IMPROVED TRADING RETURNS

NZ Truth, Issue 1194, 18 October 1928, Page 22

IMPROVED TRADING RETURNS

Runanga Co-operative Society, Ltd., Meets Increased Demands

THRIVES WITHOUT BANK OVERDRAFT

(By "Fiat Lux.") , ' > "Excelsior" would seem to be the guiding spirit of the Runanga Co~ operative Society, Limited. Each six months' accounts shoro better ana higher trading returns, whilst the capital is kept moving ever upward to mttt the increasing demands of the business.

•THERE are a great number of con--1 cerns m the Dominion — large con- . cerns, too — the names of which are household words, whose finances with great profit to their shareholders, could be modelled upon the example set by the Runanga Co-operative Society, Limited. ..'■•. In one respect at least, this society must be almost unique among cooperative concerns, since not only does it thrive without an overdraft, but it actually has the nerve to fly m the face of all tradition by lending the banks money on fixed deposit! A surplus #2000, lying around unused, has- been invested m bank , shares: X Yes, sir* these people know where to place their funds for sound returns and, at the same time, ensure the safety of their capital. On the face of things, it seems almost a joke, but it isn't; it is as good an example of sound finance as will be found m the Dominion. If, by ill-chance, a financial storm should. one day strike this'Vlittle ship of commerce, "Fiat Lux" is prepared to stake his reputation that it will come through with dry decks and colors flying. ■', ■ "' What is the secret of the success of this venture: The society's business slogan: "United we stand — divided we fall," supplies the answer. - The theory is sound, but how does the management reconcile it with practice? . This is how it appears to "Fiat Lux." The people of Runanga have to purchase furniture,' drapery, boots", groceries and bread somewhere — if they can buy these things at competitive prices, and subsequently secure a rebate of 2/6 to 3/- m the £1 on such purchases, naturally they are going to become shareholders by investing a modest £20 m shares to obtain this shareholders' half-yearly rebate. . In other words, if the shareholders desire to obtain other than a small percentage on their share investment, they have to patronize the society's store; and the more the store is patronized by each shareholder, the larger is his half-yearly dividend. : . Simple, isn't it? The more you put m. the more you get out, but sound finance and good management, of course, makl the above results possible. What is meant 'Sby good management? This means, keeping the whole organisation functioning smoothly at

the highest point of efficiency, but at the lowest possible cost per £1.00 of turnover. Let. us come dowp from the higher realms and quote one concrete example of "highest efficiency." Take this concern's grocery department; these are the rules which all members are requested to observe, taken from the half-yearly report: "We wish to impress on our members that all grocery orders must be sent m one ' clear day previous to delivery, which will enable the staff to give them their close attention . . . Have your orders ready and the bread carter .will deliver them to the grocery branch." The town is divided into two distinct delivery rounds, which are served on alternate days. These arrangements mean, first, that the indoor staff is working steadily all the time and is not rushed off its feet part of the day and slack for the remainder. They always have to-morrow's ordera to put up and are free from the annoyance so prevalent m competitive' shops of Mrs. So-and-So telephoning for the urgent delivery of one pound of butter, which has to be se'ht a. mile by special motor ' delivery. ; , Secondly, by dividing- the town into two delivery rounds which , are served on alternate days', the delivery plant and personnel is cut m half; consequently, it follows that the delivery expenses are also 50 per cent, of what they would be if this "highest efficiency" were not put into practice. For the Bix months' period ended September 8. last, the Runanga Cooperative Society, Limited, established some new records for turnover, profits, etc., which .should serve to stimulate similar concerns throughout the Dominion. . The 'firm's turnover for the halfyear, amounted to £ 22,120, which, compared with the previous half, was, an advance of £1231, equal to £205 per month. 'This increase was due, no doubt, m large ■■ measure to the additions to membership, which advanced from 331 to 348, a gain for'- the period of 17 members. It , seems astonishing that there should be any residents of the township who are not members! The gross profit for the period amounted to £ 5600, an increase of £346, whilst- the percentage of same to sales increased from £24.6 to £24.8. Those figures albne are sufficient to refute any suggestion that the man-

Unity Is Strength

Delivery Rounds

agement sells. its goods at an unduly high rate of profit m order to make a big dividend return to shareholders. Such suggestions are always made with reference to successful concerns, many of which, however, do not provide the material data upon which a refutation can be based. - / The working expenses have increased during the period by £117, due principally to motor repairs. The total expenses for the period amount to £2813 and represent £12.7 per cent; of sales. This is an extraordinarily small rate, but it will be appreciated just how the careful organization of staff and delivery rounds contributed to this result. • The expense ratio to sales for other recent periods are given below. It has to be observed that a consistent improvement is shown: Percent, of Working Period ended , Expenses to Sales September, 1926 .15.2 March, 1927 14.6 March, 1928 12.9 September, 1928 12.7 .. We come now to thf net profits on ■ trading (apart from 1 returns on investments) ; this item, I too, shows steady and consistent improvement. For the ~ peri o d reviewed, the net return on trading Was £2.688,, being an increase of £229 over the last half-year. This is certainly an excellent performance m itself, but hereunder. the percentages for previous periods are given. Thus the steady rise m this item can be better appreciated: Percent, of Net Period ended Profits" to Sales March, 1926 10.4 September, 1926 11.7 March, 1927 11.9 March, 1928 i 1.7 September, 1928 12.1 The paid-up capital of the business now stands at £7747- and shows an increas^ of £851 for the half-year. " As the membership totals 348, the average capital per member is £22/5/2— not a very big individual stake, perhaps, but "Unity; is strength." With the present membership, this amount appears to be ample for the society's requirements. ' Even on this comparatively small j capital, the company's turnover m j sales for the full year to September 8 last, was over £43,000. Calculating j

this back to cost price, it is apparent that the company's . stock has been turned over for the year well over six times, so that each £3 00 of the firm's capital invested m stock has earned m net profits for. the whole year, approximately £72. Which explains why this flourishing concern is such a popular institution and why it returns such good dividends to its shareholders. " ■' Dealing Hylth the balance-sheet, the outstanding feature is the increase for the six months m the capital and reserves. The capital has gone up by £851 and the reserves by £191, a total of £1042. What has been done with the money? It has been put "down south" m banking investments against a possible rainy day. And quite right, too. The debts due by the concern at balance day totalled only £92, against £326 at the March balance, and, m addition, £27 was reserved for outstanding bread coupons — evidently this 1 branch of the business is on a "strictly cash" basis. Buildings are held in-, the .accounts at only a nominal figure — £339— and no doubt this item contains a stout secret reserve. - The investments account now totals £5122. It is very pleasing to note that this account follows the practice ,qf big concerns and gives a . detailed classification ■or its securities, over half of which are m banking, the balance m commercial concerns and loans. ■•" Stocks chow a slight decrease,* the amount at £5328 being £464 behind last half. Small, but regular, buying' is the. right' policy m these days of falling prices. Book debts at £4080.ahow slight improvement (£116) over last ; half-year, but .are still altogether too high. How is it that bad debts are never recorded m these accounts? Is a shareholder's paidrup' papital held as security and converted if the current account remains unpaid? To > review this concern is indeed a pleasure. "Fiat Lux" sincerely trusts that the' management will continue along the present tried and proved lines, thuß vindicating the sound principles'c& co-operation m retail business.