The size of a company's statement is oftentimes all out of proportion to the size of the business; some of the smaller industries present reports of their operations so voluminous in size as to rival that of the United States Steel Corporation, or that prepared by the actuary of one of the mammoth insurance companies.
It should be remembered that a busy manager is more interested in economical management than in wholesale bookkeeping, and has but little use for a formidable array of figures, except in so far as they show general results. Such a statement, when presented to him, is usually tossed aside to be examined later, while if it were condensed and served up to him in a more attractive form, it would probably be eagerly examined and studied with interest. A multitude of figures is more apt to confuse than to enlighten the situation, is a waste of an accountant's time, and, being a source of displeasure to the employer, thereby defeats the very object for which it was made.
Detailed records should always be kept, and in such shape as to be immediately available when called for, but it is hardly necessary to incorporate them in a tabulation intended to show results. It will be well, in submitting figures to the manager, to always bear in mind an imaginary notice over his desk: "This is my busy day; be brief." It is safe to say that a good statement should contain as few figures as possible to intelligently show the desired result.
30. Tabulate the Essentials. The data for a good statement should be well chosen. A manufacturer wants results. He is in business for profit making, and wants to know the true condition of his shop operation and the expense, in a concise presentation of facts, and has but little use for comparisons beyond those necessary for showing him the result of his management. He is not often found to be a philanthropist, eager to load down his expense account so that his clerical assistants may use his time to pursue their studies in the science of accounting. He wants to know what his costs of production and the expense of operation are, and where they may be cut, and it is as much to an accountant's interest to show him this in a clear and self-explanatory statement as it is by an elaborate and dazzling array of statistics to show his own ability in handling figures.
A manufacturer will doubtless obtain just as much solid comfort and real pleasure in knowing that special tools recently made have enabled him to clip a few cents off the cost of one of the units of his product, and that economics in his shops have reduced his operating expenses 2% or 3%, as to be furnished the startling information that his Printing and Stationery account is .7148% of his General Expense, his Insurance, 6.2714%, Postage, .5218%, Telephone and Telegraph, .6538%, and so on down the list.
The illustration used is not an imaginary one either. Statements are occasionally seen wherein all the individual items of expense are thus figured and the percentages carried out four decimal places. Of what conceivable use can such figures be? The only imaginable excuse seems to be that the accountant hoped to lower these percentages in the next period—possibly the third and fourth figures in the decimal—by bringing pressure to bear on the telephone company and on the insurance underwriters sufficient to get the rates reduced, and by telling the mail boy he must use less postage stamps. Rather a peculiar method of cutting expenses, and it is quite safe to say that the same effort applied in other directions would be productive of far more satisfactory results. A good statement, then, should be clear, concise, and complete.
31. What the Statement Should Show. The two elements in a factory, in which the management is directly interested, are the productive output and the operating expense. The former should be pushed to the utmost limit, while the latter should be trimmed at every point possible; and it is readily seen that the point of greatest efficiency is reached when the plant is producing at its full capacity. A factory with a complete organization is operated at a heavy expense when running at but 50% of its full capacity. These two elements, output and operating expense, are so closely related that a change in one immediately affects the other, and the relationship between the two, which is expressed in a percentage, is either raised or lowered according to the character of the change.
(a) If the operating expense remains stationary and the production increases, or
(b) If the operating expense is lowered and the production remains unchanged, or
(c) If the output increases at a greater rate than the expense increases, or