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9 L I B R kY N. A. C. A. BULLETIN Vol. X, No. 1 September 1, 1928 IN FOUR SECTIONS Section II J j This bulletin is published semi- monthly by the National Association of Cost Accountants, 26 West 44th St., New York THE COST OF OFFICE WORK By C. Milton Clark, C. P. A., Chief Accountant, Crouse -Hinds Company, Syracuse, N. Y. HE factory has been analyzed. Production has been measured T and standard costs set. We delight in pointing out variations from these standards. The spotlight has been turned on the costs of selling— distribution, if you want to call it by its technical name. What about office work? Our office at the present time is trying to analyze different tasks. It is an interesting study. Our treas- urer, W. C. Blanding, made a very good comparison the other day. He asked the question: "How much of this office work is abso- lutely necessary and how much of it is merely insurance against losses? Of the part that is insurance, what is the premium that is paid?" The idea of what is necessary is controlled to a large degree by the generally accepted methods of business. Few businesses would operate without fire insurance, and yet fire insurance is not an ab- solute necessity. In fact, there are businesses which do not buy fire insurance. The rate is too high. They will stand their losses, but if luck is with them it may cost less than the premiums would cost. But this is not a talk on insurance. What we want though is to get right down to the bottom of this question. What office work is absolutely necessary? I venture the answer, viz., four things are necessary: i. Receive the order a. Send the bill 3. Collect the payment 4. Pay our own bills These four things, comparatively simple in themselves, are all hemmed in by systems of check and recheck. All to avoid losses. And let us not forget one other factor of business today. The possibility of keeping a business on a paying basis can only be as- sured by the premium paid for facts and information. There is many an order that has gone to some concern because that con- cern knew just one more fact than its competitors. There is many 20 September 1, 1928 N. A. C. A. Bulletin COST CONFERENCE FOR CONNECTICUT MANUFACTURERS AT HARTFORD ON TUESDAY, SEPTEMBER 25, 1928 With the co- operation and active support of the Governor of the State and the Manufacturers' Association of Connecticut, the Hartford Chapter announces a one -day conference on the relation of cost accounting to industrial management. This conference will be held at Ha rtford on Tuesday, Septem- ber 25, 1928 and while it is organized and will be conducted primarily for the manufacturing industries of the State of Connec- ticut, visitors from outside of the State will be welcome. How- ever, as the registration will be limited, guests from outside the State are requested to make reservations in advance. PROGRAM Morning—Profit Trend in Industry Conducted by Paul M. Mazur, of Lehman Brothers, dis- tinguished author and economist, who attracted so much favorable attention at the recent National con- vention in New York. Economic Effect of Taking Business At or Below Normal Cost Conducted by C. R. Stevenson, of Stevenson, Harrison & Jordan, past president of the National Association of Cost Accountants. Luncheon — Governor John H. Trumbull of Connecticut E. Kent Hubbard, President, Manufacturers' Association of Connecticut Frank L. Sweetser, President, National Association of Cost Accountants Charles R. Ogsbury, President, Hartford Chapter, N. A. C. A. Stuart C. McLeod, Secretary, National Association of Cost Accountants Afternoon — Industrial Accounting —Its Scope & Value Accounts based on sound fundamentals, compiled capably, pre- sented clearly, used intelligently are the only safe basis for industrial management Speaker to be announced Executive Use of Cost Accounts Dr. Charles Reitell, Head of the Accounting Department, University of Pittsburgh, will present the material which he developed in his study of this subject which was awarded the first prize in the Scovell Prize Essay Com- petition conducted by the N. A. C. A. as part of their practical service to American Industry. NO BANQUET * * * NO ENTERTAINMENT This is to be a working conference dealing in a serious way with some of the most vital problems effecting our industrial organi- zations today. Requests for additional information and reservations should be addressed to HAROLD H. HILLIARD, Henry & Wright Mfg. Co., 760 Windsor Ave., Hartford, Conn. 21 N. A. C. A. Bulletin September 1, 1928 a concern that has taken an order and wished that it had known just the one more fact that saved some other concern from a loss. The cost of office work is the subject of these meetings. May we outline, if possible, a system of insurance rates that are reason- able, that are just, and proper to be paid. We cannot standardize these rates because we cannot standardize the risks and hazards against which protection is sought. Perhaps we can have our own little insurance investigation even though we cannot have any sequel in a legislative session. What should a business pay for paper and pencil work? There are two extremes at which an office may be run. First, there may be an absolute minimum of operating detail with such investigative work as is necessary from time to time to make up tax returns, check up apparent losses, and so on. I have a friend who runs a small business. He makes a good income from his business. I will give him credit for doing busi- ness with about as little overhead as I have met in my experience. Of course, the business has his personal supervision. He has some losses. He knows about them. Perhaps there are some he does not know about. He employs an accountant to prepare his tax returns. Right or wrong, he represents the first extreme —the ab- solute minimum of accounting detail. I do not mean that he has not any accounting records at all. He has a good business, and he could not have a good business with no records whatever. The other extreme is the organization that keeps its daily records fully analyzed and up to the minute. Sales reports, daily or weekly, according to various classifications. Daily cash statements. Systems of internal check. Corresponding figures from different sources that must prove. Current analysis of variations from normal or estimated figures. An endless amount of detail —two purposes, operating control and managerial policy. That proverbial individual who finds himself between the devil and the deep blue sea has a simple problem compared to the grow- ing industry that is building overhead faster than income, and apparently powerless to build more income without greater control and overhead. The individual with business acumen must grow from the atti- tude of personal supervision to long distance control. His tend - 22 September 1, 1928 N. A. C. A.Bulletin envy is to safeguard all transactions which formerly he watched. Operating detail is fenced in with operating safeguards. And so the offices of today may find themselves "insurance poor." You have all met the fellow who has been asked a question and spent perhaps a day looking up the answer. With a solemn vow he swears he will never be caught napping again. Conscientiously and energetically he spends a half hour each day keeping the record up -to -date. A year goes by and no one asks the question over again. A report in our office was under discussion the other day. A change in the report eliminated 2570 of the work. Only one com- plaint was received about the modified report. This was answered showing just how the desired information was available. So the revised report stands. How far shall the office go in its effort to answer every question —to see that every "i" is properly dotted? What kind of collision insurance do you carry on your car —full value; $50.00 waiver; $ioo.00 waiver; or what? Do you spend half an hour a day, 3 0 0 days a year, keeping a current analysis that is used only once a year? One hundred and fifty hours — between three and four weeks' work —when a week's work at the end of the year would give better results. That is an extreme. There is another one. Have you a record in your office you are so busy keeping you never have time to study it? It is not the intention of these meetings to tear down office routine. This meeting would not have served its purpose if there is naught but destructive criticism. It is our intention to study the cost of office work. The sugges- tion of an outline upon which to study such costs is as follows: i. What is the cost of the bare record without exceptional items? 2. What is the percentage of exceptional work? 3. In what way can the cheapest insurance be had against the ex- ceptional item ? q. What supplementary records are valuable in conjunction with the basic record? 5. What is the added cost of combining basic and supplementary records? 23 N. A. C. A. Bulletin September 1, 1928 6. Which records shall be subjected to continuous analvsis and which shall be considered "dead" except for occasional test, study, or audit? CASTING IDENTIFICATION AND UNIFORM TRADE CUSTOMS By Wm. E. Walker, Office Manager, E. C. Stearns & Co., Inc., Syracuse, N. Y. AM starting out with the assumption that everyone agrees as to Ithe value and necessity of some means of identifying castings produced.

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