Commercial agencies usually call this condition a lack of capital. The real cause, however, is not so much lack of capital as it is too much business on credit. This does not mean that credit should not be sought; or that all business should be done on the capital actually invested in the concern. Credit is necessary to commercial life. Very few business concerns are so strong financially as to be able to do without credit.

Credit should be sought and used intelligently, and it is not a hard matter for any battery service station proprietor to keep his credit good. All that is necessary is to take a few precautions, and observe in general the principles of good business. The first requisite, of course, is to accept no more credit than the business will stand. Sometimes it is possible to secure enough credit to ruin a business. Its present condition and future prospects may appear so good as to warrant securing all the credit possible under the circumstances.

It requires courage to limit the growth and the temporary prosperity of a business by keeping down the credit accepted. It is very hard to refuse business. It is difficult not to make extensions when there is enough business in sight to pay for the extensions. But the acid test of whether or not you should extend and borrow is not the amount of business that can be done, but the amount of money that can be spared. The mere fact that you have the money or can get it does not in the least mean that it should be spent.

And the reason for this is that, in order to keep your credit good, you must meet all obligations promptly. Nothing has a more chilling effect on any business than failure to meet all indebtedness when due. As soon as additional time is requested in which to meet obligations, your credit rating begins to contract; and if, at the same time, your credit has been overexpanded the business is placed in a most difficult position. More than one concern has gone to the wall when faced with this combination.

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. 1% cash, 30 days net . . . . . . . . . . . . . . . . . . . 12 % per year
  2. 2% cash, 30 days net . . . . . . . . . . . . . . . . . . . 24 % per year
  3. 3% cash, 30 days net . . . . . . . . . . . . . . . . . . . 36 % per year
  4. 5% cash, 30 days net . . . . . . . . . . . . . . . . . . . 60 % per year
  5. 8% cash, 30 days net . . . . . . . . . . . . . . . . . . . 96 % per year
  6. 1% 10 days, 30 days net. . . . . . . . . . . . . . . . . 18 % per year
  7. 2% 10 days, 30 days net. . . . . . . . . . . . . . . . . 36 % per year
  8. 3% 10 days, 30 days net. . . . . . . . . . . . . . . . . 54 % per year
  9. 5% 10 days, 30 days net. . . . . . . . . . . . . . . . . 90 % per year
  10. 8% 10 days, 30 days net. . . . . . . . . . . . . . . . 144 % per year
  11. 1% 10 days, 60 days net. . . . . . . . . . . . . . . . . 14.4 % per year
  12. 2% 10 days, 60 days net. . . . . . . . . . . . . . . . . 28.8 % per year
  13. 3% 10 days, 60 days net. . . . . . . . . . . . . . . . . 43.2 % per year
  14. 5% 10 days, 60 days net. . . . . . . . . . . . . . . . . 72 % per year
  15. 8% 10 days, 60 days net. . . . . . . . . . . . . . . . .115.2 % per year

  1. 1% cash, 30 days net . . . . . . . . . . . . . . . . . . . 12 % per year
  2. 2% cash, 30 days net . . . . . . . . . . . . . . . . . . . 24 % per year
  3. 3% cash, 30 days net . . . . . . . . . . . . . . . . . . . 36 % per year
  4. 5% cash, 30 days net . . . . . . . . . . . . . . . . . . . 60 % per year
  5. 8% cash, 30 days net . . . . . . . . . . . . . . . . . . . 96 % per year
  6. 1% 10 days, 30 days net. . . . . . . . . . . . . . . . . 18 % per year
  7. 2% 10 days, 30 days net. . . . . . . . . . . . . . . . . 36 % per year
  8. 3% 10 days, 30 days net. . . . . . . . . . . . . . . . . 54 % per year
  9. 5% 10 days, 30 days net. . . . . . . . . . . . . . . . . 90 % per year
  10. 8% 10 days, 30 days net. . . . . . . . . . . . . . . . 144 % per year
  11. 1% 10 days, 60 days net. . . . . . . . . . . . . . . . . 14.4 % per year
  12. 2% 10 days, 60 days net. . . . . . . . . . . . . . . . . 28.8 % per year
  13. 3% 10 days, 60 days net. . . . . . . . . . . . . . . . . 43.2 % per year
  14. 5% 10 days, 60 days net. . . . . . . . . . . . . . . . . 72 % per year
  15. 8% 10 days, 60 days net. . . . . . . . . . . . . . . . .115.2 % per year