Proper Bookkeeping Records
The principal difficulty in this matter of the proper use of credit will lie in poor bookkeeping records, making it impossible for the proprietor to know very much about his financial position or operating condition day by day and week by week and month by month.
Many service station proprietors figure what they owe once a year only, when they inventory, and many do not keep a permanent record even then; and usually those who are neglectful in this regard are the ones who owe the most, proportionately, who do not take their discounts, and who do not progress.
The following table covers the average discounts allowed in various lines. If you study it, and find out how much it costs you to lose discounts, you will at once realize the necessity for the proper sort of bookkeeping records.
1% cash, 30 days net................... 12 % per year
2% cash, 30 days net................... 24 % per year
3% cash, 30 days net................... 36 % per year
5% cash, 30 days net................... 60 % per year
8% cash, 30 days net................... 96 % per year
1% 10 days, 30 days net................. 18 % per year
2% 10 days, 30 days net................. 36 % per year
3% 10 days, 30 days net................. 54 % per year
5% 10 days, 30 days net................. 90 % per year
8% 10 days, 30 days net................ 144 % per year
1% 10 days, 60 days net................. 14.4 % per year
2% 10 days, 60 days net................. 28.8 % per year
3% 10 days, 60 days net................. 43.2 % per year
5% 10 days, 60 days net................. 72 % per year
8% 10 days, 60 days net.................115.2 % per year
Then there is the matter of expenses; rent, wages, insurances, taxes, depreciation, freight and express, and all the other miscellaneous items that go to make up the total of your cost of doing business. Expenses eat up a business unless controlled. They ought to be so analyzed that you are able to place your finger on items which appear too large, or uncalled for, or which need explanation.