more substantial than boxes made of binder's board. Boxes the size of a
vertical file drawer were used. These were usually stored on shelves,
and to refer to the contents it was necessary to take down the box and
remove the cover. To keep pace with improvements in filing cabinets,
new styles of transfer files have been perfected. One of the most
satisfactory of the more modern styles is the drawer transfer file,
which is practically a single drawer section. It is made of light wood
with a drawer as shown in Fig. 36. These files can be stacked, one on
top of another, and locked together, making a solid filing cabinet.
The drawers hold the contents of a vertical file drawer, but are not
equipped with follower blocks, and are not recommended for current
filing. These transfer files cost more than the old style, but when
durability and accessibility are considered, they probably are more
economical in the long run.
[Illustration: DICTATING TO THE BUSINESS PHONOGRAPH, MANUFACTURED BY
THE NATIONAL PHONOGRAPH COMPANY, ORANGE, N.J.]
[Illustration: Fig. 35. A Stack of Sectionets _Shaw-Walker Co._]
=Metal Files.= Metal furniture is rapidly gaining in popularity
for office use. All sorts of office furniture is now made of sheet
steel--desks, tables, chairs, counters, and filing devices for all
purposes. Metal cabinets are made in upright sections and equipped with
the same filing devices found in wooden cabinets. Fig. 37 shows a row
of metal sections, combining a variety of filing devices. At either end
are roller book shelves and a cupboard, while in the center are six
styles of files.
[Illustration: Fig. 36. Transfer Drawer. _Browne-Morse Co._]
[Illustration: Fig. 37. A Row of Metal Files. _The Berger Co._]
The most apparent advantage of metal files is the safety afforded, as
it has been amply demonstrated that they will go through a very severe
fire without damage to contents. Few offices have sufficient vault
space for the papers that must be kept. Metal files not only take care
of the valuable papers, but by keeping all papers away from combustible
material, act as a fire preventive.
Another reason for the increasing popularity of metal files is the
scarcity of suitable timber and its advancing cost. The supply of
oak and mahogany is decreasing so rapidly that the necessity for a
substitute seems inevitable in the near future. For office furniture
steel seems to offer the most practical substitute.
[Illustration: BURROUGHS ADDING MACHINES IN THE OFFICE OF THE FAIR,
DEPARTMENT STORE, CHICAGO, ILL.]
BUSINESS STATISTICS
STATISTICAL DEPARTMENT
One of the chief functions of the comptroller's office is to gather
statistics which tell what is being done in every branch, department,
and division of the business. The purpose of these statistics is to
show the results of these activities--the gross volume of transactions,
the cost, and the result in net profits. When assembled in the form of
intelligent reports, these statistics present an understandable history
of the business.
The statistical department may be considered as the cost department
of the commercial branch. Manufacturers recognize the necessity for
comprehensive statistics in the manufacturing branch; they realize
that they must know what their goods cost to manufacture; but in
comparatively few enterprises is the importance of commercial costs
recognized.
In the factory, costs are figured down to the most minute detail; what
it costs to perform each operation on every part of the completed whole
is known; the efficiency of every man--what he costs in wages, in
power, and general expense, and the cost of every bit of material he
uses--all of this is told by the cost accounting system. What it costs
to sell the goods is usually a matter of guess work.
To know what it costs to run a business--to know _commercial costs_--is
just as important as to know manufacturing costs. Both are necessities
if the business is to attain its greatest possibilities.
What are the actual profits of this or that department?
How much net profit is there in handling this commodity?
Does it cost more to send a salesman to that little town, ten miles off
the main line, to take Jones' order than the profits on his business?
Is there as much profit in working _this_ territory as some other?
Measured by the standard of _net profits_--not volume of sales--is
Brown a profitable salesman? Compared with White, what is his
efficiency?
These are some of the questions to be answered before it can be claimed
that the statistical department has reached its highest state of
efficiency. The success of modern merchandising is measured, not by the
volume of business transacted, but by profits. In days gone by, the
merchant liked to be able to say that he sold more goods last year than
any of his competitors; today he is better pleased if he has made the
most money. A net profit of 10% on a business of $500,000.00, is more
attractive than a million-dollar business without profit.
Commercial costs may be divided into two classes--sales costs and
administrative costs. Of the two, sales costs are the more important;
if sales costs are not kept down, there will be nothing left from which
to pay administrative costs.
=Sales Costs.= In the broadest interpretation, sales costs include
every expense properly chargeable to the sale of goods. For statistical
purposes it may very properly be divided into direct and indirect, or
general selling expense. Direct sales expense is made up of salaries
and traveling expenses of salesmen--items which can be definitely
determined and charged against definite sales. Indirect sales expense
is made up of advertising, salaries of the sales manager and his
office assistants, expense of entering orders and billing, packing
and shipping expense, and all similar items properly chargeable to
the expense of marketing the goods--items which, while chargeable to
sales, cannot be applied directly to individual sales, nor to specific
territories.
Figuring sales costs is a specific function of the statistical
department which is sometimes referred to as _profit figuring_--an
appropriate term, since the principal object of gathering sales
statistics is to determine profits. As a preliminary to figuring
profits, it is necessary to have an accurate record of the _cost_ of
the goods sold. In a manufacturing enterprise, it is expected that
this information will be supplied by the cost department; in a trading
business, the statistical department must make the calculations.
The first step is to obtain a record of all goods received. This can
be done most easily by obtaining duplicate invoices, which will be
supplied by those from whom goods are purchased, if insisted upon. To
the invoice must be added the freight and cartage--items which must be
supplied by the accounting department. This gives the total cost, laid
down, and should be divided to show costs per unit--as yards, dozen,
pounds, barrels, or tons. On a mixed shipment it is not difficult to
apportion the freight to the different commodities. Every freight bill
shows the rate at which the shipment is billed, and the total can be
apportioned by weight on the same basis.
To insure a permanent record of cost prices, it is best to register
each shipment received, with its cost. This register should be divided
according to commodities, providing a separate record of each one. A
loose-leaf book is best for the purpose.
A suitable form is shown in Fig. 1. This sheet is headed with the name
of the article or commodity, and each sheet is used for a record of
receipts of a single article. The record includes date of invoice, date
received, from whom, lot number, quantity, price, amount of invoice,
freight and cartage, total cost, and cost per unit. Each lot of goods
received is given a lot number, these numbers being consecutive for
each commodity.
The sheet serves the double purpose of a record of receipts and a price
list. Both the quantity and total columns are footed, the footings
being carried forward to the end of the month. All sheets are filed
alphabetically by commodities, subdivided by departments, the current
sheets always being on top.
=Records of Shipments.= Before sales costs and profits can be figured,
the statistical department must be supplied with records of shipments.
This may be accomplished by providing an extra copy of the invoice,
which is easily done with modern billing systems. To save transcribing,
the copy for the statistical department should be wider than the
original invoice. The extra width allows for the addition of special
columns needed in figuring profits on the shipment, as shown in Fig.
2. This form has added columns for total cost, gross profits, sales
expense, net profits, and per cent of net profits.
When these invoice copies are received in the statistical department,
the price lists, Fig. 1, are referred to for cost prices. Here the use
of the lot number assumes importance, as prices are obtained for the
specific lot numbers shown on the invoice, resulting in actual rather
than estimated profit figures.
After serving their purposes in the tabulation of other data, explained
later, the invoice copies are filed alphabetically, keeping all
invoices to the same customer together. Either a vertical file or a
post binder may be used for this purpose.
[Illustration: Fig. 1. Register of Merchandise Received]
=Returned Goods.= Another very important record in profit figuring is
that of returned goods. Profits may be figured on the invoices, but if
accurate profits on the business of a customer or a salesman are to be
recorded, returned goods must be considered.
[Illustration: Fig. 2. Copy of Invoice for Statistical Department]
When goods are returned, it means a loss of anticipated profits,
and should be considered in the same light as an actual loss. In a
well-managed business, returned goods are kept down to a minimum; if
they increase above normal, an investigation into causes is in order.
Repeated returns of the same merchandise indicate a defect in the
merchandise itself; if those from the territory of one salesman are
frequent, an inquiry into the salesman's methods is necessary--he may
have the fault of loading his customers too heavily, or of adding to
their orders--all of which are added reasons why a record of returns
should be kept.
A blank for a monthly record is shown in Fig. 3. This record shows the
name of the department from which the goods were sold, the commodity,
name of customer, price at which sold, the cost--including selling
cost--the loss, and the name of the salesman. From this sheet, all data
necessary for complete records can be tabulated.
[Illustration: Fig. 3. Report of Returned Goods]
=Salesmen's Records.= One of the special benefits--perhaps the chief
benefit--of a profit-figuring department is a record of the work of
each salesman. Not merely the volume of his sales, but the profits on
those sales, measure his worth to the house.
The salesman whose sales are largest in quantity, or even in dollars
and cents, is not necessarily the best salesman. One man may sell a
thousand dollars' worth of sugar, while another sells two hundred
dollars' worth of tea and makes more money for the house; one strives
for volume--making price concessions to secure a big order--while the
other is content with smaller sales at a good profit.
In the final analysis, profits determine the efficiency of the
salesman. His salary may be large or small; his expense high or low;
but he is not efficient unless his business shows a net profit.
To tabulate the sales of each salesman, so that a complete record of
his work may be seen at a glance, is then, of the utmost importance.
The first step should be to make a record of _what_ he sells--how much
calico and how much silk. On a loose-leaf sheet, ruled as shown in Fig.
4, a record of a salesman's sales of a single commodity may be kept;
from these sheets, a record of his total sales can be tabulated.
The head of this sheet shows the name of the commodity, the name
of the salesman, and the month covered by the record. A detailed
record is kept of each day's sales, showing quantity, cost, sales,
gross profits, and per cent of gross profit. At the end of the month
returns are deducted--the information being obtained from the returned
goods report, Fig. 3, leaving the net record. This sheet, which is
loose-leaf, is filed alphabetically by salesman's name, the sheets for
each man being in alphabetical order by commodities.
A record of the salesman's total business is made on the loose-leaf
form shown in Fig. 5. This record is made up from the totals of the
commodity records, Fig. 4, and the form has the same columns, with
an additional column, headed _% of total_. In this column is entered
the per cent which the total sales of each commodity bears to the
salesman's total sales. The profits on the salesman's business usually
increase in direct ratio to the increase in the per cent of sales of
the higher-priced specialties.
This total record is, of course, made up at the end of the month, only
the monthly totals being shown. A recapitulation is made at the bottom
of the sheet. In the right-hand, or credit, column the gross profit
is brought down; in the left-hand column, sales expense is entered,
the several items being separated. First, the salary of the salesman
and the amount of his traveling expenses are entered and footed, the
total being the direct sales expense. Following this is entered the
general sales expense that should be charged against the business of
the salesman, this item being supplied by the accounting department.
The total sales expense is then extended in the credit column and
deducted from gross profits, leaving net profits--the real measure of
the salesman's value.
[Illustration: Fig. 4. Record of Salesman's Sales Arranged by
Commodities]
These sheets should be filed in the same binder with the salesman's
commodity sales records. A separate index may be used, or they may
be filed on top of the commodity sheets, bringing the entire month's
record together. To make identification easy, they should be of a
different color from the commodity sheets.
Sales records such as these give a complete history of the business
of each salesman; they tell the whole story in language most easily
understood by the manager. The longer they are kept, the more valuable
the history becomes.
=Mail Orders.= In a business in which occasional mail orders are
received, sales of this character may be grouped under some such
caption as _home office_, and treated in the statistical records in the
same manner as the sales of one salesman. Where an extensive mail-order
department is maintained, it may be advisable to keep records of the
business of each mail-order salesman.
=Expense Distribution.= General sales expense must be distributed,
on some equitable basis, over the total sales. There are two logical
factors on which this distribution may be made, _total sales_ and _cost
of goods sold_. The latter seems to be the most equitable. If based on
total sales, the distribution may actually penalize the salesman who
is really the most profitable. For example, one salesman may sell for
$2000.00 goods which cost $1500.00, while another will obtain $2200.00
for the same goods; if the expense is distributed on the basis of total
sales, a larger amount is charged against the business of the latter
salesman when the increase is all profit. On the basis of cost, the
same amount would be charged against the business of both salesmen.
When the total sales expense and total cost of goods sold is
ascertained, the former is divided by the latter amount to obtain the
correct percentage. This is then added to the cost of sales of each
salesman.
While, as a rule, general sales expense should be charged against the
cost of _all_ goods sold, there are certain exceptions when a part of
this expense should be charged against specific sales. For example,
a manufacturer may make a special appropriation for advertising his
product in a certain state, using local papers, street cars, and bill
boards. In that case the advertising is very properly chargeable
against the business from that state; though it might be advisable to
distribute the amount over several months.
[Illustration: Fig. 5. Record of a Salesman's Total Sales]
A mail-order department involves certain expenses, none of which are
chargeable against the business produced by the salesmen. Included in
this special expense are such items as postage, stationery, printing,
and stenographers' salaries. This expense should be charged against the
business of the department and, if records of the work of each salesman
are kept, it must be _prorated_ on the basis of cost of goods sold by
each.
=Total Commodity Sales.= A record of the total sales of each commodity
is necessary in order that the profit in handling the commodity may be
determined. Sometimes it is found that a commodity which is apparently
being sold at a profit is actually sold at a loss, when the actual
selling costs are determined. Or, one salesman may sell the commodity
at a loss, while others sell it at a profit.
The form shown in Fig. 6 is used for a summary of the sales of one
commodity. At the end of the month one of these sheets is headed with
the name of each commodity and the totals entered from the salesman's
commodity records, Fig. 4. Opposite the name of each salesman is
entered the quantity and amount of his sales, following which is an
important column headed _% of whole_. In this column is entered the
percentage which the sales of the one salesman bear to the total sales
of the commodity. If Bacon sells 40% of all the tea sold by the house,
it is shown by this report; if he sells 50% of the sugar, it is shown
just as plainly. Not only how much of a given commodity is sold, but
who sold it, is recorded on this monthly summary.
In the columns following total sales, the total cost and gross profits
are entered. From the gross profit is deducted the sales expense--this
being calculated on the percentage shown for total sales expense in
the recap at the bottom of the salesman's sheet, Fig. 5, leaving the
net profit. In the last column, the per cent of net profit is entered.
The footing at the bottom of the sheet shows total amounts and the
percentages of sales expense, and net profits are calculated on the
basis of these totals; this gives the average expense and profit on the
total volume of sales.
=Department Sales.= Next in importance to a knowledge of profits
on a single commodity is a knowledge of the results produced by a
department. This necessitates a record of departmental sales. Sales and
profits measure the efficiency of a department, just as they do of a
salesman.
[Illustration: Fig. 6. Record of Total Sales of One Commodity]
[Illustration: RAILWAY EXCHANGE BUILDING, CHICAGO, ILL. An Excellent
Example of the Modern Type of Office Buildings]
The necessity for departmental records depends on the business. A
manufacturer who produces but two or three articles needs only records
of sales of commodities; a wholesaler requires records of sales of
classes of goods. In a wholesale business, departmental divisions are
distinct; each department is in charge of a head, and the record of the
department is his record.
In a comparison of departmental profits, the percentage of net profits
should not be followed blindly. Certain departments are not money
makers. To a certain extent it is possible to discontinue unprofitable
lines, or even departments, but in some businesses it is necessary
to maintain departments which are not profitable. In the dry goods
business--either wholesale or retail--the margin of gross profit in
notions is so small that it is doubtful if, when all legitimate expense
is deducted, a net profit is realized. The salesman for a wholesale
house whose sales of notions is largest, has made the poorest record;
the manager who has kept the sales of the notion department at the
lowest price--at the same time keeping his stock down--may be the most
efficient.
For a record of departmental sales the form shown in Fig. 7 may be
used. The data for this report is secured from the commodity records,
Fig. 6. For each commodity, the quantity and total amount of sales are
entered. Following this is a per cent column in which is entered the
ratio which the sale of each commodity bears to the total sales of the
department. The columns which follow are the same as on the commodity
sales records. A loose-leaf form should be used, and this may be filed
with the commodity records--the departmental record on top, with the
commodity records arranged alphabetically underneath.
The forms described provide detailed records of the business of each
salesman and each department (classified by commodities), records of
goods received, and of returned goods. From these records, complete
trading statements can be made for each department, or for the entire
business.
=Trading Statements.= Reports in the form of trading statements made
from these records give the manager the facts in which he is specially
interested; they show him the profits of the business and the sources
of the profits.
[Illustration: Fig. 7. Record of Sales of a Department Divided as to
Commodities]
A monthly trading statement should be made for each department, in
order that the total operations may be seen at a glance. All of the
essential facts are shown on the department report, Fig. 7, but a
properly constructed trading statement affords an opportunity for
valuable comparisons. While the fact that a department has made a net
profit of $7864.20 this month is interesting, these figures take on
added interest when compared with last month's profits.
A form for a monthly departmental trading summary is shown in Fig. 8.
In this form, the trading statement for the current month is entered
in the two columns headed _trading_. First, the total amount of sales
is entered in the credit column; then the value of stock on hand at
the beginning of the month is entered on the next line, in the debit
column. When the profit-figuring department is organized, it is
necessary to have an accurate inventory in each department that this
trading statement may be started correctly. If started on a correct
basis, the record becomes perpetual. To the amount on hand is added the
value of goods received, as shown by the merchandise received reports,
Fig. 1. From the total, the value of the inventory at the end of the
month is deducted, the remainder being known as the _turnover_--the
cost or inventory value of goods sold. To find the value of the
inventory an actual count of the goods on hand is unnecessary. The
value may be found by deducting from the total the value, at cost, of
goods sold, which is the footing of the total cost column, Fig. 7. This
inventory is, of course, the amount shown as on hand at the beginning
of the next month.
The difference between the _turnover_ and _sales_ is the _gross
profit_--being the amount necessary to balance the debit and credit
columns. The gross profit is brought down and entered in the credit
column. Sales expense is entered in the debit column, the difference
between this amount and gross profits being _net trading profit_, for
the current month.
The three columns at the right are for comparative figures. In the
column headed _to date_ is entered the total sales, turnover, gross
profits, expense, and net profits from the beginning of the current
fiscal year to date; in the two columns next following, the same facts
are entered for last month and last year.
[Illustration: Fig. 8. A Form for a Monthly Trading Summary]
As a rule, these monthly trading statements for each department give
the manager just the information he wants; but, when there are a large
number of departments, it is sometimes advisable to tabulate these
statements, giving one complete record. A form for such a report is
shown in Fig. 9. No detailed explanation of this report is necessary,
the columns being arranged for the same information as given on the
department statement. The only exception is the inventory column, which
is intended for the current inventory only. In the three comparative
columns at the right, net profits only are entered. This statement
gives a history of sales in a nut shell.