Bankruptcy Returns

Sun (Auckland), Volume IV, Issue 1081, 19 September 1930, Page 8

Bankruptcy Returns

BETTER CREDIT CONTROL

A Brighter Future Seen

THE view that an increase shown in bankruptcies in the North Island may be largely due to the adoption of better methods of credit control and that it does not necessarily mean that credit in trade is much worse in the North than in the South is the interesting opinion expressed by Mr. A. J. Hutchinson, chairman of the New Zealand National Creditmen’s Association.

In the North Island these returns, made up at the end of July, show 290 bankruptcies as compared with 269. An increase of 21 or pot quite 8 per cent. There was also an increase of four in the number of deeds and assignments registered in the North Island, the figures being 84 as against SO. Thus the total bankruptcies in the North Island for the period was 374, against 349, an increase for the period of 25, or just more than 7 per cent. “Undoubtedly the depressed conditions of trade that have obtained during the seven months period have been a large factor in bringing about the financial disasters,” writes Mr. Hutchinson. “Things have probably long been going from bad to worse in the cases of some firms, and many concerns which had managed to tide over the previous period have come to disaster, through the greater stringency of conditions and the restriction of loan facilities, excepting those supported by gilt-edged securities.” Trade money is, at present, hard to get, and the trade returns of the total money invested in shares has shown a shrinkage in value over previous periods, due to such restriction of trade and the resultant disinclination of investors to take up this kind of capital investment when Government and other gilt-edged securities are available at rates of interest which, though not so high as those promised by trade, are certainly more secure and payable upon a' given base. The cry of less importations, less spending, less luxury is manifestly having its effect upon buyers and, whether the position is justified by the Dominion’s economic position or not, a restriction in trade is being experienced by very many businesses today. Unfortunately, such restriction of turnover does not always lessen expenses of carrying on business. Fixed charges often remain the same as in prosperous times. Unfortunately, it is to be expected that, businesses that have not got their roots securely planted will feel the weather, and, in many cases, will meet with disaster. FACING THE FACTS It is, perhaps, not altogether owing to the trade restriction that the returns registered an increase in bankruptcies and private arrangements, but it may be that concerns which were able to carry on owing to the laxity of credit conditions which were prevalent before, find it no longer possible to evade or defer their financial responsibilities, due to the control of credit which has recently been set up by the merchant world, as an en-

deavour to stem the tide of bad debts and secure a better footing for safe trading. Now the unsuccessful trader is called upon to face his creditors at an earlier period than formerly, and if there be no chance of so organising his business as to ensure better results, the concern is put into bankruptcy or assignment in order to save as much as possible before affairs get so bad that the trader himself is forced to - call a meeting. It seems possible that the increase in bankruptcies, etc., is a direct outcome of this credit control and the operations of the co-operative organisation with which I am connected, the New Zealand National Creditmen’s Association, give ample evidence of the fact that many concerns which should have been brought lf> book many months ago, have, through this recent organisation of ours, been at last wound up and the bad debts faced by the creditors. In the report given in your valuable paper, the South Island shews a decrease for the period under review, and such a fact would seem to bear out my surmise that the above cause has been operating, for cooperative credit control is, as yet, not so far developed in the South Island as in the North and therefore I think that we may conclude that the preponderance of North Island financial disasters does not necessarily mean that credit in trade is worse in the North than in the South. PREVENTING BAD BUSINESS Added to the above factor is the well-known fact that in the North Island individualistic merchandising is much more in evidence. Trade group associations are more frequent in the South than in the North, with the result that information has been more freely and honestly distributed within groups. In the North such group trade organisation does not succeed so well and this Northern individualism makes my association a ‘favourable factor, in that it acts for all trades, wholesale and retail, combining all groups for the benefit of all its members. I am certain that, even in the face of the present depression in trade, the future results, viewed from the actual losses in bad debts, will be comparatively better in future periods than they liave been in the past, even if the number of bankruptcies and assignments should increase, which fact will really mean that bad and unsound businesses are being stopped at earlier periods before they become so deeply involved with their creditors as was previously possible.