Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-06-23
Credit Cost in Grocery Business
BY FREDERIC J. HAsKIN.

up to $4,000 instead of $4,000.
So long, the bureau claims, as the
goods are not paid for they belong to
the grocer, even though they have been
transferred from his shelves and con-
sumed. Nevertheless. he is the real
must continue to be regarded as q part
Of his stock in trade. So. unless he
bases prices on the total inventory,
wherever 1t Is, his calculations win be
wrongly based
In fact, the bureau shows, It Is even
more costly to furnish goods on credit
basis than on a cash basis. II the store
bookkeeper must be hired, and there
are labor, postage and stationery costs
In connection with preparing and send.
ing out periodical bills The older the
bill the more 1t Is costing to sell the
goods represented. Every month which,
goes by adds to the cost Of selling, the
price Of sending out a fresh hrst-of-
the-month bill, and also the loss on
money invested. Indeed. experts l1aves
figured out that a grocer Is fully justi-
fed in adding 31a per cent to barely
cover these charges on regular 30-day
accounts.
Should Charge for Credit. -:
The bureau took the case Of busy,
grocery making a net sales profit of
eight-tenths Of per cent on each sale
considered q good profit, provided
the total turnover is adequate. This
figure, converted to percentage basis.
showed that a customer who delayed
more than two months in paying his
bill completely wiped out the grocer's
profit. The figures show that q third
Of all credit accounts are In arrears
well over this length Of time. So there
Is q dead loss on one-third Of all sales
on such credit. This is pretty certain
to spell ruin for the grocer who permits
such situation long to endure. These
figures are based on expectation Of full
eventual payments. Inasmuch as many
accounts have to be written OF as bad
debts, the loss Is still greater.
The bureau makes the definite sur-
gestion that grocers should arbitrarily
add at least 5 per cent to the price OF
all goods sold on such credit terms to,
take care Of these exigencies It Is the
rare exception to find a grocer rich
enough to be his own banker and
banker for his customers. too. The
grocer himself must borrow from a
oank In order to pay the bills he owes
wholesalers and jobbers. Obviously,
the grocer must pay interest TO the bank
on his loans.
In making suggestions to better the,
lot OF the Independent grocer, the Gov
eminent. to use rather cold terms. can
didly advises him to be hard-boiled"
IN the matter Of granting credit. THE
retailer should consider applicants for
credit from the standpoint Of ability.
to pay. rather than the seriousness
OF their need for credit" Is the clear
statement OF the bureau. Merchants
should watch bills and shut down rigid
ly when they become overdue or become
disproportionately large for even q short
period. Use of local credit-investieat-
ing agencies also Is recommended. The
grocer Is urged to do this not only to
protect his own business, but in Justice
to his substantial and reliable custom
ers who pay regularly. Otherwise, he
will have to charge higher and unjust
prices to the people who pay promptly,
making them, in effect, bear the bur-
dens Of the others.
! The chain grocery stores which do
not grant credit have worked changes
in the retail grocery field. For the
very reason that they extend no credit
they can sell at lower prices. By
limiting and strictly supervising the
credit aspect Of retailing groceries, the
independent grocer has about his only
chance Of continuing as an important
] factor In the business.