May 1, 1917.] 



THE INDIA RUBBER WORLD 



449 



Trade Acceptances for the Rubber Goods Dealer. 



By R. R. Voorhees. 





truAyC- 



TRADE acceptances are being used more and more by business 

 houses on account of their value to both the buyer and 

 the seller of goods. And the future will see an increasing 

 use of these handy instruments of business. Only the larger 

 concerns now use trade acceptances, but as their value becomes 

 more generally known the smaller concerns will adopt them un- 

 til finally they will be as familiar in the business world as are 

 checks to-day. And for this reason it would be well for every 

 rubber goods dealer to know just what they are, how they oper- 

 ate and the advantages they offer. 



But before their operation is explained, it might be well to 

 quote the definition of a trade acceptance as given by the Federal 

 Reserve Board in one of its recent circulars, as follows : "A 

 bill of exchange .... drawn to order, having a definite maturity 

 and payable in dollars in the United States, the obligation to 

 pay which has 

 been accepted by 

 an acknowledg- 

 ment, written or 

 stamped, and 

 signed across the 

 face of the in- 

 strument by the 

 company, firm, 

 corporation o r 

 person upon 

 whom it is 

 drawn; such 

 agreement to be 

 to the effect that 

 the acceptor will 

 pay at maturity, \ Tr.^de Accept.^nce 



according to its 



tenor, such draft or bill without qualifying conditions." And it 

 might also be well to state that trade acceptances were created 

 by the Federal Reserve Act. 



The operation of trade acceptances is very simple. When a 

 purchaser buys goods on time ; that is, does not pay cash for the 

 merchandise, the seller of the goods includes with the invoice 

 a blank acceptance form, upon which has been written the num- 

 ber and amount of the invoice and also the date of maturity. 

 In other words, if the purchaser buys on 30, 60 or 90 days' 

 credit, the date of maturity will be 30, 60 or 90 days, as the case 

 may be. If the buyer of the goods wishes to give an accept- 

 ance covering his purchase he fills in the date, signs it and 

 designates the bank through which the amount is to be paid at 

 maturity. This is then sent back to the seller of the goods, and 

 if the seller so desires, he can sign this acceptance and take it 

 to his bank, discount it and in that way obtain the money at 

 once for goods that have been sold on time. The discount rate 

 is smaller than it is on one name paper, since this is two name 

 paper, both the buyer and the seller having signed it. 



Of course, the advantages to the seller of the goods are most 

 apparent. But there are real reasons why the buyer of goods 

 should do credit buying on a trade acceptance basis instead of 

 on the old style open account system that is now in general use. 



At present, cash customers are given all the advantages in 

 business. When they make a purchase and pay cash for it, 

 they receive what is termed a cash discount and in the course 

 of a year this amounts to considerable. But with the credit 

 customer it is different. He pays the full amount of the bill 

 because the seller of the goods is forced to wait 30, 60 or 90 

 days for his money and on that account cannot afford to give 



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ler^4*^^?pay to the order of &<lA4X-'^lA£d^ 



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e acceptor hereof kritc* out of the purchaaa of good* from Uie druwer. 



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any discount. But as trade acceptances come into more gen- 

 eral use there will be a marked tendency to allow a small dis- 

 count to buyers of goods who give trade acceptances for their 

 purchases. The sellers of the goods will be able to realize on 

 the sale at once, minus a small discount, and on this account can 

 afford to give a discount if the buyer will give a trade acceptance. 

 In addition to the possibility of obtaining a discount there will 

 be a tendency to lower the net prices of the goods purchased. 

 As the seller of goods gets more of his customers to give trade 

 acceptances, covering their purchases he will be able to lower 

 the net price of the goods he sells and in that way the buyer 

 will be given an advantage that he did not have before the use 

 of trade acceptances was possible. 



Overstocking is one of the chief reasons for failure. Quite 

 unintentional, to be sure, but still a fact, the average dealer is 



too apt to take 



on stock with the 

 hope that he will 

 be able to sell it 

 instead of being 

 confident that he 

 can dispose of it. 

 He has it in his 

 place for a while 

 and then, per- 

 haps, finds that 

 it does not sell. 

 Much of this 

 sort of buying 

 soon puts him 

 out of business. 

 Properly Filled Out. But if he gave a 



trade acceptance 

 for everything that he bought on credit he would use more judg- 

 ment in making purchases. 



Giving a trade acceptance would not curtail the amount of 

 goods that a seller would allow a purchaser to buy because by 

 so doing the purchaser would indicate himself to be a man of 

 business judgment who fully realized his obligations. The seller 

 would feel that any purchases made under the new method of 

 doing credit business were purchases of merchandise that the 

 buyer really needed and on this account would be willing to 

 allow the buyer to have it. 



In case the buyer of the goods could not meet the trade ac- 

 ceptance when it was due, the seller would, in most cases, be 

 lenient with him, since when the purchase was made, the buyer 

 gave to the seller what he so much desired. 



Some buyers feel that a trade acceptance is a note, but such 

 is not the case. Trade acceptances can be given only for obliga- 

 tions arising out of the purchase of merchandise, and for old 

 accounts or for money loaned. On the face of the acceptance 

 is written the number and amount of the invoice, which proves 

 that it is for merchandise that has been bought. Instead of a 

 trade acceptance harming the giver, it really helps him by 

 placing him in a preferred credit class and making him appear 

 as one who wants to do business on the highest business plane. 

 Trade acceptances are new and many do not realize their 

 advantages. Every rubber goods dealer will do well to. ask his 

 bank about them and to ascertain if the firms of which he buys 

 goods use them in their business. Trade acceptances are the 

 coming method on which credit business will be done in this 

 country, and it is only a matter of a short time when they will 

 be in almost as common use as checks are to-day. 



