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.