Factors of Successful Management
Certain points must be watched in all systems and under all conditions. Since the total net profits or losses are determined largely by the average turnover of circulating capital invested in the merchandise, the control of the quantity of merchandise, as well as the price, is a question which must have very careful attention and intelligent supervision. The stock on hand must be that quantity which will insure a supply adequate at all times to meet the demands of the trade, and which at the same time will be the minimum necessary to accomplish such a result. Each article turns in accordance with certain fixed principles. Certain goods turn faster than others, but there is a general relation between the rate of turnover and the profit per turn which should be carefully watched.
In the last analysis the success of every branch store system depends upon three things:
- 1. A fair gross profit on sales, augmented by
- 2. A proper rate of turnover on the merchandise carried, and
- 3. Economical management.
Since expenses are a more or less fixed item, their relation to the total volume of business transacted must have the constant attention of the manager. Statistical charts made up from the reports sent in by the various branches, with summaries of total results, compared either by territories or by branches or by product will show to the manager the past history and also the present trend of the business as a whole or in parts. From these charts he is able to form an intelligent basis for inaugurating future policies of control.
Main Principles of Branch Accounting
The underlying principles upon which branch store accounting is based are very simple, but the superstructure will be simple or complex according to the nature of the business and the information which the head office requires for its accounts and records.
The main points to be kept in view in installing a system of accounts are to insure:
- 1. Control or supervision by the head office.
- 2. Separate results for the trading of each branch.
- 3. Facilities for centralizing and comparing such separate results.
In discussing the question of branch accounting any treatment of the problems peculiar to it is so dependent on the particular system employed that only a very general statement of principles can be made unless the comment is confined to a particular system and this might not be relevant to all systems. There are, however, certain principles which apply fundamentally to all systems. The question of the degree of control desired by the head office and the resulting information which must be given by the branch to the head office governs largely the detailed ramifications of general principles which will be necessary. Also the amount of information as to the results of the business done at each branch which it is desirable for the branch management to know has an important bearing on the manner of keeping the accounts. Sometimes it is not desirable that the branch manager should know the amount of profit which his branch is earning. While, of course, it is impossible to keep a shrewd manager in entire ignorance of the results of his management, yet the exact figure of profit earned by his branch can be kept from him if the books are handled properly. It is purposed here to develop by statement and illustration most of the problems which are peculiar to branch and agency accounting.