Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-10-20
CREDIT EXTENSION
PROBLEMS S|FTED
Greater Care Is Urged in
Survey Made by Com
merce Department.

Greater care in credit extension as q
means of controlling bad-deht losses is
a problem of primary Importance In
profitable wholesaling Of electrical
goods, according to the Commerce De-
partment's reports of its latest cost
and operations analysis, Problems of
Wholesale Electrical Goods Distribu-
tion," recently made public.
Bad-debt losses were found to be
wholly responsible for the marked in
crease in operating costs-from 1853
per cent to 28.1 per cent of sales
shown by the business over the three
year period covered by the departments
survey. Omitting these losses, it is
further revealed, ether operating ex-
penses show a slight down trend in
the same length of time.
Operations Analysed.
The study Of electrical goods whole
sailing was made by the Commerce De-
partment at the request of the National
Electrical wholesalers Association It
covered the operations of single large
establishment handling a wide range
Of electrical goods, including construc-
ton equipment, industrial goods radio
and accessories and miscellaneous ap-
planes and dealing In trade terri
tory extending into three States.
The credit difficulties of this concern
were found to result largely from con-
cessionS of liberal credit terms allowed
in an effort to build up sales volume
in this territory. The classes of Gus
toners served varied more widely than
with most types of wholesale houses,
ranging from contractors, retailers and
dealers to industrial concerns and
municipalities. and increasing the prob
lens Of profitable customer selection.
Forty-two different electrical COM
modify groups were handled by the
wholesale house, the report shows. OF
these % showed net profit and 20 a
net loss. Commodity groups, which
were responsible for considerable part
OF the loss sustained. included conduits
and fittings. wiring accessories and fuses
and accessories. Construction mate
rails and heating appliances were also
In the loss column. The commodity
groups registering the greatest net
gains were radio and accessories, safety
switches, certain cables and fittings and
the standard types of electric lamp.
Chief Factions Given.
The principal factors tending to
throw commodity group into the loss
column, it is shown, were, in the order
VI IIleIT lHlpOr lance, nlgn investment
and storage charges resulting from ex-
cessive inventory high cost of routine
selling and clerical effort resulting from
small unit sales, and in some cases
extra costs of physical handling.
In few instances commodity groups
appeared to fall into the Improbable
class because of inadequate gross mar
gin. Net profit was possible, however.
on rather narrow margin, since 10
out of the % profitable commodity
groups were handled on a gross profit
less than the average for the business
as whole.
serious small-order problem was
found to exist. with 70 per cent of all
orders failing to return profit when
charged with their share of operating
costs.
Seventeen other important findings
are included in the report of the sur
vey results, ranging from cost of han
ding the varied commodity groups to
rate Of tournover and average sale for
each. The study also outlines the cost
analysis system employed in making
the survey. which. it is held, should be
Of value to merchants in building a
similar system applicable to their own
needs.