24. H. F. Scott-Stokes to Harrod, 13 March '24
C.S & M.
13 March '24
My dear Roy,
Your queries of three weeks ago still remain on my desk - alack, I can't answer them, & my routine-wallish (? CSS) accountant is equally unable. It appears that our overdraft is actually apt to be larger in bad times, because other people don't pay us while the stock is unsold in their shops, whereas we continue to pay out much about the same in wages and purchases & other running expenses; and I think it's true to say that the simple-minded manufacturer doesn't take much note of Bank-rate fluctuations - within normal limits - just as he doesn't study price-movements, or at any rate not in a speculative way - that is the merchant's job x the manufacturer's. Of course he could make money that way (or lose it), but it would be outside his sphere & he would be out of his depth, & it's a poor kind of thing to rely on ultimately - no doubt, tho', we go too far in ignoring all that, & a really large concern couldn't do it. What we really do is to try and turn out for every season (all our trades are seasonal) just so much as we can sell in that season only, so avoiding all chance losses (& profits) on stocks carried over. It seems that our overdraft would incidentally be smaller in bad times in that we should make few purchases in anticipation of a reduced demand; but practically speaking no man yet ever anticipated a reduced demand, & so it'd probably merely work out that we had bought much as usual, sold little, & not been paid for that, therefore more over-draft than ever.
This is a clumsy statement of what seems to me to happen - I'm afraid I don't understand the fraction average balance (incl. overdraft)
month's payments made
in really bad times the m's.p.m. would be something reduced, & the overdraft reduced or inflated according to the sagacity of the M.Director - probably inflated. But what is the `average balance', other than the overdraft?
We never raise a loan or a definite overdraft all all - the state of it is made up & interest charged daily, and the whole amount drawn as required by cheque without warning. It seems an admirable arrangement for all concerned - until there's a panic or other disturbance; then I suppose it'd all go bust.
MacInnes (the blind) is coming over from Bristol to argue to us.
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