Music Trade Review

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THE MUSIC TRADE REVIEW
Retail Piano Paper the Basis of Piano Credits.
By LOUIS R. COOKE, Manager Retail Collections, Cable-Nelson Piano Co., Chicago, III.
The year just passed has been particularly illus-
trative of the importance of judicious extension of
credit. It has brought rather forcefully before us
in some instances the importance of bringing the
piano business closer to a cash basis. I am firmly
of the opinion that retailing pianos on a longer
time than thirty-six months is at present con-
sidered more of a fallacy than it was one year ago
and also believe that the greater majority of manu-
facturers and dealers are now obviating the diffi-
culty by insisting on shorter credits. Any retail
sale that will not return the wholesale cost in not
to exceed eighteen months cannot properly be con-
sidered a profit producer, and should be shunned
except possibly by those in a position to carry the
account on their own resources.
The trade cannot justly cast a reflecting finger
toward the retail purchaser who can hardly be ex-
pected to delve into the intricate subject of piano
credits, for certainly he is not to blame. If per-
chance you have happened to eavesdrop on the
average salesman and his prospect from an angle
unobserved you will doubtless recall two important
general talking points; first, how easy it would be
to make the payments, and offering the prospect as
a secondary consideration for purchase the quality
of the instrument and the satisfaction it would
produce. It is with particular emphasis that 1 ask
your permission to refer to player sales in this
connection. It is practically a simple matter for a
tactful salesman to interest a prospect in a player-
piano after having secured his favorable attention.
In fact, the beautiful music so artistically rendered
generally impels the signature to the contract. Of
course, the salesman has so confidently assured our
friend that the house would be lenient with him if
for any reason he should find it inconvenient to
make the monthly remittance of $15 that our pur-
chaser does not think to tell him that he is the
recipient of a $15 weekly stipend. In fact, the
salesman does not wish to disturb the harmonious
relation between buyer and seller by asking any
impertinent questions as to his financial condition.
The sale is turned in with the cash down payment
of possibly $15—that is, $5 now and the balance
next week. The sale is accepted after a detailed
explanation of the fierce competition, and the
player delivered. Is the salesman at fault? Not
altogether. He is paid to produce a certain volume
of business of acceptable quality and as long as
the house accepts the business we must charge
it with the responsibility. The efforts of one
manufacturer or dealer in a locality to correct this
evil will avail him nothing except smaller sales
unless all co-operate. I was much pleased to note
recently an advertisement something to this effect:
"If not convenient to pay all cash, pay what you
can and the balance may be taken up in payments
to suit." Certainly, this is a step in the right
direction.
we have found it to keep a record of each branch
month by month of the percentage delinquent. We
may then determine whether existing conditions in
a particular locality justify the amount of paper in
default. In my opinion the average of past due
should never in any event exceed 10 per cent., for
even this practically amounts to adding four months
to the average extension of credit, figuring that we
draw contracts to pay out in thirty-six months. I
think 5 per cent, past due possibly the minimum of
any lot of paper and the average will run from G
to 7 per cent. If, on account of sickness or non-
employment, a good account must necessarily be
extended, a renewal may consistently be drawn
when the party is in a position to resume regular
payments, providing not more than one renewal be
drawn on any account.
To illustrate the importance of shorter extension
not checked by the manufacturer he will soon be
overextended. His statement shows approximately
as follows:
ASSETS.
Cash
Notes, leases and mortgages
Stock
Fixtures
$200
10,600
2,000
1.000
if 13.800
LIABILITIES.
Hills payable
Capital stock
Surplus
$3,000
0,000
4,800
$13.S0<)
I have figured the collections as anticipated, fig-
uring that the amount of cash obtained as down
payment on each sale over and above the regular
instalment would offset any payments missed; also
total expense to date, i. e., $1,200, has been charged
against the surplus.
Another four months pass. Still he is unable to
meet all of the $3,000 note maturing, so he appeals
to his local banker for a loan, who, might advance
$2,501) secured by leases two for one. His banker
may grant one renewal, but wants the account
cleaned up once a year. The manufacturer sells
him more goods, grants frequent renewals • and
finally curtails his credit, which is his only salva-
tion.
Now if Mr. Dealer is wise he will do one
of two things: Make a consignment arrangement
with the manufacturer or hypothecate his paper
with a reliable banking house which is in a position
to give him the money he needs in his business on
the same terms that he is disposing of his goods.
His limited capital makes it essential that an in-
vestment and not a commercial credit be extended.
Hy doing good business and financing it on either
plan he will show a healthier statement at the end
of the year and, moreover, his profits will be cash
insead of paper profits. Of course, the coSt of
financing is necessarily more, but this may be ad-
justed by affixing fair prices to all his goods, tak-
ing into consideration the additional cost. If he
Louis R. Cooke.
adopts the plan of discounting his paper he should
of credit let us take for example a piano salesman p;.y cash for his goods, for if he uses the money
about to embark on his own account with $6,000 obtained thereby for further expansion it will not
capital. If he invests $4,000 in stock as follows,
be long before he finds himself even worse off
1(1 upright pianos, average $12")
$l,2. r >0
than before he adopted the practice. Let him bear
10 players, average $2 7.->
2,730
in mind that he cannot consistently extend credit
on others' capital on a more liberal basis than he
Total
if 4,000
leaving $1,000 for fixtures, etc., and $1,000 for run- can obtain the capital.
iiing expense. We will suppose he disposes of this
Just a word in reference to cash tunings and re-
stock for $8,000, taking in payment paper maturing pairs. 1 hope the day is not far off when all manu-
in thirty-six months. His anticipated revenue will facturers and dealers will insist upon being re-
be approximately $225 per month. Of course, he munerated for tunings made on pianos after the
has paid cash and taken his discount and is now first year. Certainly this is consistent. By watch-
in the market for more goods. He is much elated ing this department closely it is surprising the
for he shows a profit on his books of about $3,000 amount of revenue derived, and operating on this
if he has disposed of the goods in a reasonable plan the tuning and repair department will cease
length of time. He forgets that this is really an to be a dead expense and become a real, live profit
unearned profit when he proudly exhibits the state- producer.
Let us hope that the close of 1915 will find the
Obtaining credit information regarding the party ment to the manufacturer whose line he repre-
sold is a simple matter if pursued tactfully, ati.l sents. The house, anxious for his business and piano business on a more liquid basis by following
this information should accompany each sale prop- respecting his sales ability, duplicates his initial the slogans of "Shorter Credits" and "Better
erly indicated on a sales report for the purpose. order, accepting four month' note settlement for Sales."
As a rule the prospect has either applied previously $4,000. You will recall his anticipated receipts are
for credit from other trades people or has a bank $225 per month, and even if he is fortunate in dis-
TO CROSS COUNTRY BY AUTO.
account, and we generally find either sources will posing of, say, 50 per cent, of the" new stock im-
M. V. DeForeest. the prominent piano dealer of
give us the information we require. A follow-up r. ediately, his total monthly revenue at the outside
card system keeps us in touch with all the ac- will no; run over $-'550. In four months his notes Sharon, Pa., accompanied by his family, plans to
counts in order as their payments mature, notify- become due and his total collections have aggre- leave about the 1st of February on a trans-conti-
ing them promptly in five days after maturity if gated not to exceed $1,400. The original $1,000 in nental trip in his automobile, visiting the expositions
cash has been spent and he has used some of the in San Francisco and San Diego at the end of his
they fail to make remittance. As to methods of
collection, we all have our pet schemes of "extrac- revenue from his paper. Consequently he can re- journey. Several friends, with their cars, will join
tion" ; suffice it to say that they be suited to the tire $1,000 of the $4,000 indebtedness and requests Mr. DeForeest on the trip, which will be taken
three-fourths renewal, which the manufacturer leisurely and last for several weeks. The party
party addressed.
In reference to past due paper how important grants necessarily. It can- readily be seen if he is will probably return by rail.
WINTER & CO.
220 SOUTHERN BOULEVARD, N E W YORK
Manufacturers of
Superior Pianos
and Player Pianos