The Pamphlet Collection of Sir Robert Stout: Volume 30
Figures to Prove Facts
Figures to Prove Facts.
Let us see what are the advantages of paying cash for everything one consumes, or buys for sale again.
Interest is saved. This is an item that seldom figures in the calculations of the average man in a small business. Strange as it may seem to say so, yet it is true that fully one half of the small traders do not take into consideration the annual value of the money that is locked up in their concerns. They pay interest for every bit of the accommodation which they receive either from the merchant, or from the bank, yet they are willing to give unlimited credit to their own customers and charge nothing for that accommodation whatever. Perhaps the following may be taken as a fair sample of a country storekeeper's transactions, on the scale of £100:—He will buy £100 worth of goods from a merchant. Three months credit are allowed and he gives a bill payable at the end of that time for £100, together with the bank rate of discount, say 9 per cent. In marking the goods for sale, he uses the invoice which came with them, and adds his profits to the prices stated in it. For the sake of convenience, we will suppose that the average profit on all the goods amounts to 20 per cent. Then our typical friend will argue thus:—I paid £100 for the goods, and since I sell them at an advance af 20 per cent, my profit is £20, which is very fair. And as I turn over £2000 worth of stock every year, therefore my income is £400. But let me state this gentleman's affairs for him, and then we will see if there is anything in the short-credit system which I want to see introduced in the colony of New Zealand:—
page 4Statement of account 'with reference to business of A.B., a country storekeeper, per £100 of turn-over.
Dr. | £ | s. | d. |
---|---|---|---|
To cost of goods from merchant | 100 | 0 | 0 |
Interest on Bill at 3mos. at 9 p.c. | 2 | 5 | 0 |
Interest on purchase money lying locked up in business, supposing that an average credit of 12 mos. be given to customers viz. 9 p.c. on £100 for 9-mos | 7 | 15 | 0 |
Allowance for bad debts &c., 10 p.c. on £120 | 12 | 0 | 0 |
Total | 122 | 0 | 0 |
Cr. | £ | s. | d. |
---|---|---|---|
By Profit on Sales | 20 | 0 | 0 |
Capital Recouped | 100 | 0 | 0 |
Actual Loss | 2 | 0 | 0 |
Total | 122 | 0 | 0 |
Balance of Loss | 2 | 0 | 0 |
Dr. | £ | s. | d. |
---|---|---|---|
To Cost of goods from merchant | 100 | 0 | 0 |
To Interest on capital lying idle for 4 months, 9 p.c. on £100 | 3 | 0 | 0 |
To Balance profit | 17 | 0 | 0 |
Total | 120 | 0 | 0 |
Cr. | £. | s. | d. |
---|---|---|---|
By capital recouped | 100 | 0 | 0 |
By Profit on sales | 20 | 0 | 0 |
Total | 120 | 0 | 0 |
These figures may be taken as sufficiently accurate to show the difference that the item of "interest" makes in the business of the world. And it must be added that this item can never be eliminated, for whether the trader works on his own or on borrowed money, that money is still worthy of its hire, just as much as the laborer who does his eight hours work every day.