town
heading the card. If there are several customers in a town, their
cards should be arranged in alphabetical order. State boundaries
need not be followed; it is usually better to file the cards according
to salesmen's territories. This makes a combined customers' and
territorial file, and if a record of the business in a town or state is
wanted, it can be obtained from the cards. If desired, a new card
can be inserted for a total record of each town or group of towns.

Value of Profit Figuring. The value of the records described
can scarcely be overestimated. To know the profit-making ability of
each department and each salesman; to read at a glance the value of
every town and every customer; to know the cost value of goods sold
and the exact condition of the stock at the end of every month, these
are the facts which enable a manager to size up his business.

The man who lacks these facts — ^w^ho is obliged to wait for them



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COMPARATIVE TRADING STATEMENT

MONTH O^






DtPARTMEMT


INVEN-
-TORY


SALES


TURN-
OVER


GROSS
PROFIT


EX-
PENSE


NET
RROFIT


TO

DATE


LAST


LAST
VEAR








































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TOTAL




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Fig. 9. Departmental Ck>mparative Trading Statemem



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BUSINESS STATISTICS



19



until the end of the year, and then get only a part of them, does
not have a grasp of his business, and cannot expect to bring it to the
highest possible state of efficiency. That more managers have not
insisted on having these facts before them is doubtless due to one or
both of two causes: failure to appreciate their value; and the belief
that dependable statistics of this sort were wiohtainable without too
great an expenditure of labor. Neither is borne out; all the evidence
is to the contrary.



TOWN


NAME


BUSINESS


SALESMAN


1909


1910 ^ 1




1909


1910 1


BOUGHT 1


PROFIT


BOUGHT 1


PROFIT 1


BOU©


HT PROnj


BOUG


t!I


jm


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JAN.
















HorM


















FEB.
















JULY


















MCH.


















AUG.


















APL.


















SEPT.


















MAY


















OCT.






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JUNE


















NOV.




































DEC.


















For'd


















TOTAL























































Fig. 10. Record of Purchases and Profits of a Customer

As to their value, little need be said. The fact that the most
extensive enterprises find it profitable to compile statistics setting
forth the most minute operations in every department is sufficient
evidence of the value of corresponding statistics to the smaller mer-
chant or manufacturer. If a great railway system finds it not only
profitable but necessary to compile statistics showing the cost of repairs
per ton-mile for every engine in its service, arranged for a comparison
of the efficiency of individual locomotives, surely the merchant will
find it profitable to analyze his profits. An analysis of the profits
and losses of a wholesale grocer, showing how much he has made
on tea; bow much he has lost on sugar; what profit has been produced
by a certain salesman; the profit value of a customer, is of as great
value to him as a knowledge of the cost of repairs on an individual
car to the officials of a railway.



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20 BUSINESS STATISTICS

To the man who has made no attempt to secure them, the com-
pilation of these statistics may seem an endless task, not justified
by their value. Actually, the magnitude of the task is, to a great
extent, governed by desire; a man is quite likely to obtain what
he really wants, and as his desires increase the difficulties decrease.

When it comes to the actual work of preparing these statistics,
the difficulties are found to be really minor ones. The main thing
is to do the work every day; to record the transactions of a single day
does not involve an undue amount of labor, but if allowed to get
behind, the task assumes appalling proportions.

Modem billing systems make it possible to tabulate certain of
these statistics when the bills are made. The adding machine is
also of inestimable value in statistical work; computations which
would involve a whole day of hand-and-brain work are made in an
hour on a modern adding or calculating machine.

In deciding what statistics should be compiled, the nature and
needs of the business must be considered. It is usually unneces-
sary to use as the unit a single brand of a given commodity. A
wholesale grocer, for instance, would not find it necessary to make
separate records of each brand, or even each article, in canned goods.
They weuld be divided into classes — as vegetables, fruits, and meats,
and each class would be treated in the records as a single commodity.
When taking on an entirely new line, he might wish to compile separate
statistics for a time, but when the fact that the line is a profitable
one has been established, the special statistics would be unnecessary.

Again, one house will find it advisable to go into certain details
not considered necessary in another establishment. For example,
one house has, as a result of the facts revealed by their statistical
department, established a system of bonuses to their salesmen based
on the profit percentages of their business. This necessitates a
record different from any of those that have been shown. This con-
cern has grouped the goods in each department according to per-
centages of gross profits — as 5%, 10%, 20%, 25%, etc. Each sales-
man is given a monthly quota — based on salary, territory, and previ-
ous sales — ^which he is expected to reach. This quota specifies not
only the amount of sales but the percentage of profit; each $100.00
of sales is expected to include not more than a certain amount of 5%
goods, nor less than a given amount of 25% goods, the exact ratio



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BUSINESS STATISTICS



21



of each being given. If a salesman exacUy equals his quota, main
taining the percentage prescribed, he is given a small bonus; if he
exceeds his quota and maintains the prescribed percentages, or
increases the percentage of sales of the more profitable goods, his
bonus is increased in proportion to the increased profits — the greater
the percentage of profits, the more rapid the increase in the bonus.



MONTHLY SALES STATEMENT




MONTH










SAl_E.S


IV MOLE


GtUATATlON


moRCAse.


IMO.




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15 "


















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TOTAL




















TOTAL%









































Fig. 11. Salesman's Oomparatlve Sales Statement

On the other hand, if his sales of goods sold at a small profit increase,
he is penalized by being denied a bonus, no matter what the volume
of his sales.

This bonus system, which is an adaptation of the bonus wage
system used 4n factories, has the effect of increasing the sale of the
most profitable goods. When a customer places an order for goods
in which there is litde profit, the salesman — ^who cannot refuse the
order — is given an incentive to push the sale of more profitable goods;
he must do so as a matter of self-protection.

To determine the bonuses, statistical statements diflfering from
those already shown are necessary. These statements must divide



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22 BUSINESS STATISTICS

sales according to percentage groups, rather than by commodities,
as shown in Fig. 11. The data for this statement is taken from the
commodity sales statement, Fig. 4, and with an adding machine can
be tabulated very quickly.

Another house, which does an exclusive mail-order business,
keeps accurate records of the sales resulting from circular letters,
charging the cost of the letters, including postage, to those sales.
Records are also kept of the sales of each correspondent. When
an order is received, the correspondence record Is examined and, if
the order is in response to a dictated letter, the correspondent receives
credit Each correspondent is required to keep a record of the num-
ber of dictated and form letters that he usas, the cost of which is
charged against his sales. At the end of the month results are tabu-
lated showing the percentage of orders secured from circular letters
and from dictated letters; the amount of business from each letter
of each correspondent; and the percentage of cost to the cost of goods
sold.

These and many other statistics can be tabulated, and for each a
special form is needed. The classes of information to be presented
in statistical form depend on the business. When it has been deter-
mined what information will be of greatest value, forms should be
prepared which will make it possible to tabulate the desired facts
with the least labor.

ADMINISTRATIVE COSTS

Commercial casts which are not chargeable to sales are classed
as administrative, and may l>e divided into executive, accounting,
office expense, credits, and collections.

In a strictly trading business, purchasing Is an added division,
while in a manufacturing enterprise it is usual to consider this a
manufacturing expense.

Executive expense is made up of the salaries of the general man-
ager and comptroller, salaries of clerks and stenographers, and a
proper portion of miscellaneous expense. In a maim factu ring busi-
ness, a part of the executive salaries is charged to manufacturing.

Accounting expense includes the salaries of chief accountant
and caihier, clerks and stenographers, blank books and supplies,
and miscellaneous expense.



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BUSINESS STATISTICS 23

Ojficr expense is charged with the salary of the chief stenographer,
and the expense of mailing and filing, including salaries of clerks.

Credits and collection expense include the salaries of the credit
man and his clerks, the cost of mercantile agency service and reports,
and the cost of collections, including postage.

Purchasing expense, which, as stated, sometimes is a com-
mercial expense, includes the salaries of purchasing agent, receiving
clerk, stores clerk and their assistants, and the entire expense of the
storeroom.

In a stricdy trading business, such items as power, heat and light,
insurance and taxes — usually a manufacturing expense — ^become
administrative expense. These, and aJI similar items, are grouped
under the head of miscellaneous, to be distributed over all divisions of
commercial casts.

In the main, the different divisions of administrative casts are
easily assembled. In each division there is the salary of the depart-
ment head, the total of which is charged to the division, and a correct
apportionment of salaries which must be divided among two or more
divisions. For illustration, the salaries of stenographers are dis-
tributed as has already been explained. By far the larger part of
tUs expense is charged to the advertising and sales departments,
but from the weekly reports of thl^ division, the amount to be charged
to the executive, accounting, credit and collection, and purchasing
divisions may be obtained.

Mailing Costs. In the division of office expense one item which
must be distributed, at least between sales and administrative, is
mailing expense. Mailing expense is made up of labor and postage,
the latter being most important.

All enterprises of magnitude maintain a separate mailing de-
partment* in charge of one person, frequently the chief stenographer.
The very fact that postage 1$ the big item of expense in the mailing
room, makes a very complete system of records absolutely essential.

The work of the mailing room consists of folding circulars and
letters, enclosing catalogs, circulars, and letters in envelopes, address-
ing, filling in dates and addresses on printed form letters, and stamp-
ing. Sometimes addressing and filling in is done in the stenography
division, but the more usual plan is to coiLsider this a part of the mail-
ing expense.



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MAIUNG ROOM LABOR REPORT

DATF






Rform
1 ^^'


FOR


NUMBER

OP Pieces


HOURS


MIN."


RATE


AMOUKT


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Fig. 12 A Report of Labor in the Mailing Room



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BUSINESS STATISTICS 25

Of first importance is a record of work done, which is best secured
by means of a daily report of the work of each clerk. All work should
be assigned by the head of the department, and the clerk required
to keep an accurate record of both time and production. This
question of assigning the work is especially important in the mailing
room, as one department may flood the room with work which, if
done, would ftiake it impossible to handle the work of other depart-
ments for several days. The head of the department must decide
which is the most important work. Sometimes it is necessary to
make out, in advance, a weekly schedule of circularizing to be done,
and compel all departments to be governed by the schedule. As
an alternative, some of the larger enterprises maintain a separate
mailing room, in charge of the advertising department, exclusively
for circularizing work.

A suitable form for the employe's daily report is shown in Fig.
12. This report is divided for a record of the different classes of
work perfornied. All work is recorded by number, that is, if the
work is folding circular No. 518, that number is placed in the first
column opposite folding. The center colunm is for the name of the
department; as a rule, the form number indicates the name of the
department, but sometimes the same form is used by several depart-
ments. Li the colunms next following, the clerk enters the number
of pieces handled and the time taken. The extension columns,
showing rate and amount, are filled in by the head of the department.

From these reports, the paj-roll is made up. All of this work
can be handled on a piece-rate basis, and most large concerns find
this the most economical basis. The rate must necessarily be varied
to suit local conditions, and should be high enough that by doing a
full day's work a clerk will earn something more than the standard
day wage. For example, a girl will address from 1000 to 1500 en-
velopes, or fill in addresses on the same number of form letters, in
a day of eight hours, the average being — say 1200. In different cities
the accepted wage standard for the class of help required in this work
varies from $5.00 to $7.00 a week. Where the $5.00 rate prevails, a
piece rate of 90 cents a thousand is equitable; a girl who maintains
an average of 1200 a day for five and one-half days (the usual time
required in an office) will earn $5.94 with a chance to earn still more
if she can increase her speed. The extra ninety-four cents is an in-



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BUSINESS STATISTICS



ducement to at least equal the average; without it, she would probably
drop to KXX) or less. While her wage has been increased, the Cost
has been lowered.

Daily Mall Report. That the information may be in convenient
form for statistical purposes and for making final reports, there should
be a daily mail report. This report should be a complete record of
everything mailed, showing the number of pieces and the rate of





DAILV MAIL REPORT

DATF






DtSCRlPTION


NUMBER
OF PIECE.S


P0STA6E

rate:


1 ME.RCHAMOISE























































































































































































































Fig. 13. Form for a DaUy Mftil Report

postage for each. A form for such a report is shown in Fig. 13. This
report is divided for a record of regular mail-letters, circulars, and
catalogs — and merchandise. The latter is not required in all cases,
but is very important for a concern doing a mail-order business in
small articles which can l)e sent by mail.

This report shows the description, number of pieces, and postage
rate. In the description column the name of the department should
be written first, followed by a description of the mail originating in
that department. The daily report should be made up by the stamp



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BUSINESS STATISTICS



27



clerk, without reference to the individual employes' reports, as it is
intended as a check against the latter. A memorandum of the number
of pieces reported for the different operations by the employes should
be kept, and at the end of the week com-
pared with the quantities shown by the
daily mail reports. For some of the
operations, the quantities reported by
employes may be the larger, certain work
being completed on matter which has not
been mailed. To reconcile this difference,
the work itself should be on hand in the mailing room.

Postage Record. The most important of all records in the mail-
ing room is the postage record. Postage should be placed in charge



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Online LibraryIll.) American School (LansingCyclopedia of commerce, accountancy, business administration ... [microform] → online text (page 24 of 27)