measured by the profits on his business, is as important as a knowledge
of the value of each salesman. It is for the purpose of obtaining this
information that columns for calculating net profits are added to the
statistical department's copy of the invoice, Fig. 2.
Detailed records of purchases of each customer, divided by commodities,
are unnecessary, but there should be a summary showing total purchases
and profits. Detailed information about individual shipments and
separate commodities can be obtained from the invoice copies.
Fig. 10 shows a form for a customer's record on a 4-in. X 6-in. card.
This form provides for monthly records only. At the end of the month
the total purchases and total profits are obtained from the invoice
copies, and the amounts entered on the card. The card is ruled for a
two-years' record.
These cards should be filed geographically, the name of the town
heading the card. If there are several customers in a town, their
cards should be arranged in alphabetical order. State boundaries need
not be followed; it is usually better to file the cards according
to salesmen's territories. This makes a combined customers' and
territorial file, and if a record of the business in a town or state is
wanted, it can be obtained from the cards. If desired, a new card can
be inserted for a total record of each town or group of towns.
=Value of Profit Figuring.= The value of the records described can
scarcely be overestimated. To know the profit-making ability of each
department and each salesman; to read at a glance the value of every
town and every customer; to know the cost value of goods sold and the
exact condition of the stock at the end of every month, these are the
facts which enable a manager to size up his business.
[Illustration: Fig. 9. Departmental Comparative Trading Statement]
The man who lacks these facts--who is obliged to wait for them until
the end of the year, and then get only a part of them, does not have
a grasp of his business, and cannot expect to bring it to the highest
possible state of efficiency. That more managers have not insisted
on having these facts before them is doubtless due to one or both of
two causes: _failure to appreciate their value_; and _the belief that
dependable statistics of this sort were unobtainable without too great
an expenditure of labor_. Neither is borne out; all the evidence is to
the contrary.
[Illustration: Fig. 10. Record of Purchases and Profits of a Customer]
As to their value, little need be said. The fact that the most
extensive enterprises find it profitable to compile statistics setting
forth the most minute operations in every department is sufficient
evidence of the value of corresponding statistics to the smaller
merchant or manufacturer. If a great railway system finds it not only
profitable but necessary to compile statistics showing the cost of
repairs per ton-mile for every engine in its service, arranged for a
comparison of the efficiency of individual locomotives, surely the
merchant will find it profitable to analyze his profits. An analysis
of the profits and losses of a wholesale grocer, showing how much he
has made on tea; how much he has lost on sugar; what profit has been
produced by a certain salesman; the profit value of a customer, is
of as great value to him as a knowledge of the cost of repairs on an
individual car to the officials of a railway.
To the man who has made no attempt to secure them, the compilation
of these statistics may seem an endless task, not justified by their
value. Actually, the magnitude of the task is, to a great extent,
governed by desire; a man is quite likely to obtain what he really
wants, and as his desires increase the difficulties decrease.
When it comes to the actual work of preparing these statistics, the
difficulties are found to be really minor ones. The main thing is to
do the work every day; to record the transactions of a single day does
not involve an undue amount of labor, but if allowed to get behind, the
task assumes appalling proportions.
Modern billing systems make it possible to tabulate certain of these
statistics when the bills are made. The adding machine is also of
inestimable value in statistical work; computations which would involve
a whole day of hand-and-brain work are made in an hour on a modern
adding or calculating machine.
In deciding what statistics should be compiled, the nature and needs
of the business must be considered. It is usually unnecessary to use
as the unit a single brand of a given commodity. A wholesale grocer,
for instance, would not find it necessary to make separate records
of each brand, or even each article, in canned goods. They would be
divided into classes--as vegetables, fruits, and meats, and each class
would be treated in the records as a single commodity. When taking on
an entirely new line, he might wish to compile separate statistics for
a time, but when the fact that the line is a profitable one has been
established, the special statistics would be unnecessary.
Again, one house will find it advisable to go into certain details not
considered necessary in another establishment. For example, one house
has, as a result of the facts revealed by their statistical department,
established a system of bonuses to their salesmen based on the profit
percentages of their business. This necessitates a record different
from any of those that have been shown. This concern has grouped the
goods in each department according to percentages of gross profits--as
5%, 10%, 20%, 25%, etc. Each salesman is given a monthly quota--based
on salary, territory, and previous sales--which he is expected to
reach. This quota specifies not only the amount of sales but the
percentage of profit; each $100.00 of sales is expected to include not
more than a certain amount of 5% goods, nor less than a given amount of
25% goods, the exact ratio of each being given. If a salesman exactly
equals his quota, maintaining the percentage prescribed, he is given
a small bonus; if he exceeds his quota and maintains the prescribed
percentages, or increases the percentage of sales of the more
profitable goods, his bonus is increased in proportion to the increased
profits--the greater the percentage of profits, the more rapid the
increase in the bonus. On the other hand, if his sales of goods sold at
a small profit increase, he is penalized by being denied a bonus, no
matter what the volume of his sales.
[Illustration: Fig. 11. Salesman's Comparative Sales Statement]
This bonus system, which is an adaptation of the bonus wage system
used in factories, has the effect of increasing the sale of the most
profitable goods. When a customer places an order for goods in which
there is little profit, the salesman--who cannot refuse the order--is
given an incentive to push the sale of more profitable goods; he must
do so as a matter of self-protection.
To determine the bonuses, statistical statements differing from those
already shown are necessary. These statements must divide sales
according to percentage groups, rather than by commodities, as shown in
Fig. 11. The data for this statement is taken from the commodity sales
statement, Fig. 4, and with an adding machine can be tabulated very
quickly.
Another house, which does an exclusive mail-order business, keeps
accurate records of the sales resulting from circular letters, charging
the cost of the letters, including postage, to those sales. Records
are also kept of the sales of each correspondent. When an order is
received, the correspondence record is examined and, if the order is in
response to a dictated letter, the correspondent receives credit. Each
correspondent is required to keep a record of the number of dictated
and form letters that he uses, the cost of which is charged against
his sales. At the end of the month results are tabulated showing the
percentage of orders secured from circular letters and from dictated
letters; the amount of business from each letter of each correspondent;
and the percentage of cost to the cost of goods sold.
These and many other statistics can be tabulated, and for each a
special form is needed. The classes of information to be presented in
statistical form depend on the business. When it has been determined
what information will be of greatest value, forms should be prepared
which will make it possible to tabulate the desired facts with the
least labor.
ADMINISTRATIVE COSTS
Commercial costs which are not chargeable to sales are classed as
administrative, and may be divided into _executive_, _accounting_,
_office expense_, _credits_, and _collections_.
In a strictly trading business, _purchasing_ is an added division,
while in a manufacturing enterprise it is usual to consider this a
manufacturing expense.
_Executive_ expense is made up of the salaries of the general manager
and comptroller, salaries of clerks and stenographers, and a proper
portion of miscellaneous expense. In a manufacturing business, a part
of the executive salaries is charged to manufacturing.
_Accounting_ expense includes the salaries of chief accountant and
cashier, clerks and stenographers, blank books and supplies, and
miscellaneous expense.
_Office_ expense is charged with the salary of the chief stenographer,
and the expense of mailing and filing, including salaries of clerks.
_Credits_ and _collection_ expense include the salaries of the credit
man and his clerks, the cost of mercantile agency service and reports,
and the cost of collections, including postage.
_Purchasing_ expense, which, as stated, sometimes is a commercial
expense, includes the salaries of purchasing agent, receiving clerk,
stores clerk and their assistants, and the entire expense of the
storeroom.
In a strictly trading business, such items as power, heat and
light, insurance and taxes--usually a manufacturing expense--become
administrative expense. These, and all similar items, are grouped under
the head of _miscellaneous_, to be distributed over all divisions of
commercial costs.
In the main, the different divisions of administrative costs are easily
assembled. In each division there is the salary of the department
head, the total of which is charged to the division, and a correct
apportionment of salaries which must be divided among two or more
divisions. For illustration, the salaries of stenographers are
distributed as has already been explained. By far the larger part of
this expense is charged to the advertising and sales departments, but
from the weekly reports of this division, the amount to be charged
to the executive, accounting, credit and collection, and purchasing
divisions may be obtained.
_Mailing Costs._ In the division of office expense one item which must
be distributed, at least between sales and administrative, is mailing
expense. Mailing expense is made up of labor and postage, the latter
being most important.
All enterprises of magnitude maintain a separate mailing department in
charge of one person, frequently the chief stenographer. The very fact
that postage is the big item of expense in the mailing room, makes a
very complete system of records absolutely essential.
The work of the mailing room consists of folding circulars and letters,
enclosing catalogs, circulars, and letters in envelopes, addressing,
filling in dates and addresses on printed form letters, and stamping.
Sometimes addressing and filling in is done in the stenography
division, but the more usual plan is to consider this a part of the
mailing expense.
[Illustration: Fig. 12. A Report of Labor in the Mailing Room]
Of first importance is a record of work done, which is best secured
by means of a daily report of the work of each clerk. All work should
be assigned by the head of the department, and the clerk required to
keep an accurate record of both time and production. This question of
assigning the work is especially important in the mailing room, as one
department may flood the room with work which, if done, would make it
impossible to handle the work of other departments for several days.
The head of the department must decide which is the most important
work. Sometimes it is necessary to make out, in advance, a weekly
schedule of circularizing to be done, and compel all departments to
be governed by the schedule. As an alternative, some of the larger
enterprises maintain a separate mailing room, in charge of the
advertising department, exclusively for circularizing work.
A suitable form for the employe's daily report is shown in Fig. 12.
This report is divided for a record of the different classes of work
performed. All work is recorded by number, that is, if the work
is folding circular _No. 518_, that number is placed in the first
column opposite _folding_. The center column is for the name of the
department; as a rule, the form number indicates the name of the
department, but sometimes the same form is used by several departments.
In the columns next following, the clerk enters the number of pieces
handled and the time taken. The extension columns, showing rate and
amount, are filled in by the head of the department.
From these reports, the pay-roll is made up. All of this work can be
handled on a piece-rate basis, and most large concerns find this the
most economical basis. The rate must necessarily be varied to suit
local conditions, and should be high enough that by doing a full day's
work a clerk will earn something more than the standard day wage. For
example, a girl will address from 1000 to 1500 envelopes, or fill in
addresses on the same number of form letters, in a day of eight hours,
the average being--say 1200. In different cities the accepted wage
standard for the class of help required in this work varies from $5.00
to $7.00 a week. Where the $5.00 rate prevails, a piece rate of 90
cents a thousand is equitable; a girl who maintains an average of 1200
a day for five and one-half days (the usual time required in an office)
will earn $5.94 with a chance to earn still more if she can increase
her speed. The extra ninety-four cents is an inducement to at least
equal the average; without it, she would probably drop to 1000 or less.
While her wage has been increased, the cost has been lowered.
=Daily Mail Report.= That the information may be in convenient form
for statistical purposes and for making final reports, there should
be a daily mail report. This report should be a complete record of
everything mailed, showing the number of pieces and the rate of
postage for each. A form for such a report is shown in Fig. 13. This
report is divided for a record of regular mail-letters, circulars, and
catalogs--and merchandise. The latter is not required in all cases, but
is very important for a concern doing a mail-order business in small
articles which can be sent by mail.
[Illustration: Fig. 13. Form for a Daily Mail Report]
[Illustration: Fig. 14. Stamp Identification]
This report shows the description, number of pieces, and postage
rate. In the description column the name of the department should be
written first, followed by a description of the mail originating in
that department. The daily report should be made up by the stamp
clerk, without reference to the individual employes' reports, as it is
intended as a check against the latter. A memorandum of the number of
pieces reported for the different operations by the employes should be
kept, and at the end of the week compared with the quantities shown
by the daily mail reports. For some of the operations, the quantities
reported by employes may be the larger, certain work being completed
on matter which has not been mailed. To reconcile this difference, the
work itself should be on hand in the mailing room.
[Illustration: Fig. 15. Voucher for Postage]
=Postage Record.= The most important of all records in the mailing
room is the postage record. Postage should be placed in charge of the
stamp clerk, who should be made responsible for its accounting. The
mail clerk is, in fact, a cashier, having the custody of the equivalent
of cash in the form of postage stamps. Unless a very strict record is
kept, there are abundant opportunities for thievery of stamps and,
because they are almost as easily disposed of as cash, the temptation
is strong. So great have the losses been from this source, that the
government now permits business houses to identify its own stamps by
means of perforations. There is now on the market a machine which
perforates the initials or trade mark of a firm. The machine is very
rapid in operation and stamps can be perforated in sheets very quickly.
An enlarged reproduction of a stamp perforation is shown in Fig. 14.
[Illustration: Fig. 16. A Weekly Report of Postage Used]
[Illustration: ROTUNDA IN THE ROOKERY BUILDING, CHICAGO, ILL. This is
One of the Largest Office Buildings in the City]
[Illustration: ROTUNDA IN THE RAILWAY EXCHANGE BUILDING, CHICAGO,
ILL. An Exterior View of this Building is Shown Elsewhere in this
Volume]
The first step in providing for a complete postage record is to make
a voucher for postage required. The cashier should require a voucher
before supplying stamps or the money with which to buy them. A special
voucher form showing the postage on hand, and the number of stamps of
each denomination required, is shown in Fig. 15. This should be made
in duplicate; the original goes to the cashier and the duplicate is
retained by the stamp clerk.
=Weekly Report.= From the daily mail reports, a weekly postage report
should be made. This report should show the total amount of postage
used, distributed by departments. A form for such a report is shown in
Fig. 16. In the first column the names of the departments are written,
and in the daily columns the amounts used are recorded. The amount
expended for registry and special delivery is entered at the bottom of
the sheet, and below this is a recapitulation showing the balance of
postage on hand. This report, which is made by the head of the mailing
room, should be in duplicate--one copy for the accounting department,
and one to be retained by the stamp clerk.
=Weekly Mailing Report.= The final report of the mailing room is a
weekly report which shows exactly what work has been done for each
department. The information required to make up this report is obtained
from the employes' daily reports, and the daily mail reports. The
postage is taken from the daily mail reports and checked with the
weekly postage report to guard against any inaccuracy. A comprehensive
form of report is shown in Fig. 17. This report is made to the
statistical department.
=Stationery and Supplies.= Attention has already been called to the
necessity for the proper care of stationery and office supplies. The
losses due to careless handling of supplies are more serious than is
usually appreciated. Probably the best way to reduce this expense is
to require signed requisitions for all supplies drawn, and to charge
all supplies to the different departments. All departments should be
required to present requisitions once a day only, and then only during
certain hours. In very few offices is a stock clerk required for office
supplies alone; if the supplies are kept in the regular storeroom, or
if one of the office clerks has charge of the supply cabinet, this plan
will save time, as an hour a day is sufficient to handle the work in
almost any office.
[Illustration: Fig. 17. Weekly Report of Mailing Department]
After posting the supplies records, the clerk in charge should make a
report to the statistical department of supplies drawn. This may be a
weekly report, as shown in Fig. 18. A second copy should be made for
the accounting department.
[Illustration: Fig. 18. Summary of Supplies Drawn]
This report shows the value of supplies drawn each day by each
department. The amounts can be entered daily from the requisitions, the
totals being entered at the end of the week.
=Summary of Administrative Expense.= The reports and records described
place the statistical department in a position to make complete
summaries of administrative expense. The salaries of department and
division heads, clerks, and stenographers employed in each department
are obtained from the accounting department; mailing expense is
obtained from the weekly report of the mailing clerk; cost of supplies
drawn is shown by the supplies clerk's report; the amount of expense
items not otherwise accounted for is supplied by the accounting
department. The last item named--representing overhead expense--can be
distributed to the departments on the basis of the ratio of the known
expense of each department--that is, if the known expense, including
salaries, mailing, and supplies, in one department is 20% of the known
expense of all departments, it may be charged with 20% of the overhead.
[Illustration: Fig. 19. Form for a Distribution of Administrative
Expense]
Fig. 19 shows a form for a summary of all administrative expense,
the different classes of expense being divided for each department.
Totals of expense of each class, totals for each department, and the
grand total are shown. Totals of the different classes and the grand
total must agree with the records of the accounting department. At
the bottom of the administrative expense summary the per cent of
total administrative expense to sales and turnover--or cost of goods
sold--should be shown.
=Profit and Loss Statements.= The profits shown by the comparative
trading statement, Fig. 9, are trading profits only--not net profits,
as administrative expense and profits from other sources than sales are
not included. A statement should be prepared, therefore, which will
show net profits. This can be combined with the trading statement,
but the better plan is to prepare a separate statement. It is usually
advisable to supply copies of the trading statement to the heads of
all departments of the sales division that each may see what progress
he is making, and compare it with that of other departments. It is not
advisable, however, to let the department heads know the exact net
profits; this information is for the general manager and directors.
Fig. 20 shows a form of monthly profit and loss statement, divided by
departments. The totals for the fiscal year to the first of the current
month are brought forward at the head of the sheet; then the figures
for the current month are entered. Sales, sales expense, and sales
profits are taken from the trading statement; administrative expense
is shown by the summary, Fig. 19. Administrative expense is charged to
the different departments on the basis of the turnover--that is, if
the total administrative expense is 10% of the total turnover, each
department will be charged an amount equal to 10% of its turnover.
[Illustration: Fig. 20. Condensed Profit and Loss Statement by
Departments]
There are certain profits which arise from other sources than the sale
of goods in which the concern is trading. Among other sources are
interest and premiums and profits on the sale of bonds and stocks. All
such items should be listed separately each month that the amount of
unusual profits may be known. This statement presents a history of the
progress of the business reduced to its final analysis--that of actual
net profits.
MAILING-ROOM MACHINERY
Mechanical devices and machines are used for many purposes in an
office, and both the variety of uses and types of machines are steadily
increasing. Inventors and manufacturers of office appliances are
working constantly to perfect devices which will save time, insure
accuracy, and reduce costs. Among the important devices are several
designed to reduce labor and insure increased speed in the mailing room.