CASH DISBURSEMENTS.

Figure 28, (Reduced in size)

When these voucher checks are returned to us by our banker, we file them in a check filing drawer, equipped with sets of monthly tabbedguides, according to the voucher numbers, thus forming the voucher record for our cash disbursements.

It is hard to find a weak spot in the check voucher system, but some inspectors seem to object to it, so, until it is specifically authorized by the War Department, the inexperienced Exchange Officer would do well to stick to the system previously described.

To revert to our purchase record sheets: there is no necessity for noting thereon the amount paid on each invoice or the discount on same, as is sometimes done. This information will be shown in the cash book, and data should not be repeated unnecessarily. The remaining two columns (Balances) are used only when closing the books. Whenever this is done, the balance on each order is brought out to the proper column, the amount we owe being entered in the credit side of this column, and the amount due us being entered on the debit side. The total of the credit side of the Purchase column is then posted as a lump sum to the credit side of the “Bills Payable Merchandise” account on the general ledger, and the total of the debit side is posted to the debit side of the same account. Ordinarily, there will be no such debit entries. It will be seen that the net balance of the Purchase Record and of the above account should equal the difference between the total purchases and the sum of the totals shown in the “Creditors” and the “Discounts” columns in the cash book.

The right or credit side of the cash book is, in general, of the same form as the debit side. See Fig. 11. As all distribution of merchandise to the various departments is made through the stock records, there is no necessity of trying to duplicate this information on the pages of the cash book. We, therefore, lump all merchandise payments under the heading “Creditors” and reserve a column for such payments only. In a similar manner, all payments for services rendered in the various departments could be entered under a heading, “Labor”, and the proper distribution or pro-rata share of each department could be shown on the receipted pay roll, as explained hereafter.

Other columns that will be needed are:—Maintenance, Fixtures, Interest and Discount, Appropriations, and Expense. All disbursements which can not be placed in one of the other columns should be entered under Interest and Discount. Under Appropriations, enter all disbursements voted by the Exchange Council for Athletics, Dividends, Sick in Hospital, etc. Under Fixtures should go all expenditures for permanent equipment (new) of the Exchange, and under Maintenance, all money spent for repairs, replacing of old equipment by new, and the like. In the Expense Column we carry such items as wastage, breakage, telephone and telegraph bills, fuel, light, insurance, printing and stationery, and such expendable supplies as twine, paper, etc., as are used in carrying on the business. When the Exchange Officer or authorized agent makes a purchasing trip on purely Exchange business, his authorized expenses should be entered in this column. Exchange Councils differ in their interpretations of what such expenses should be, and the Exchange Officer should have it recorded in the proceedings of the Council that such allowances of expenses are authorized.

To sum up:—the columns of the credit side of the cash book, reading from left to right are as follows:—Date; Description of item entered, giving name of creditor and a clue to the articles on the invoices; Voucher No.; Check No.; Net Cash; Discount; Creditors (or Merchandise); Labor; Appropriations; Fixtures; Interest and Discount; Expense; Sundries, and perhaps, one or two spare columns.

At the end of the month or when the books are closed, the totals of the various columns are posted to the debit side of the General Ledger as follows:—

Creditors posted to Bills Payable, Mdse.

Interest and Discount to Interest and Discount.

Discount to Interest and Discount.

Fixtures to Fixtures (Exchange or Laundry, as the case may be).

The items entered in the Expense column must be distributed, such items as cannot properly be posted to the account of any of the departments must be posted to the “General Expense” account in the General Ledger. The same rule applies to Labor and to Sundries. The items in the Appropriations column must also be distributed among the proper ledger accounts, such as Athletics, Dividends, Sick in Hospital, etc., as the case may be.

The ledger is the book which shows us the status of every part of our business. It is the most important book that we keep, and, consequently, it should be kept with great care. Every transaction, no matter how small, sooner or later finds its way to the ledger, although it will not be given the dignity of a line to itself. The ledger is, of course, kept on the double entry system.

There are several stock forms for ledger sheets, that shown as Form 30, in Fig. 30, being one of the best, as the center balance column saves much space. Perhaps the most convenient size is 11¼ × 11⅞ inches, which gives about the right amount of room in all columns. These sheets, printed and ruled as shown, cost $12.00 per thousand, retail. Leather tabbed indices cost $1.65 per set and a high grade ledger binder costs $12.00, although a cheaper type, known as a “transfer” can be obtained for a price as low as $2.75, but it would not give the service and satisfaction of the regular type of ledger. In our system, a ledger with a 1¼ inch back should prove of ample size.

Figure 30, (Reduced in size)

Live accounts only should be kept in the ledger; as soon as an account has been closed out, the pages containing same should be taken out and placed in a ledger transfer binder. The same procedure should be followed with the filled pages of live accounts just as soon as there becomes little chance of their being consulted frequently.

As has been previously described, our method of handling our charge accounts has rendered it unnecessary for us to keep a private ledger account with each of our charge customers. To do so would be merely to repeat information which we already possess. Also, our Purchase Record has obviated the necessity of a separate ledger account with each of our creditors, for the same reason.

Having noprivateledger accounts, it follows that this book then becomes a “General Ledger”, holding only general accounts, such as Bills Payable, etc.

Some of our general accounts should be sub-divided in order to give us a better idea of what the business is doing. Take the Expense account, for example. It is usually desirable to classify our expenses as nearly as possible under the following headings:—

Another example is Bills Payable, which is divided into Charge Accounts, Credit Coupons, Enlisted Men’s Laundry, etc., as circumstances dictate.

A complete list of the accounts in our ledger should run about as follows:—

It has been noticed that our Ledger is used but once a month or whenever our books are closed. At this time, each account in the ledger is brought down to date by entering the results obtained by summarizing the accounts contained in the subsidiary books. This operation is called “posting” and will be discussed with reference to each of the foregoing accounts. It will be assumed, in each case, that the balance from the previous month has been brought down correctly.

It will be of great assistance to remember that any account in the General Ledger representsoneof the following:—

a.Every account showing a debit balance is either an asset or a loss; a “Personal” account showing a debit balance is an asset, an “expense” account showing a debit balance is a loss.

b.Every account showing a credit balance is either a liability or a profit; a “personal” account showing a credit balance is a liability (something we owe), any sales account showing a credit balance is a profit.

1.Post Exchange Account.Another name for this account is “Net Worth”, or, if the Exchange is out of debt, “Surplus”. It is important that the status of this account be shown on every monthly statement exhibited to the Exchange Council. It is debited at the beginning of the month with the net worth of the Exchange on that date. Credit it with such decreases and debit it with such increases as will be shown on the “Surplus and Adjustment Schedule” on Form 32 and discussed in connection therewith.

2.Bills Receivable, Notes.Debit this account for the amount owed by any organization to the Exchange for Entrance fees, etc., and credit it via the cash book with the amount of payments received from such organizations.

3.Bills Receivable, Charge Accounts.Debit this account, as before described, with the total amount of charge sales made during the month, which amount is obtained from the Charge Accounts book. Credit this account with the total of the “Customers” column on the debit side of the cash book and also with the total of the “Credit” column in the Charge Accounts book.

4.Bills Receivable, Credit Coupons.This account has been exhaustively discussed under “Coupons”.

5.Bills Receivable, Enlisted Men’s Laundry.Debit this account at the end of the month with the gross amount of laundry bills contracted by enlisted men during the month. Credit it with the total of the cash book (debit) column in which are entered the payments by enlisted men for laundry work done. Also credit this account with whatever credits have been allowed for overcharges, damages, etc., these amounts also being charged (debited) against the Laundry account.

6.Check Account.See note under paragraph 4 above.

7.Bills Payable, Merchandise.Debit this account with balance due creditors on 1st of the month and with Cr. Purchase column of Purchase Record. Credit it with amount of creditors column in cash book, and with total of Dr. Purchase column of Purchase Record.

8.Exchange Building.If built and owned by the Government, this item is not an asset of the Exchange. If the building belongs to the Exchange, we debit this account with all amounts spent upon it for additionsof any kind, but not for repairs, renewals, painting, etc. Credit this account with all depreciation voted by the Post Exchange Council, and debit this amount against the Depreciation Account.

9.Laundry Building.Same as preceding.

10.Exchange Fixtures.Debit this account through the cash book with the amount of all new fixtures purchased; credit it with the amount of depreciation voted by the Exchange Council, as before explained, also, with the book value of all fixtures scrapped or otherwise disposed of. When an article is merely replaced by a newly purchased one, it is proper to make no change in the value of our fixtures, but charge the whole purchase price against maintenance. The same applies to cost of repairs.

11.Laundry Fixtures.Same as preceding.

12.Laundry.This is a live account against which are charged (debited):—

(a) The total of the Debit Laundry column in the Cost Price Stock Record, (Form 13), also, the value of inventory at 1st of month.(b) The total cost of labor incurred by that department.(c) Any CASH REIMBURSEMENTS that may have been paid to customers.(d) Such items of Freight, Expense, Maintenance, Board, etc., as may have been paid during the month on account of the Laundry.(e) Any credits that may be allowed for damages, etc. (From Charge Accts.)

(a) The total of the Debit Laundry column in the Cost Price Stock Record, (Form 13), also, the value of inventory at 1st of month.

(b) The total cost of labor incurred by that department.

(d) Such items of Freight, Expense, Maintenance, Board, etc., as may have been paid during the month on account of the Laundry.

(e) Any credits that may be allowed for damages, etc. (From Charge Accts.)

This account is credited with:—

(a) The total of the Laundry columns in the Charge Accounts Book.(b) The total of the Laundry columns pertaining to the current month on our paytable collection sheets (Form 25).(c) The total shown in the Credit Laundry column of Form 13(d) The total of all sales not accounted for under (a) and (b) above.(e) Inventory at last of month.

(a) The total of the Laundry columns in the Charge Accounts Book.

(b) The total of the Laundry columns pertaining to the current month on our paytable collection sheets (Form 25).

(d) The total of all sales not accounted for under (a) and (b) above.

(e) Inventory at last of month.

The balance, showing gross loss or gain, is transferred to the Profit and Loss Account.

13.Store.This and all other departmental accounts should behandled in the manner described in the preceding paragraph except they should receive credit for all coupon and cash sales made during the month.

14.Interest and Discount.Credit this account with the total of the Discount column on the credit side of the cash book; this anomaly being only apparent, not real. Credit, also, the total of the Interest and Discount column on the debit side of the cash book and debit the total of the Interest and Discount column found on the credit side of the cash book.

15.Insurance.Debit this account, through the cash book, with all premiums paid out, at the time they are paid. Credit this account monthly with the monthly share of such premium or premiums, and debit them against Post Exchange. The effect of this method is to show the unexpired policies as assets, as they should be. There can be no doubt that an unexpired policy is an asset, nor is there any question about the propriety of showing the value of this asset by deducting the appropriate amount monthly. The practice of some exchanges of writing such assets off the books immediately upon payment of premiums is not sound.

16.Fuel and Lights.Debit this account through the cash book with all amounts paid out for these items, provided they cannot be properly apportioned to the various departments.

17.Freight and Express.Same as preceding, except that all such charges on incoming merchandise should be charged to the goods in question, just as if they cost us that much more. “Out” freight, etc., is a legitimate charge against this account.

18.Printing and Stationery.Same remarks as under 16.

19.Telephone and Telegraph.Same as under 16.

20.General Expense.Debit this account with all items of expense that cannot properly be placed under one of the other expense accounts.

21.Depreciation.Debit this account with the total amount of depreciation voted by the Council, and as this entails a corresponding credit elsewhere in the ledger, the respective accounts affected must be credited to a corresponding amount. When the books are closed, the balance of this account is transferred to Profit and Loss by crediting Depreciation and debiting the latter account. This Depreciation account can be eliminated entirely, if desired, by crediting Exchange Fixtures or what not with the amount of depreciation decreed by the Council and debiting this amount straight against Post Exchange. This is the usual method.

22.Lost Accounts.Debit this account with all bad debts which we have decided we cannot collect. This, of course, necessitates a correspondingcredit entry in some other account, such as Bills Receivable Credit Coupons or Charge Accounts, etc., as the case may be. When the books are closed, this account is balanced and transferred to Profit and Loss, as explained in 21. If any of these accounts are afterwards collected, we must credit this account, via the cash book, with the proper amounts.

23.Athletics.Credit this account with all amounts voted by the Exchange Council for the support of athletics and charge or debit the same amount against Post Exchange (Account No. 1, above). At the end of each month, pick out of the Appropriations column on the credit side of the cash book, all amounts which were spent for athletics during the month and debit them to this account. The credit balance of this account is a liability against the Exchange.

24.Dividends.Credit this account with the amount of dividends declared by the Council and debit the same amount against Post Exchange account. Debit this account with all dividends paid to organizations. If the dividends have not been paid out by the end of the month, they will show up in this account as a credit balance, a liability against the Exchange; if they have been paid, there will be no balance left to this account.

25.Sick in Hospital.Same as preceding.

26.Regimental Fund.Same as 24.

27.Wages.It will be remembered that each department was debited with its share of all labor charges incurred during the month. These “accrued wages” are credited to this account in the Ledger. Debit this account with the total of the Labor column on the credit side of the cash book. Any credit balance remaining (as when part of the pay due an employee is held back) is a liability against the Exchange.

28.Profit and Loss.This account is ordinarily posted only upon closing the books. To this account, we post the balances of all those Ledger accounts which show a profit or a loss to the Exchange. These include all departmental accounts and also accounts numbered 14 to 29, inclusive, except Nos. 15, 21, 23, 24, 25, 26 and No. 28, which is now under discussion. Remember that each of these accounts which shows a debit balance is a loss and each that shows a credit balance is a profit or gain. After all of these accounts have been balanced and brought into Profit and Loss, the latter is balanced and the balance transferred to Post Exchange. Before this last named operation is performed, however, a trial balance should be taken, because, for reasons before explained, the books will neverbalance to the cent, and the entry of a small item, usually “income not otherwise accounted for,” is necessary in this account before the books will balance.

29.Maintenance.This is really in the nature of an expense account and we should debit it with the amounts shown on the credit side of the cash book as paid out on this account. Credit this account for such items as can be and are debited against any of the departments (see 12 d); credit this account for the balance remaining at the end of the month and charge same against Profit and Loss.

It has been stated above, that all “Expense” accounts are balanced monthly and posted to Profit and Loss, and that after a trial balance has proved the Ledger to be in balance, the balance of the Profit and Loss account is transferred to the “Post Exchange” account. The remaining accounts, Nos. 1-11, inclusive, etc., represent assets and liabilities and are not transferred at all, although they are balanced every month.

We now come to the book-keepers’ bug-a-boo, the “Trial Balance”. This is a simple thing (to describe), consisting merely going through our ledger, taking the total of all the totals on the credit side of all our ledger accounts and seeing if this equals the total of all the totals on the debit side. If these totals do not agree, the book-keeper must run down the error and correct it. There are no rules for this procedure that would be of practical benefit. This trial balance does not necessarily mean that the ledger is correct, it simply proves that for every debit item entered a corresponding credit entry has been made; it does not prove that these entries have been made in the proper accounts.

A sample trial balance sheet, worked out by Mr. Parker, cashier of the Fort Slocum Exchange, is shown herewith.

After the ledger is balanced, we proceed to get out our monthly statement. If it is a case of an inspector, we can get all the data he needs by simply taking our statements since his last visit and combining the results shown by same.

The primary object of the monthly statement is to give the Exchange Council and the Commanding Officer a clear and concise understanding of the operations and financial standing of the Exchange. The statement, therefore, should be so simple in construction that it can be understood at a glance by anybody, regardless of their knowledge of book-keeping. Most statements submitted to Exchange Councils either show nothing or lead to a waste of time, due to the necessity for asking for explanations of obscure items. The statement should also contain such information as will be required by the Inspector. The form of statement here shown fulfils all of the above requirements and is a form approved by certified public accountants. It is divided into three parts, which will be discussed in their relative order.

This, Form 32, is shown in Fig. 31 and is almost self explanatory. Attention is invited to the scheme of segregating different classes of assets and of liabilities. A stock form of this nature would do for all Exchanges, regardless of their size, as there are sufficient blank lines to suit all requirements, but perhaps better satisfaction would be obtained if the form here shown be merely taken as a model and only those items be used as apply to the particular case in hand. Pains have been taken, in this form, to insert a sufficient number of entries to show clearly how any ordinary item should be handled.

Of course, the item, “Exchange building”, should be omitted if the building belongs to the Government and not to the Exchange. The item, “Cash Reserve”, covers the amount required by regulations to be set aside before dividends can be declared. Under the liabilities, there will ordinarily be no entries under “Funded Debt”; this entry merely shows how such items should be handled in case any should exist. “Commissions due” is the amount we owe for goods already sold on consignment; the same item under the assets refers to the amount due us for goods sold on consignment or commission. A declared dividend is a liability until it is paid. Outstanding coupons are also a liability. Under the deferred liabilities come any amounts that are payable at some future date, but are meanwhile bona fide debts owed by the Exchange. The term “Total Surplus” refers to the surplus at the end of the month in question, and, while not really a liability, it is put in this place in order to properly balance the account.

Figure 31, (Reduced in size)

Under this head, we show the changes in the net worth of the Exchange which have occurred during the month, this being, to all intents and purposes, a repetition of the Post Exchange Account in our general Ledger.

Under “Re-valuation”, take up any increase in the value of buildings or fixtures that may have occurred other than through the cash book (upon appraisal, for instance). Under “Adjustment”, take up any increase of amount owed us on any account, that is, if any account has been corrected during the month and the amount due us on this account has been increased, the amount of such increase should be taken up under the head in question. The net profits for the month are obtained from the Statement of Income and Profit and Loss, to be described later. All of the above items serve to increase our surplus or net worth, and hence, must be added to the net worth shown at the beginning of the month.

Under the deductions would come all amounts written off for depreciation; dividends actually paid; appropriations paid or put to the credit of any particular fund, such as the Athletic Fund; and all decreases in accounts owed us, caused by the adjustment of same.

After the above notations are made, the surplus at the end of the month is entered in the proper space in the general balance sheet. This surplus is the net worth of the Post Exchange, and should, of course, be equal to the balance of the Post Exchange account in the Ledger.

Figure 32, (Reduced in size)

This, Form 16, gives us a very clear and concise statement of the operations of all of our departments during the month. It is printed on the back of Form 32. It is filled in as follows:—

aEnter on the first line, the total sales for cash as shown by the footings of the respective debit columns in the cash book.

bOn the second line, enter the total coupon sales of the various departments shown by the footings of the respective columns of Form 26 (Fig. 17).

cOn the third line, enter the total charge sales made by each department as shown by the footings of the respective columns of Form 7 (Fig. 6).

dAdd the above, both horizontally and vertically and see if the grand totals check.

eEnter on the fourth line all credits given during the month.

fSubtractefromd; the remainder shows the net sales made by each department during the month and should be entered in the proper spaces.

gUnder “Inventory ... 1st”, is entered the cost price of all merchandise on hand in the various departments at the beginning of the month, which amounts are obtained from the Inventory Book or Inventory cards as before described.

hUnder “Purchases” are entered the cost values of all merchandise sent to the various departments, that is, the difference between the footings of the Dr. and Cr. columns referring to each department on Form 13 (Cost Price). No cash discount is considered.

iUnder “Labor”, charge each department with its proper share of the wages paid by the Exchange. If any employee divides his time between two or more departments, his wages should be distributed between said departments proportionately. Book-keeper’s wages should be charged to Office. To counterbalance this charge, some Exchanges credit all cash discounts to Office instead of taking them up under Other Income. This is entirely proper, as is also the procedure of crediting the Office with mail order profits, etc. In the usual case, there being no accrued wages, the figures for labor are taken from the Labor column in the cash book.

jUnder “Maintenance”, transfer from the cash book all amounts paid out for

kUnder “Board”, should be entered all amounts paid out for board of employees.

lUnder “Expense”, enter the value of all expendable supplies issued to the various departments, such as paper bags, etc., or, as illustrated in the case of a Laundry, the cost of all soaps, starch, soda, etc.

mAdd items (g) to (l), inclusive, and enter the totals on the proper line. Also, add the items horizontally and check the grand totals obtained by these two operations.

nEnter under “Deduct Inventory”, the cost price of all articles found on hand in the various departments at the end of the month.

oSubtract (n) from (m) and enter the respective remainders in the spaces for “Cost of Goods Sold”. Check these remainders vertically and horizontally.

pSubtract the Cost of Goods Sold from Net Sales and enter the remainders in the spaces for “Gross Profit”. Check results as before.

The lower part of this form is made out as follows:—

aUnder “Cash Discounts” (unless credited to Office as before explained), enter the total of the Discounts column in the cash book.

bCash in excess of daily checks is self explanatory.

cUnder “Goods Sold on Consignment”, should be entered all such sales actually made during the month.

dMiscellaneous credits is self explanatory, being for such items as junk, receptacles sold, etc., as are not credited through the stock records.

eEntrance fees cover all payments by organizations joining the Exchange.

fInterest on Bank balances is self explanatory.

gLost Accounts collected refers to amounts that have previously been dropped from the books as lost, but have afterwards been collected.

hUnder “Income not otherwise accounted for”, is entered the amount that will make the books balance. As it is impracticable to give precise weights on bulk merchandise and as mistakes will sometimes occur, the books will never balance exactly and all discrepancies are thrown into this item. As an example, suppose we unintentionally give short weights on our sales of, say, crackers. At the end of the month, we will have more money on hand than our sales would call for, and such excess is taken up under this heading. If, as sometimes happens, there is a deficit (for example, caused by melting and wastage of ice) it should be taken up under the “General Expense” side of this form. It should be noted that this item cannot be filled in until the General Balance Sheet is made out.

i“Freight and Express Out” refers to transportation charges on goods returned to our creditors or sold to our customers.

jUnder the item, “Insurance”, should be entered the total premiums paid out during the month, but not the pro-rata share that is charged off monthly.

kUnder “Paid on Consignment”, should be entered the net amounts paid to our creditors for the goods sold by us.

lTo the Total Gross Profit, add the total Other Income, from this amount, subtract the Total General Expense and the remainder is the net profit for the month; it should be carried to the Surplus and Adjustment part of the general balance sheet.

Figure 33, (Reduced in size)

A thoroughly satisfactory form for pay rolls is shown by Form 2 in Fig. 33. The Recapitulation at the bottom of the form is for the purpose of distributing the cost of labor among the various departments when wemake out our statement of income and profit and loss. If employees are not paid up to date, that is, if a part of their pay due is withheld, this form allows such information to be recorded. In some cases, it has been found practicable to pay off three times a month, especially in the case of civilian employees. In any case, all hands should be paid promptly at the last of the month, thus getting all of these wages out of the way and avoiding the necessity of any reversing entries or other expedients to show the real operations of the Exchange. If any wages due the employees are not paid by the end of the month, these amounts become “accrued wages” and must be carried as such.

This is done by some employee designated by the Exchange Officer; sometimes it is done by the Exchange Officer himself. It is sometimes prescribed by the Council that when organizations (shareholders in the Exchange) order articles not in stock, the selling price shall be actual cost to the Exchange of such articles. This cost would, of course, include any transportation charges, etc., that were incurred, but the Exchange would get the benefit of all cash discounts. It is also prescribed in some instances that persons not stockholders in the Exchange who order merchandise that is not in stock shall be charged a commission of 5%. Both of these rules are sound, because, in the first case, any profits made by the Exchange would simply revert in dividends to the organizations from which the profits were made, assuming that all organizations transacted the same amount of this kind of business. If they did not, it would still be unjust to penalize one company for patronizing the Exchange by taking from it money for distribution in dividends to other companies, regardless of the amount of patronage the latter gave the Exchange. The second rule is sound because the transaction is a quick sale, and the money of the Exchange is tied up in stock for the minimum length of time. The selling price in the above cases is, therefore, very easily determined.

In figuring out the selling price for the ordinary run of goods, the process, while different, is never very difficult. We must base our calculations on the smallest value used in coupon sales, except in the case of staples sold only to charge customers. Ordinarily, the smallest purchase that can be made with coupon books is five cents. We should, therefore, in every possible case, make our selling price a number divisible by 5. Cheap articles may be sold “2 for 5”, etc. It is a bad policy to sell articles for 4 or 9 cents and have the clerk hand back change when a coupon sale is made.

Articles that can be quickly and easily sold can be handled at a small margin of profit, but articles that may prove to be “stickers” or those representing a considerable investment should be made to pay a larger profit.

In this connection, the general policy of the Exchange may be made to take one of two trends. The first policy is to sell all articles at the minimum price consistent with making the Exchange self-supporting. In this case, the amounts paid to the organizations in dividends will be proportionately small, and consequently, the various companies will receive little money to spend on their messes, athletics, etc. This plan would be of considerable benefit to such customers of the Exchange as are not stockholders.

The other policy is to charge about the same prices as obtain in the stores of nearby towns. In some cases of isolated posts, the prices could be put even higher. This plan would result in larger dividends paid to the companies but might entail the loss of customers, especially in these days of mail-order and catalogue houses. This latter policy is upheld by many able authorities, especially since the passage of the “anti-canteen” law. According to one of the most able officers the writer has ever known, this policy was stated about as follows:—“We should charge as high a price as the traffic will stand. I do not want my men to spend their money in town, for obvious reasons. I want them to spend it where they themselves will get the benefit of the profits made on their purchases. Therefore, give them good value for their money—as good as they can get anywhere—but donottry for low prices anddomake the Exchange so attractive that they will naturally gather there and patronize it.”

In view of the above facts, and knowing the general policy of the Exchange it is not difficult in the ordinary case, to fix a selling price for our goods. We simply add the cost of transportation to the cost price of the goods, add the desired profit and this gives us our approximate selling price. In some Exchanges, other items of overhead charges, such as clerk hire, depreciation, etc., are taken into consideration in fixing the selling price. There should be ample space in the right hand columns of Form 28, the receiving record, in which to figure the selling prices.

One of the results to be tried for in every Exchange is QUICK SALES. It is a serious mistake to keep money tied up in stock any longer than is absolutely necessary. A vivid illustration of this point is obtained by taking the case of, say, an Italian banana vendor on the street. Let us assume that he buys a bunch of bananas in the morning for $1.00. We may rest assured that he will have sold out by evening; it is a certainty; he is too good a merchant to do otherwise. Even supposing that he had a bad day, and was compelled to close out part of his stock in the evening at cut prices, he will have realized anywhere from $1.50 to $2.00 on his sales, thus giving him from 25% to 50% gross profit. At this rate, he will turn over his capital at least 25 times during one month, thus transacting a total amount of business 25 times greater than his actual net resources, and securing a profit equivalent to that of the greater amount. This is the ideal toward which the Exchange should strive.

In this connection, do not state your profits as a percentage of the COST price of your goods, but of the SELLING price. In other words, if an article costs the Exchange $10.00, do not add one dollar to this for the selling price and then imagine your profits will be 10% of your sales.If you desire 10% profit, then the cost must constitute 90% and you must sell the article for $11.11 in order to make 10% on the sale. Take a pencil and figure it yourself. A very good talk on this subject (and many others of interest) is given in “A Better Day’s Profits”, published by the Burroughs Adding Machine Company.

Another most excellent book containing many hints which would prove of value to any Exchange Officer is one entitled, “Where Have My Profits Gone?”, published by the American Sales Book Company of Elmira, New York.

Many Exchanges run laundries and while no attempt will be made here to show how a laundry should be handled, it is thought proper to explain how the books should be kept. The handling of actual laundry work can be learned only by experience and it is an exceedingly difficult task to prevent a flood of complaints unless careful supervision and checking is in force.

As far as the Post Exchange Books are concerned, the Laundry need furnish but three items:—

Back to Index Next