If a perpetual inventory system is maintained, the manager should keep in touch with any irregularities which may be disclosed in checking up the cost or book inventories by physical inspection of the stores or the stock room. Carelessness in charging out mate rial, or in transferring it to other departments, or petty thieving may be the cause of these discrepancies. They should in all cases be investigated and corrected.
5. Production management should also receive reports• of production. The quantity of goods, or of classes, manufactured during the period, should be reported by departments, or by manufactur ing functions, together with the unit cost. This en ables the management to inquire into the causes of re duced volume of production, and locate and stop the waste.
6. Sales as there can be no profit until the product is actually sold, the sales de partment becomes the balance of power in any busi ness establishment. Accordingly, a study of success ful business houses will generally reveal the fact that their success is due chiefly to: a careful study of markets; the training of salesmen; the building of sales arguments; and effective advertising.
Analysis of sales according to periods of time, ter ritories, salesmen, branch offices, classes of goods, lines of industry, and the like, should always be available. Quite often, as this information is of a statistical na ture and not recorded in the books of accounts, it is overlooked. Too much emphasis cannot be placed upon the fact that if this information is properly pre sented and interpreted, it is bound to be a valuable fund of information for the progressive executive. To illustrate : If sales are analyzed by territories and results are compared with a preceding period, it may be found that while the sales have increased in total, the firm has been losing ground in one section of the country, and gaining it in another. With ana lyzed information on sales before him, the executive is in a position to know in which territories the sales have decreased and to concentrate upon those territories.
In the same manner, a failure to analyze sales by the classes of goods will not reveal to the manager the particular lines which are selling and those which are not.
Care must be taken, too, that the information col lected prove not too costly. However, the main
tenance of a small statistical department, prop erly equipped with mechanical devices, will, in a large majority of cases, pay for the installation and the ex pense of operation in a short time, by reason of the valuable information disclosed.
7. Expense almost every business there are certain expense items which, if properly ex amined, will reveal much more information than might otherwise appear. It is, of course, advisable to pro vide a sufficient number of expense accounts in the classification of accounts so that items of like nature only will be charged to a single expense account. When, however, this method has not been followed, it is advisable for the executive to require an analysis of the expense account. The miscellaneous expense ac count often. becomes a very tempting hiding place for questionable items or improper outlays. In these statements are set forth the various kinds of expenses which make up the total of this account. They may reveal unsuspected leaks and be the means of stop ping them.
Similarly, it is even advisable to attach certain def inite earmarks to the expense account analyzed; thus, expenses for adv.ertising and sales-promotion items should be analyzed, if possible, by classes of goods ad vertised. If this is done it is advisable to make a separation between advertising expense which can be definitely allocated to a given line of products, and expenses of a general advertising nature.
8. Cash manager should have a proper statement of cash on hand and in banks made to him daily. This statement should show the re ceipts, the disbursements, the balance at the beginning of the day, and the bank balances at the end of the day. Comparative figures for the preceding periods should also be included.
In connection with the cash statement there should be included a schedule of the maturing notes receiv able and of notes payable. As already pointed out, no figure or amount is valuable by itself. The value of any information in a report lies chiefly in its relation to other figures properly comparable with it. For this reason, all reports, whether daily or monthly, should give corresponding information for one or more preceding periods.