A study of this work will show clearly that its
importance is largely due to the series of sequences which
have been brought out. These sequences have shown the
Banker, more clearly than ever before, what has been taking
place month by month and year by year during all the operations in the borrower's Accounts. He can now ascertain the
high and the low months. If there is any deviation from
these, an enquiry can be set up immediately as to the reason
and a satisfactory answer obtained. This is one of the most
important items to be remembered in the lending of money.
The data being required immediately at the end of each
month ensures that the Accounts are kept before the eye of the
Banker, and the production of the monthly results is in no way
hindered, as is sometimes the case with statistical investigation.
The collection of data in this way brings the Banker
into closer touch with his customer. He becomes more interested
in the welfare of the latter, and by investigating the
matters which cause variations in the Accounts, he obtains a
wider knowledge of what is taking place in the industry or
trade. He can thus have a deeper insight into the borrower's
activities, and the effect will be to make the borrower's
officials feel that their company or firm is of real value and
worthy of respect and consideration, and to give the Banker
himself a sound foundation of fact upon which to base his
loans to the borrower.
This work has dealt with facts presently existing, but
it has shown that it is possible for the Banker to make short
forecasts for a period of three or four months. This applies
particularly to the Bills of Exchange Account, where, as has
been said, it pays the borrower to use the facilities given and to take advantage of a lower rate of interest and even the
two Current Accounts can also be used in this forecast, the
one acting as a guide to the other, so that here a new sphere
is introduced. While the general opinion appears to be that
forecasting is not regarded with much favour among Bankers,
yet there is no doubt that it can be carried out with a
reasonable measure of success in lending to certain industries,
and in particular to those reviewed here.
Thus it will be seen that out of the mass of figures
contained in the Banker's Current Account and Bills of
Exchange Account Ledgers, there has been evolved a very clear
picture of a Company's lending, presented in a manner which
has never been previously attempted, and a higher standard
of efficiency has thus emerged. As regards other Loan
Accounts of the Bank's customers, further progress could,
without doubt, be made. This work, although in itself very
small, lays down the principle to be followed after a considerable
period of research.
As a further step forward a Research Department would
be a distinct aid to work of this nature, for there is no
doubt that Banking, viewing as it does the whole ramifications
of Commerce and Industry, stands in the best position to give
information and advice to its many customers on whom the Bank
has had to reply since its inception, while the present state
of Scottish Commerce and Industry is such that a loosening of
the rigidity of some of the defined principles of Banking would
be of infinite value. A Research Department ready to point
out quickly changing conditions and to deal with confusing
problems which the Banker at the moment has no time to
investigate, would be a definite aid both to the Bank and to
its customers.
The Banker should thus feel himself on firmer ground.
He not only has the figures before him, but by making
graphic representations of his Accounts he can build up a
visual picture of the state of affairs and thus can be
certain of any observations he makes to his Head Office from
time to time upon the Accounts. It is not suggested that
all Bank lending to -day is just "a shot in the dark," and
that no system exists for eliciting information regarding
the principles of lending. But at present the "why and
wherefore" of present day lending is only studied on the
surface. By the use of modern scientific methods it can
in the future be thoroughly examined and the results
systematically collected and scientifically investigated.
It is the aim of this work to present such an
investigation in three definite fields of study, as an
illustration of the methods required to raise Banking to the
status of a science rather than a tradition.
