Salesmen’s Commissions and Efficiency Records.—Salesmen are often paid a commission in addition to salaries. Where the commission is based on the amount of sales, the sales ticket is made use of as the source of information for computing the commissions earned. To this end the tickets are sorted according to salesmen, and a record sheet, either separate or as an adjunct to the sales journal sheets, is filled in with each salesman’s total sales for the day. These totals should prove against the salesman’s record in the back of his book of sales tickets. At the end of the month his total sales are shown by his record sheet and his commission is determined therefrom. Of course, the total for all salesmen as shown by these sheets must equal the total sales for the period.
If the commission, often known as “spifs” or “P. M.’s,” is allowed only on certain classes of sales in order to encourage the movement of old stock, each sales ticket should indicate the amount of premium or commission due, so that a record can be made without the necessity of depending on the records of the individual salesmen.
Salesmen’s records besides being used for the particular purpose of computing commission, or bonuses due them, serve a wider object in that they contain fairly complete and reliable data in regard to the value and efficiency of individual salesmen. For this reason such records should be kept at all times, no matter whether a commission or bonus system is operated or not. Whenever an increase in a salesman’s salary is considered or when the sales force is to be decreased in number, these efficiency records are a valuable aid in making the right decision.
CHAPTER XLVIII
CONSIGNMENTS
Definition.—When goods are shipped to another party to be sold by him for account of the shipper, the transaction is called a “consignment.” In its original sense, to “consign” means to seal, sign, mark, or label in a formal way. In commerce this term has come to signify goods sent for sale through another party. Usually such goods are marked or labeled to distinguish them from those belonging to the consignee. The owner or sender is designated “the consignor”; the selling or receiving party “the consignee.” Sometimes the word “shipment” is used by the consignor to designate the goods sent away for sale, and the word “consignment” to indicate the goods received by the consignee. Differentiation on this basis is convenient, but the terms “consignments-out” and “consignments-in” are more descriptive and will be used here.
Legal Status.—Before treating the accounts required to record consignment transactions, it is well to understand the legal relations between the consignor and consignee. The general law of bailments and of agency applies in a restricted sense to consignments. A bailment is defined as, “A delivery of goods for the execution of a special object, beneficial to the bailor, the bailee or both, upon a contract expressed or implied, to carry out this object, and dispose of the property in conformity with the purpose of the trust.” Agency is the term used to indicate the legal relation between a principal and the agent who represents him. A person appointing another to act for him in his dealings with third parties is called the principal. The one appointed to represent the principal is the agent. A bailment is therefore a special class of agency transactions with particular rules governing the safe-keeping of the goods of the principal in the possession of the agent. In the case of a consignment, the consignor is the principal and the consignee the agent. The relation of the consignee to the consignor as regards the care to be exercised in handling the consignor’s goods is a bailment relationship.
The Broker.—A broker, although he acts as agent, usually is not a consignee. He acts “as a middleman, bringing people together to trade, or trading for them in the private purchase or sale of any kind of property, which property, ordinarily, is not in his possession.” The charge for his service is usually in the form of a commission, sometimes called brokerage. There are several classes of brokers, named according to the kind of commodity they deal in; for instance, there is the exchange broker, the note broker, the insurance broker, the stock broker, the real estate broker, the merchandise broker, etc.
The Factor.—Other types of middlemen are the manufacturer’s agent, who is a broker or sales agent, effecting sales usually by means of samples; and the factor or commission merchant who actually handles and sells the goods of his principal. The chief distinction between the broker and the factor is that the broker sells goods in the name and for the account of his principal, but the goods are delivered directly to the purchaser by the principal, who also collects the account; whereas the factor has the goods of his principal in his possession and sells them either in his own name or in the name of his principal.
The factor may operate under a specific contract with his principal, covering a single consignment, or under a general contract governing all consignment transactions between the two parties. Again, there may be no formal contract between them, in which case the law sets up a contract relationship based on trade usage and customs in any particular line. Where the factor operates under a specific or general contract, certain points may arise which are not provided for in such contract, and on these points trade custom governs.
Duties of the Factor.—Barring specific instructions, the factor may conduct the consignment transactions for his principal on the same basis and in the same general way as he would conduct them were the goods his own. In other words, he is expected to exercise the same care in the handling of consignment goods as he employs in handling his own property. In selling goods consigned to him he may extend credit to the buyer if it is the custom in that particular line to do so, and he must exercise due care as to the rating of the customer. He must push his collections with ordinary diligence. He may warrant the goods sold if that is customary. He can give good title to goods sold, and this title may even be better than the one possessed by the owner of the goods. A bona fide purchaser who does not know the principal is protected in a sale made by a factor even if the factor exceeded his authority.