The Times. Published on Tuesday and Friday Afternoons. Motto: Public service. FRIDAY, NOVEMBER 12, 1920. THE CREDIT SYSTEM.

Pukekohe & Waiuku Times, Volume 9, Issue 583, 12 November 1920, Page 2

The Times. Published on Tuesday and Friday Afternoons. Motto: Public service. FRIDAY, NOVEMBER 12, 1920. THE CREDIT SYSTEM.

Among the pressing problems thai business men have had seriously to consider during the past few years of stress and strain is that of the credit system. It has often been aigued that credit should be abolished, but examination proves that this contention rests on rather superficial grounds: probably somewhere near 90 .per cent of the v .rld's 0 .sines* is oil credit, and.it is upon this basis, tiiSt uil systems of book-kest'*n£ uiut accountancy have been evolved. However alluring "cash down mky apexperience proves that without credit it is a most diftcult matter to transact business when dealing with persons of all classes. There are few tieis who u;> not require credit at out time or another, and no matter how nard a trader may strive to run a purely cash business he finds it very uillicult to maintain that standaia. When an old and valued customs calls in for a small order, and' says •1 have not the money with me, buv I will call in to-morrow 'and pay, •the merchant finds it politic to oblige rather than risk giving offence, and there ends his credit system. Foi ordinary trading in groceries, drapery, otc., the few houses that are abu 10 trade on a ctsti basis, only, &rt cnose in large ccnfces of population svnich can depend on a sulticient numoer of casual customers to make ii pay, but attempts to enforce tht principle generally have failed. Casi. sales, or their equivalent almost, art conducted satistactorily in the cast of, say,.a big dairying concern, when mere is one buyer only, but the farmers, though they receive their pay regularly from dairy companies, tino it impossible or inconvenient to pay cash for the commodities they purchase -and New Zealand is a primary producers' country. For several reasons we may .consider the institution of cash trading in all branches oi ousiness as impracticable of achieve inent, and therefore we had bettei turn our minds the evolution oj means whereby the merchant who ha: toY'arry large book debts may secure just compensation. A method oi gaining a quid pro quo is already ii. vogue by some business houses'whiei. announce that certain rates of inter est are chargeable on overdue . accounts. The stipulations are morally right, so long as the interest does not exceed the current bank rate b\ more than., say, XVz to 2 per cent.; unfortunately this moral right is not legally enforceable, unless by indirect, and unsatisfactory and troublesome means, such as *by promissory notes to pay. What is wanted is statutory authority to charge, say, 2 per cent, aboijj the current rate of interest or. all accounts not paid within 30 days of their being contracted. This system would be a fair one and wpulu put the ordinary business mail on an equal footing the banks and professional moneylenders, for if a business man is carrying a large volume . of book debts they represent so much interest that he would be getting ii the moneys owing to him were in the bank instead. It is a singular and immoral thing that merchant*; whose enterprise helps so largely to builci up the commercial stability of a nation are not allowed to charge interest on money really lent out, although the professional moneylender, who may not be a produce? or worker in the ordinary sense is fully empowered to do so; the unfortunate trader may dispose of his gtwds- anil be left for lengthy periods'- Without possessing cither the goods or the money, but he cannot claim any sort of compensation. lie may sue for debt, but likely as not the case goes against him, and he has then to pay legal expenses and stand the loss oi his own time and that of his accounting staff. The -charging of interest, legally enforceable, would be a gain to the whole community, for retail traders, Who get little or no consideration whatever'from the wholesale merchants, find it very difficult to carry on, and therefore some reliei: must be given before very lonp. especially as the banks arc becoming very cautious about overdrafts. It is certainly not just that a trader Should have large sums on 'his books--011 which he is not getting interest, while at the same time he is paying 0 or 6Vo per cent, to the bank on his overdraft -that is "the most unkindest cut of all." The case for the charging of interest on overdue accounts is so strong, so morally right that it* should be backed up by law, and it is highly probable thai if most of the chambers of commerc in the Dominion were to take this matter up and petition Parliament in 111.' direction indicated the required legislation would be passed.