22 N. H. Agri. Experiment Station [Bulletin 251 



accounts receivable in relation to sales of 2.5 per cent, 27 with 7.5 per 

 cent, 20 with 12.5 per cent, 9 with 20 per cent, and 9 with more than 

 30 per cent. Three stores had extended so much credit that it ex- 

 ceeded 60 per cent of total sales. 



The percentage of total grain sales which were for cash varied from 

 10 to 100 per cent. Twenty-two stores were found in the state sur- 

 vey which were selling grain on practically a cash basis. 



As a usual thing, a liberal credit policy will be accompanied by 

 some bad debt. During 1926, the losses due to bad debts totaled 

 $34,821.15 for 103 stores. In the majority of stores these losses were 

 under $200, but in several instances amounted to more than $2000. 

 Bad debts were distributed among the 103 stores as follows: 34 with 

 less than $100, 25 with an average of $150, 25 with an average of 

 $225, and 19 with more than $500. 



Bad debts varied from less than Y^ to S^/o per cent of sales. Some 

 stores build up a reserve for bad accounts by setting aside % per 

 cent of yearly sales. When bad debts are compared with sales, 33 

 stores have bad debts less than .25 per cent of sales, 25 have .37 per 

 cent, 18 have .62 per cent, 11 have 1 j^er cent and 11 have more than 

 1.25 per cent. 



Other important costs resulting from supplying credit are interest, 

 credit accounting, office supplies and collection costs. 



Usually, the greater part of the accounts was in book and not note 

 form, so that no direct income was received for the extension of credit. 

 This means that a charge for credit had to be added at the time of 

 sale or else absorbed as part of the general overhead. 



A study of grain store credit in New York State showed an annual 

 cost of 13.35 per cent — more than twice the 6 per cent rate charged by 

 banks.* On this basis, the annual cost to the 89 New Hampshire 

 grain stores of extending $870,520.50 of credit Avould be $116,214.48, 

 or $63,983.25 more than it would have cost if obtained from banks. 



TURNOVER OF ACCOUNTS RECEIVABLE 



In order to determine the average length of time accounts stay on the 

 books, the amount of average daily sales was divided into the av- 

 erage amount of accounts receivable. This turnover of accounts re- 

 ceivable for the 89 stores varied from- less than five days up to 242 

 days with an average of 38 days. (Table 16). 



Cash Discounts 



Practices varied tln-oughout the state in the treatment of credit. 

 Many managers made no effort to charge for this service or to differ- 

 entiate between a cash and credit customer. Although all stores did 

 not give complete reports on this subject, sufficient evidence was found 

 to show that cash sales increased as the discount allowed for cash in- 

 creased from nothing up to 10 and 15 cents a bag. (Table 17). 



*Cornell Station Bulletin 430; An Economic Stud\- of Rural Store Credit in 

 New York. 



