BUSINESS ON RIGHT LINES

NZ Truth, Issue 1187, 30 August 1928, Page 16

BUSINESS ON RIGHT LINES

Reviews

Northern Wairoa Co-operative Dairy Co., Ltd. WHAT THE BALANCE-SHEET SHOWS j (By "Fiat Lux.") The blue riband for clarity, conciseness and comprehensiveness^ m presenting accounts and statistics m the dairy industry is unanimously awarded by "Fiat Lux" to the Nprthern Wairoa Co-oper-ative Dairy Company, Limited. ''.'■,-

■POR some obscure, reason, perhaps A not unconnected with remuneration of staff, dairy companies' accounts m New Zealand have m bygone years left a great deal to the imagination. If the accounts of this company, however, are any indication, then the standard of accounting m, the dairying business bids fair to rise to that high plane- where it will be of real service to the industry. , .: , This company started operations m the Winterless North as far back as 1902 with one small factory. During its first year of operations the company won 84 suppliers and manufactured 64% tons of butter, for which it received the then ruling i - ate of lOd. per pound. As a result £4533 was distributed between its 84 shareholders—an average of £54 each. To the city worker of the "collar and cuff" brigade, even of those times, such a return for the season's work would no doubt have seemed extremely small. To those persevering dairy pioneers, however, it represented some of the golden harvest to be reaped from their efforts, to bring the virgin country into full production. '■ To the everlasting glory of those pioneer men and ■ women and to the economic advancement of the'' Dominion, their highest desires have been fully consummated, as the splendid records of the Northern* Wairoa Co-operative Dairy Co., Ltd., so completely show. In support of this statement the company's records show that m the 1920-1921 year — admittedly a record one forprice, which averaged 29 pence per- pound at the factory— the number of suppliers was 509 and the average amount paid out to each supplier was no less than £502.' For the period under review — 1927--1928 year — the number. of suppliers has risen to 686— the highest In the history of the company. ; The output was just short of 2000 tons of butter and the average amount distributed was approximately £ 400, the total being well over a quarter of a million sterling. A mighty fine record for a little portion of God's Own Country which 27 years ago was practically m its virgin state. . . „ During the year under review this company, which operates over a .widelyspread district, received over thirteen million pounds of cream, of which the bulk came from home separation. For purposes of cream collection the company maintains a large fleet of motors as well as two steamers and an oilengine" vessel., ! The cost of cream collecting was 0.61

Against this profit there are the administrative, executive and general overheads of which, the first item is office salaries £914. This, of course, is not the total salaries paid for office staff since both the. steamers working account and the stores accftunt both include a proportion of office expenses; hence it is not possible to state exactly what the office salaries do total for the year. Th'e next item is directors' fees £222 equal to £37 per director per annum, and as this works out at about £3 per meeting' the shareholders cannot be charged with extravagantly l-ewarding their directors. ■ . From this scribe's" knowledge of meetings of directors of dairy companies, they usually mean an, all -day sitting and, m addition, long distances have to be traversed to and from the resulting: m putting m a day of at. least sixteen hours. However, it is distinctly pleasing to know that the principle, of paying directors of : dairy companies for their services is recognized m a lViaterial manner and it is to be hoped that ultimately the principle will also be applied to all pubic bodies. '"• Regarding the managing director, this gentleman received ah -honorarium of £600 per annum so, presumably he devoted the major portipn of his time to the company's activities. "When it is remembered that the company's sales of butter for -the year under review were over half a million sterling, this payment is not at all adequate. The position of .managing director of a concern is a very important one and as a general rule,, the formulation of policy and the carrying of same into effect after'its submission to .and acceptance by the board, is not the least of this officer's duties and responsibilities. ' ' ' A capable, energetic and enterprising occupant of such an office m any business concern can often, effect economies through his .intimate knowledge of the business which would be sufficient to pay his yearly honorarium .many times over; but such transactions seldom see ' the light of day for obvious, reasons. -,: . Then again the managing director is always "one of the directors" and as such usually enjoys the \itmost confidence of . his fellow-directors as well as the loyalty and respect of 'his staff and although Shakespeai-e asks: "What's m a name," there indubitably i is a mystic something attaching to the title of managing- director which is not extended to just plain "manager." The next item of expense is that of | travelling expenses which, at £279,

Splendid Record

Revenue Account

pence per pound and the 4 c6st of manufacturing, including cream carriage and all other manufacturing expenses, was i.3 pence per pound of butter produced. The season's over-run was .2243 and the average cream test was 38.57. Guess they must be strong on Holsteins and Ayreshires -.up . north, quantity of milk evidently winning the day against Taranaki's -ideas of high butter-fat producers such as Jer^ seys. . . -v • . The company's gross revenue or manufacturing and, trading account combined is a very interesting production and shows that for the year the sales of butter alone amountedto well over half a million sterling. v - In addition', sales of butter J milk and test and grade reductions bring- the gross receipts up to £ 505,230' which includes the almost negligible sum of £165 for stock remaining on hand at balance day. ; ' ' It' is 'of more than passing interest to observe that local sales which includes supplies to shareholders, staff, etc.,' amount to only' £11,769, so that practically the whole of this firm's output finds its way on to the over-seas-markets. , The' stock on hand' at May 31, ■ ' .-...- -1927 amounted to £182,148, and was m the hands of the Dairy Control Board ■for disposal. ; : ■ ■ •■'..'.. ' This item forms "the first debit entry m the gross revenue account and is followed by payments to '■.. suppliers £227,713. • ). ' The next item is. factory working expenses which topa.V £16,092 and are divided into wages -ancl management £,5908; boxes £6535;. stores . £2038; and coal £1611. •■ , ' „ Comparing, these .figures .with the previous year every item shows a substantial' /reduction, but .unfortunately savings m both' manufacturing find cream collecting expenses amounting to' £3003 were more than; offset^ by^ a iise m distribution .expenses of £4134. Cream collecting: expenses amounted to- £9259: against £10,882.^0^1927. The water.-bornV costs were £3169 and motor cartage £'6090. ' : , ■:''■■'■ Distribution expenses which include storage, wharfage,' handling, insurance, all other,; xf.o.b. and London charges amounted to: £ 22,900, an increase of '£4134, .'•■ : ■■-..'■ ■, : ■''■■■.' ' ••■■ The balance of gross profit' amounting to '£47,118 is.' carried to the net revenue account where it is increased by rentals: £165 and profit on- stores £ 245, 'making a 1 total [ net profit of £47,528. ' . ■■■:

seem rather high, but will -no doubt include cross entries for the directors travelling- in^ the company's ships to ■attend meetings.- -■ ' Last year the expenditure under this heading was only, £215. > The next item is a very pleasing- one — depreciation ■ £ 22S1— but actually the total 'depreciation written off for the year is ,£3573, the difference, between the two totals being written off m separate acounts such as. steamers £(575, and motors £710. The rate of reduction ' applied to motors would appear to be 25, per cent; and from practical experience this writer claims that this. rate. is not toohigh although it may at -first glance appear to be. • , On plan£, 10- per cent, appears to have been applied' and although this a-ate appears to be v on the light side if is no doubt counter-balanced by heavy charges to l-evenue for maintenance. Overhead expenses total £1260 and include audit, subscriptions, rates, insurance, 'printing; '; stationery, ■ stamps a.n d instructor's salary and expenses. The latter expense should prove a very profitable one for both the company and the shareholders and is another sign of the' advance -of the times. • The- concluding item I'of expense is ■ intei-est which totals £729 leaving, a net balance for the year of £40,403, to which is added £117 brought forward from 1927 making £40,520 available tor distribution, y. . • ..-This balance' was disposed of by al T locating- 6. per. cent.' interest 'on share 'capital, .the balance . being distributed by way of! bonus on butter-fat supplied and brought the ; year's payments up to 17.G9S pence, p^iv ndimd exclusive of cream cartage. s ■ T'he position disclosed by. the bal-ance-sheet is unique m its nuggetyness. •. The liquid position from' the ordinary. commercial point of. view leaves a lot to be-desired, since the whole of the £40,520 standing at the • credit of the .profit and loss appropriation account has to be disbursed,, involving drawing oh' the bank for the amount. The paid-up capital, however,' is being increased'--, every year and during- the. period under. revieAV, has gone up • b"y £5400 so; that this difficulty should be overcome m a few years time. ■Taking a comprehensive view of this company's position-, as 'disclosed m its ; accounts it is/evident that its finances are ; being run upoti right lines and that there is no "make believe" about its assets:— they aro really solid- value. The ..concern -is, however,; 'paying away/ai-too much per annum iri'interest for banking accommodation and this can be.remeaied only by the provision/ of further.' capital which should. be readily forthcoming since it possesses £8340 of' unissued shares m addition' ■to '£14,244 of uncalled capital; :