FINANCIAL SIDE OF BUSINESS.

Shannon News, 8 July 1924, Page 4

FINANCIAL SIDE OF BUSINESS.

STOCK RECORDS AND ACCOUNTANCY.

The guest of honour and speaker at the Palmerston North Lunch Glut) on Tuesday was Mr G. D.' Hamilton, A.P.A. of Levin, whb read a paper on stock-'records and accountancy, which held the attention of a large attendance of members to -J*e .dastronr. fence Not only was interest maintained on account of the value of the paper, at a time of keen competition'and a possible ■ fall m replacement values, but the fact lemains that Mr Hamilton disposed .of anv ; suggestion of . “dryness’ in his subject by the marked jbtltty hed»play6d “While the necessity for increased business efficiency is generally recognised the accountancy of a-con-cern, receives less consideration tnan its importance justifies. ■ “The entire Question of noc profits resolves itself into the proper movement of stocks. , ’■ “Turn-over, contrary to general belief, is not the’ correct factor jior -a business man to base calculations upon for financial purposes. L.f?., while 33 1-3 per cent . may .be the average profit fixed upon in a Pai.ocu-lar-business, the actual percentages mav, where different lines and articles are involved, range from 1° pei to 75 per cent, or even 100 per cent., in. some cases. There b® dex to show how much: of the sales have been at the ‘low percentages, oad how much, at the higher, and if values are being'shown and advertised, sales will be increased on the finer marked goods. It is obvious, therefore, that the percentage of profit for che period will be correspondingly reduced. “Delegation of departmental management is necessary for buying and selling purposes and it is impossible for the manager of a concern to keep in touch with the stock of each department without definite information and an accurate figure, oir quantity,, on which' to commence a discussion with the departmental'head, i “in a great many cases, too much i stock is being carried for the business done, in the nature of gross sales compared with average stock carried. The remedy is to institute a system 'which will reduce stocks, intelligently and accurately, to such, a size that the average “stock turn” can be brought up to the desired percentage. So long as slow moving goods are kept in 'establishments, so long will. there be a financial pinch in the buying. of articles to replenish , quick-selling lines, which are making good and steady. profits “By reducing the amount carried in stock there will he a diminution in interest charges,, either in bills payable, bank-overdrafts, mortgages, debentures or preference 1 shares, The policy of quieting old stocks at whatever price they will fetch is a good* one, rather than to keep them on the shelves, and so get their value circulating in new purchases which will return profit. This is where a proper stock record and scientific, .accountancy svstem is essential- —so'that such goods will be constantly brought under review, thereby enabling,, thein to be quitted before drastic reductions have to 'be made co quit them.” Responsibility of An Auditor. “Stock is the asset upon the valuation of which depends the profits, if, any, of the particular business. Is ic right that, while an auditor should be called in to vouch the cash-book, verify the other assets, and see that a balance-sheet is drawn, up to represent the position of the business as disclosed by 'che books . of account, stock should be left without any proper check on it? Cash is converted into goods, these are stuck on shelves to which every member of a staff has access, and yet there is no general insistence on the same record being kept as of the customers’ accounts or those of the persons from whom goods are purchased! The only remedy is a proper system of stock records, and while additional overhead expense is thereby involved ft will be more than justified by the data 'thus given for, the building-up of a business, the ultimate saving mflncy and the keeping-out of difficulties.” " ' ' ' ' ' The Benefits Enumerated.

“Some of the outstanding benefits cd be derived from scientific stock records 3/I*G (1) You know from day to day your actual'gross profit; actual overhead and working expenses; actual net profit,‘^therefore (2) YouJknow what articles you are selling;'the rate (by number) they are selling at; .the number to buy for replacement; or' che articles to be brought forward to be pushed for quick sale. ’ ■ (3) You know your quick selling lines, enabling you to sell at a lower percentage of profit, yet make better profits and;so : use such lines as an advertising medium for your business. ■ (4) Better supervision can be exercised in Staff matters and you know immediately if goods are being sold at lower prices than those marked — this being one of the great sources of loss in business.

(5) Stock-taking can be done continuously -without ,the necessity of over-time employment. (6) You have an insurance against pilfering at no higher a figure than such a risk could be underwritten; and - . „, „ i (7) You have all'the data on which, to regulate buying. “Scientific stock records point out with unfailing accuracy profitable and non-profitable articles. "Dead stock/’ the worst enemy of good ’ business, is constantly brought under review, slow-moving stocks are shown at their real worth to a business and brought into line to make the desired profit.

"I am positive that stock records will gradually be accepted in modern business as the most important factor in success. If the proper control is established over the records, the manager or director can see when money is made or lost on each article. They will form the keystone of the whole

structure and the entire organisation should be built up around them.” (Applause.) Mr W. C. Harrington was in the chair, and at his request the customary vote ofthanks was on this occasion moved by |dr,R. A. Fuller, who . invited Mr Hamilton to repeat the address at a future meeting of the local ranch of the New Zealand Society of Accountants.