New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-08-26
Credit Increased
By Wider Use of
Trade Acceptance
Financial Needs of Nation
Require Adoption of New
System, Says Banker.

Il is most important for business
men and bankers in this country 70
learn how and why 10 use the trade
acceptance" in the opinion Of Robert
Il. fireman, deputy governor OF the
Federal Reserve Bank OF New York,
because OF the certainty that the
United States will soon have greater
demand made upon it than ever be-
fore for the extension Of credit, not
only for domestic trade, but to fur
nish credit 70 other nations both dur
ing the war and in the period OF re-
construction 10 follow. To meet those
demands it is essential, Mr.. fireman
says, that all our credit resources
should without delay De understood,
developed, made available and utilized.
To assist in spreading this under
standing Mr.. fireman has issued a
timely booklet, explaining what the
trace acceptance is and the advantage
to be gained from its use. He is
strongly in favor Of substituting the
trade acceptance system Of credits for
the system Of open book accounts now
generally employed in the United
States.
Defect in Business System
"The open book account" to quote
Mr.. fireman, with its losses of inter
est on overdue accounts, of waste and
loss from bad debts, has been a defect
ir our business system and has made
the cost of distribution from manu-
facturer 20 consumer unnecessarily
expensive.
When a buyer fails TO pay his bills
al a specified time he is forcing the
seller 70 carry the account on his own
capital with no compensation for this
in the selling price of the article sold.
Each day that passes after maturity
means a shaving down Of the sellers
profit. A generous credit granting in
this country has dulled commercial
rleu regarding the Importance Of meet
ing obligations promptly. 1t IS well
fer the business man in considering
the value Of the trade acceptance in its
relation to his own business to bear
in mind the bigger and broader view,
and not to limit mis- horizon to his own
aFairs.
"The signing Of trade acceptance
by the buyer is no different in its
moral effect than the signing OF the
older specifying the kind and quality
cf the goods. In signing an order,
whether b. letter or otherwise, the
buyer obligates himself 20 purchase
he quality and quantity of the goods
specified. the date Of shipment and all
the other details; and in signing the
trade acceptance he simply confirms
the agreement as 70 the terms Of pay
ncnt.
Better Methods Needed
THE trade acceptance is form Of
commercial paper, the use OF which will
do more TO increase American financial!
efficiency than almost any other factor,
whereas the open DOoA account sys'
.en is wa,eful and inefficient. Com
petitiou has in the last few years been
extensive and seems 70 be growing.
leading often 70 unsouad business
methods. while the cost Of doing bust
ress continues 20 mount; al. OF which
emphasizes the necessity for better
business methods and more careful. con-
sideration and less waste.
Besides, We are now living in tie
L. 80
caused by war. and too great emphasis
cannot be laid on the Importance 70
manufacturer and distributor during
This period OF a proper study and an
gIysis of his own business methods D
make them more efficient and econom-
zeal and 20 put himself in a position 10
meet the competition and business
which will undoubtedly follow the close
of the war. Nothing will assure this
more than improvements in our meth
DDS OF extending credit.
Would Save Capital
elimination Of open book accounts
and substituting therefor trade accep-
tances would reduce the necessity Tor
an excessive amount Of capital IN use
By manufacturer and jobber and would
save the interest on q large proportion
of the credits outstanding now in the
share Of book accounts, "a the trade
acceptance can be discounted az the
bank, and therefore the necessity OF
Furnishing the credit would fall upon
the banker. whose function 1t is to sup
piy and sell credit. rather than upon
the merchant or manufacturer.
at is difficult in a period when credit
can be easily secured at low rates and
- - saokin, loanz 0roperlv 20