Business - Eight General Causes Of Losses
( Originally Published 1912 )
There are a great many rules that might be made for detecting and preventing the loss of profits. The principal rules for such purposes are the following:
Buyer is Easy
1. The Buyer is too easy. He does not compare prices or goods or services sufficiently to give him a reliable basis for values. In other words, he takes too much for granted. He depends too much upon the man who is selling him. This habit is partly due to haste, which is a result of the lack of organization. It is also partly due to laziness. Be-sides, it is a human failing to desire to be well "liked," even by the firm which you are favoring.
2. The buyer's agent or representative may be in collusion with the seller, or the seller's agent or representative. This is a phase of business which is so ramifying and often so adroitly covered up, that nothing but "Eternal vigilance" can detect and prevent it.
3. Employees may be indifferent. This indifference may come from unjust treatment, or too low wages, or lack of example by the employer. It may also come from sympathy with each other; all conspiring to kill time so that none will lose his job.
4. Some of the employees may be dishonest. Oh! do not go up in the air over this. 'You would not be the first man who had his "heart broken" by finding that his trusted employees were digging into him steadily and abusing his confidence. Indeed, modern business is demonstrating that it is wrong to trust employees in the old way. It is unbusinesslike. It is unsystematic. It puts temptation in their way. It breeds carelessness and crookedness. The modern employee who knows his business does not expect or want to be trusted in the old-fashioned sense. For his own protection, he wants to make his records so complete, and keep them so clear, that after he has been out of a business for a number of years, he can refer to all of the records of each and every one of his transactions and give a clear proof of his part in each. The worst thing that can happen to a good man is to work in an institution where complete and accurate records are not kept by all. Because then, if anybody in the institution is crooked, the institution itself may get into bad repute. Then the honest employees may have their good names tarnished.
5. The management may enter into some expensive venture which has not been well thought out; which has not been discussed pro and con in conferences by the employees and proprietors. It is a serious thing, even in a small business, nowadays, to give one single individual power to settle everything. Even the sole proprietor has only the brains of one man. There are other men working with him, if he is the proprietor of a business that amounts to any-thing, whose judgments are worth taking into consideration. The day of the "one-man" business is over. The big businesses of to-day are built, not upon one man, but upon organizations. It is too precarious to allow any business to depend upon a single individual in these days of strenuous exertions, with quick demises, automobile accidents, train wrecks, and every other risk of incapacitation. Investors know that a one-man business is not a safe investment. Unless a business is so organized that it will go on uninterruptedly and prosperously, no matter what happens to anybody connected with it, that business is not stable or safe.
6. Business may have grown too fast. It may be conducted along methods which were not intended for its present size. The result may be that its methods of operation are too expensive; or, the opposite may be true. The business may have grown to be a great success. An expensive organization may have been built up. Then something went wrong. New competition came. The whole system may have to be torn to pieces and reorganized to meet the new conditions. A business widely known throughout the nation several years ago paid dividends of over $2,000,000 annually. Then a new condition arose; new competition entered the field. Within three years the dividends dropped to $600,-000 per year.
Conditions are changing so fast in every business in this country that we all have to keep ourselves up-to-date, and continually "reorganized," or we will step down and out for the newcomers to do it for us.
Too Much Detail
7. The proprietor of the business may be a man who has built it up. He may know it from A to Z. He may have passed through all the stages of work necessary to build it up. He may be an unusual man, able to do any part of the business better than any employee can do it. Yet now, this proprietor may be spending his time doing work which a cheap employee could do for him. His time may be so much occupied with such small details that he does not have time to plan his business and make it produce the profits to which it is entitled.
Profits are elusive. They do not grow on every bush beside every road. They cannot be picked up in the street. They may be in one place to-day and in a very different place to-morrow. Persistency is a very laudable characteristic. The world honors the "sticker"—unless he happens to stick to a bad business method until he goes broke.
Profits move in waves. Some men or institutions discover a new way to increase their profits. The news of that new way is quickly known throughout the land by other business men, in the same and other lines, who keep their eyes and ears open for the latest of everything good. Then they revamp their business to comply with the new knowledge. After a while the others "follow suit" when it is too late to secure the advantages that accrue to the originators and leaders. Then, when they change, they are in the same relative position as before.
Slow in Changing
8. Discoveries are coming so fast that the business man who is not alert and anxious to know the new and drop the old as quickly as the new is demonstrated to be better than the old, is no longer looked upon as an important commercial factor.
It used to be said that man was a fighting animal, and therefore war would always be necessary, be-cause man could not be changed. That idea is now exploded. Things are not static. Everything is changing. The whole universe is developing, in the words of the poet, "Rising on the stepping stones of our dead selves to better things." It is risky to say, "It cannot be done," because before you have finished talking, it will be done. Human beings used to torture each other to force confession. They used to bind their fellow-men in slavery. They used to practice all forms of despotism. These things have been changed.
A World-wide Change
Man used to say that since the human race had always fought it always would fight. Now, we say that at the lowest stage of humanity the savages were always fighting. A little step higher, the barbarian fought only part of the time. Then the semi-civilized nations fought occasionally. Now, the civilized nations fight rarely. As they become more civilized, they will not fight at all.
There have been only fifteen years of war since the Napoleonic campaigns of 1815.
The world used to think that there was only one way to settle international differences, namely, by war. But since 1815 over one hundred peace conferences have been held. Over two hundred arbitration treaties have been signed. Two hundred and sixty International Disputes have been settled by arbitration.
The business man who knows and talks about systems which were in vogue fifteen, ten or even five years ago, is not up to the times. He is out of step. He is not in contact with the newest improvements and the latest means of conserving profits.
Indeed, one of the undeniable and universally acknowledged benefits of big business organizations is that they can employ men and means to keep searching all the time for improvements and developments in their industries. Think of the "By-Products" that have been discovered and perfected in the experimental laboratories of big concerns, and by the experts maintained by such firms at an expense which would have been prohibitive with small disintegrated individual business houses.
Only those who are in daily and close touch with the business world have any conception of the progress that is being made every year, every month and every day in eliminating losses and increasing profits.
$20.50, etc. A further explanation of the successful ways of preventing serious loss from the abuse of the refund privilege will be found in the chapter on "Big Store Methods."
The "Non-Changeable" Record
The fundamental principle and the only reliable one to follow is to use a duplicate refund book with a two-side carbon so that when the refund is written out the amount is "in reverse" on the back side of the original slip. Very few will think to look on the back side of the slip. If they make any change on the front, the refund cashier or anybody who pays out the money on refunds, will instantly detect it by looking at the back of the check. This is the simple device which has worked to the best advantage whether the store is large or small, whether it is a manufacturing plant, jobber, or any other kind of business which must refund money.