The Richmond Virginian. (Richmond, Va.) 1910-1920, 1918-01-29
TELLS OF ADVANTAGES
OF TRADE ACCEPTANCES

The arguments in favor of the use
az trade acceptances in place OF open
book accounts should be conclusive II
She man who believes in doing bust
ness upon sound principles and IN
definite terms, says the National City
bank OF New York, in its January
bulletin il points out that the exc
cutiou of an acceptance converts the
account INTO "a negotiable instrument
which d a definite. tangible asset is
much superior TO d mere book charge.
and that. while it does not prevent
the buyer from making subsequent
representations RS to errors in an in
voice or defects III the quality OF
goods. II brings out a prompt dispo
sition OF such questions, as in case
where cash discount is taken An
acceptance being n promise TO pay on
- specified date. and as the paper is
likely 20 he IN other hands at matur-
ity there is a general understanding
that punCjual payment Is expected and
required.
over and above the fact that the
convention of book accounts into ae-
ceptances will prom ote sound business
Eletlrods there Is the larger couEidera-
ton that 1t win more effectively utti-
ize the credit resources Of the country
.and tend 20 separate the banking
function from the merchandising
function" declares the City hank
After a sale has been Effected to a
responsible party. and nothing re-
mains Of the transaction hut a short
credit, there Is ppblic economy in util-
izing bank credit. /, is the business
OF banks to trade in credit as ii IS the
business of merchants TO trade in
goods, and the banking system Is a
reservoir in which the temporarily
idle credits of the country accumulate.
Among the thousands OF banks there
are always many who do not have use
for all their funds locally. The fed
eral reserve. board rs IL deliberate
policy has made the acceptance pre-
ferred form Of credit. The fact that
the Federal Reserve banks will redis-
count acceptances at the lowest rate 8
makes them a most desirable invest
ment for member banks, and there ts
reason to believe that there Will be a
steadily widening market for them as
all the advantages from their use be-
come generally understood. They
carry on their face the evidence which
the reserve banks require as to the
commercial character of paper offered
for rediscount. and this is calculated
to give them great mobility.
names on the market increases, trad
Ing will increase and banks may be
expected to resort to this class OF out
side paper to take up their idle funds.
The efforts of the federal reserve au-
thorities to build up a broad discount
market are deserving of the support
of business men and bankers. They
have given the lead. provided the out
let for paper OF this class and the
business Interests of the country
should cooperate.
"Of aourse, the fact that paper is
executed In this form will moi obviate
the necessity for close attention to
credit conditions and "A careful scru-
tiny of names IT will not make good
risks of poor names. but II win give
greater fiuidity to sound credit. and
in that way help the country to finance
it's needs In the period of financial
strain through which we are now
passing"
The bank goes on TO explain that
the acceptance is not urged as sub
stitute for the cash account. mo
doubt IT saws, ut is desirable TO have
the buyer, where practicable, finance
himself entirely Independent of the
seller, but In country where so large
Il volume Of trade is carried on upon
oren accounts it will not do to say
that no improvement short of the
complete adoption OF cash payments
is worth while. There is a large field
in which credit conditions can be i'm
proved by using the names OF seller
and buyer together. Both will be
benefited. and both WITH be prompted
to more scrupulous attention to sound
business methods In order to protect
their credit. ~