It has already been stated that commerce consists of trade and auxiliaries to trade. Auxiliaries or aids to trade refer to the activities incidental to the buying and selling of goods and services. These auxiliaries to trade are also known as business services or facilities. These services are essential and indispensable to the smooth flow of trade and industry. The examples of business services are banking, insurance, transport, warehousing and communication.
NATURE OF BUSINESS SERVICES:
There are five basic features of services called “Five ‘I’s”, which distinguish it from goods. They are:-
- Intangibility: Cannot be seen, touched or smelled. Just can only be felt, yet their benefits can be availed of e.g. Treatment by doctor.
- Inconsistency: Different customers have different demands & expectation. There is no consistency in providing services. Service providers should adjust their offer to closely meet the requirement of the customers. E.g. Mobile services/Beauty parlor.
- Inseparability: Services are produced and consumed simultaneously. These are inseparable. In the case of goods production took place at one time and consumption at another time
- Inventory Less: Services cannot be stored for future use or performed earlier to be consumed at a later date. E.g. underutilized capacity of hotels and airlines during slack demand cannot be stored for future when there will be a peak demand.
- Involvement: Participation of the customer in the service delivery is a must e.g. A customer can get the service modified according to specific requirement.
Type of Services:-
- Social Services: – Provided voluntarily to achieve certain goals e.g. health care and education services provided by NGOs.
- Personal Services: – Services which are experienced differently by different customers. e.g. tourism, restaurants etc. That means services provided to individual customers.
- Business Services: – Services used by business enterprises for the conduct of their activities .e.g. Banking, Insurance, communication, warehousing and transportation
In this chapter we are limiting our discussion to business services only.
In the dynamic business world the role business services is changing at faster rate. There is a radical restructuring of the service industry which has branched into many areas, these include: – Banking, Insurance, Transportation, advertising, communication, Warehousing, consultancies, tax and accounting etc…..
Finance is the life blood of business. It is needed for uninterrupted supply of goods and services from the producers to the ultimate consumers through various intermediaries. Banks play a vital role in meeting the financial requirement of various business activities.
Banks occupy an important position in the modern business world. No country can make commercial and industrial progress without a well organised banking system. Banks encourage the habit of saving among the public. They mobilize small savings and chennelise them into productive uses.
A bank is an institution which deals in money and credit. It collects deposits from the public and supplies credit, thereby facilitating exchange. It also performs many other functions like credit creation, agency functions, general services etc… Hence a Bank is an organisation which accepts deposits, lends money and performs other agency functions.
In modern times bank is an institution which accept deposit for the purpose of lending money to needy people. They earn margin which is their profit.
Types of Banks:-
On the basis of focus of banking, we have following different type of banks:-
1 – Commercial Bank:-
Commercial banks are institution dealing in money and credit. Banking is a business of receiving deposit, lending them to the people needs finance and rendering other useful services. Interest on deposit is always less than interest on loan. The difference is called as margin and it is the profit of the bank. Commercial banks are governed by Indian Banking Regulation Act 1949. There are two types of commercial banks- Public sector banks and private Sector banks.
Public Sector Banks: – Public sector banks are those banks in which the government has major share. Public sector banks are dominating the banking scene in India since three decades. This was possible with the setting up State Bank of India and nationalizing 20 major commercial banks (14 banks 1969 and 6 in 1980). SBI and its associate banks such as SBT, Canara Bank, Punjab National Bank, Syndicate Bank etc… are some examples.
Private Sector Banks: – These are the banks which are owned, managed and controlled by privet parties. But they are subject to regulations of Reserve Bank of India. In India private banks are categorized into three:-
Old Generation Banks- include Federal Bank, South Indian Bank etc……, New Generation Banks- includes ICICI Bank, HDFC bank. Etc.., and foreign banks- includes Citibank, American Express etc…
2 – Co-operative Banks: –
Co-operative banks are organised on co-operative lines. These banks are governed by the provision of State Co-operative Societies Act. They are meant essentially for providing cheap credit facilities to their members. It is an important source of rural credit and agricultural credit.
3 – Specialised Banks: –
Specialised banks are those banks which render specific services to the public. These include foreign exchange banks, industrial banks, development bank, export- import bank etc….
4 – Central Banks: –
A central bank is the principal banking institution of a country. It is owned and managed by government. It supervises, guides, controls and regulates the activities of all banks in the country. It acts as banker to the government, as bankers’ bank, as lender of last resort, as custodian of foreign exchange reserve and as controller of credit and money of any country. The Reserve Bank of India is the central bank of our country which was established in 1935.
Functions of Commercial banks:-
Banks perform a variety of functions. Some of them are the basic or primary functions of a bank while others are secondary functions. The impotent functions are discussed below;-
1. Accepting Deposits: – Accepting deposits is the main function of commercial banks. Banks offer different types of Bank accounts to suit the requirements and needs of different customers. Different types of Bank accounts are as follows:
- Fixed Deposit Account:- Money is deposited in the account for a fixed period. After expiry of specified period person can claim his money from the bank. Usually the rate of interest is at maximum in this account. The longer the period of deposit, the higher will be the rate of interest on deposit.
- Current Deposit Account:- Current deposit Accounts are opened by businessman. The account holder can deposit and withdraw money whenever desired. As the deposit is repayable on demand, it is also known as demand deposit .Withdrawals are always made by cheque. No interest is paid on current accounts. Rather charges are taken by bank for services rendered by it.
- Saving Deposit Account:-The aim of a saving account is to mobilise savings of the public. A person can open this a/c by depositing a small sum of money. He can withdraw money from his account and make additional deposits at will. Account holder also gets interest on his deposit in this account, though the rate of interest is lower than the rate of interest on fixed deposit account.
- Recurring Deposit Account:-The aim of recurring deposit is to encourage regular savings by the people. A depositor can deposit a fixed amount, say Rs. 100 every month for a fixed period. The amount together with interest is repaid on maturity. The interest rate on this account is higher than that on saving deposits.
- Multiple Option Deposit Accounts:-It is a type of saving Bank A/c in which deposit in excess of a particular limit gets automatically transferred into Fixed Deposit. On the other hand, in case adequate fund is not available in our saving Bank Account so as to honour a cheque that we have issued the required amount gets automatically transferred from fixed deposit to the saving bank account. Therefore, the account holder has twin benefits from this account (i) he can earn more interest and (ii) It lowers the risk of dishonouring a cheque.
2. Lending Money: – With the help of money collected through various types of deposits, commercial banks lend finance to businessman, farmers, and others. The main ways of lending money are as follows:
- Term Loans:-These loans are provided by the banks to their customers for a fixed period to purchases Machinery, Truck, Scooter, House etc. The borrowers repay these loans in Monthly/Quarterly/Half Yearly/ Annually installments.
- Bank Overdraft:-The customer, who maintains a current account with the bank, takes permission from the bank to withdraw more money than deposited in his account. The extra amount withdrawn is called overdraft.
This facility is available to trustworthy customers for a small period. This facility is usually given against the security of some assets or on the personal security of the customer. Interest is charged on the actual amount overdrawn by the customer.
- Cash Credit:- Under this arrangement, the bank advances cash loan up to a specified limit against current assets and other securities. The bank opens an account in the name of the borrower and allows him to withdraw the money from time to time subject to the sanctioned limit. Interest is charged on the amount actually withdraw.
- Discounting of Bill of Exchange :-Under this, a bank gives money to its customers on the security of a bill of exchange before the expiry of the bill in case a customer is needs it. For this service bank charges discount for the remaining period of the bill.
The secondary functions of commercial banks are as under:
1. Agency Functions:- As an agent of its customers, a commercial bank provides the following services:
- Collecting bills of exchanges, promissory notes and cheques.
- Collecting dividends, interest, rent etc.
- Buying and selling shares, debentures and other securities
- Payment of interest, insurance premium, etc
- Transferring funds from one branch to another and from one place to another
- Acting as an agent or representative while dealing with other banks and financial institutions.
A commercial bank performs the above functions on behalf of and as per the instructions of its customers.
2. General Utility Functions: – Commercial banks also perform the following miscellaneous functions.
- Providing lockers for safe custody of jewellery and others valuables of customers.
- Giving references about the financial position of customers.
- Providing information to a customer about the credit worthiness of other customers.
- Supplying various types of trade information useful to customers
- Issuing letter of credit, pay orders, bank draft, credit cards, and traveler’s cheques to customers.
- Underwriting issues of shares and debentures.
- Providing foreign exchange to importers and travelers going abroad.
Bank Draft: – It is a financial instrument with the help of which money can be remitted from one place to another.
Using computers and internet in the functioning of the banks is called e-banking or electronic banking. Because of these services the customers do not need to go to the bank every time he has to transact with bank. He can make transactions with the bank at any time and from any place. The chief electronic services are the following.
- Electronic Fund Transfer:-Under it, a bank transfers wages and salaries directly from the company s account to the accounts of employees of the company. The other examples of EFTs are on line payment of electricity bill, water bill, insurance premium, house tax etc.
- Automatic Teller Machines (ATMs):- ATM is an automatic machine with the help of which money can be withdrawn or deposited by inserting the card and typing your personal Identity Number (PIN). This machine operates for all the 24 hours.
- Debit Card: – A Debit Card is issued to customers in lieu of his money deposited in the bank. The customers can make immediate payment of goods purchased or services obtained if sufficient balance in his account on the terminal facility is available with the seller.
- Credit Card:-A bank issues a credit card to those of its customers who enjoy good reputation. This is a sort of overdraft facility. With the help of this card the holder can buy goods or obtain services up to a certain amount even without having sufficient deposit in their bank accounts.
- Tele Banking: – Under this facility, a customer can get information about the balance in his account or information about the latest transactions on the telephone.
- Core Banking Solution/Centralised Banking Solution:- In this system a customer by opening a bank account in one branch (which has CBS facility) can operate the same account in all CBS branches of the same bank anywhere across the country. It is immaterial with which branch of the bank the customer deals with when he/she is a CBS branch customer.
- Mobile banking: – It is a system that allows customers of a bank to conduct a number of financial transactions through a mobile device such as mobile phone or tablet. By this a customer can access to his account through applications in the device. He can transfer fund, get mini statement of transaction, get alert on account activity etc… through this system
Benefits of e-Banking:-
- E-banking provides round the clock, 365 days a year services to the customers
- Customers can enter into bank transaction from office or house or when travelling via mobile phone
- It create a sense of financial discipline
- Greater customer satisfaction by offering unlimited access to the bank
- Load on branches is considerably reduced
Life is full of uncertainties. The chances of occurrence of an event may cause losses to the life and properties of individuals.
Insurance is a contract between two parties viz. the insurer and the insured. The insurer is the person who compensates other person against possible losses. The insured is the person who gets his life or properties insured against risk. For this service the insured need to pay a price or consideration called premium to the insurer. The document containing the terms and conditions of insurance is called the policy.
Thus Insurance is a form of contract under which one party (Insurer or Insurance Company) agrees in return of a consideration (Insurance premium) to pay an agreed sum of money to another party (Insured) to make good for a loss, damage or injury to something of value in which the insured has financial interest as a result of some uncertain event.
Functions of Insurance:-
- Insurance shares risk and not eliminate the risk
- Insurance affords protection from probable chance of loss
- Insurance (especially life insurance) encourage savings
- Insurance crates funds for investments- capital formation
- Insurance provides fund for developmental programs
Principles of Insurance:-
Insurance is a contract and it is based on certain fundamental principles. The following are them:-
- Utmost Good Faith (uberrimae fidei):-Insurance contracts are based upon mutual trust and confidence between the insurer and the insured. It is a condition of every insurance contract that the parties, insurer and the insured must disclose each fact and information related to insurance contract to each other.
- Insurable Interest: It means some pecuniary interest in the subject matter of insurance contract. The insured must have insurable interest in the subject matter of insurance i.e., life or property insured, the insured will have to incur loss due to this damage and insured will be benefitted if full security is being provided. A businessman has insurable interest in his house, stock, his own life and that of his wife, children etc. In life insurance , the insurable interest must exist at the time of policy is taken. It need not be in existence at the time of death. In marine insurance, the insurable interest must be present at the time loss of the subject matter. In fire and other insurance, the insurable interest must be present not only at the time of taking the policy but also at the time o loss.
- Indemnity: Principle of indemnity applies to all contracts except the contract of life insurance because estimation regarding loss of life cannot be made. The objective of contract of insurance is to compensate to the insured for the actual loss he has incurred. These contracts provide security from loss and no profit can be made out of these contracts. For e.g. a property is insured against fire for Rs.100000. fire occur and loss incurred for Rs. 75000. The insurance Co. shall allow claim only for Rs.75000 and not for Rs.100000
- Proximate Cause or Cousa Proxima: The insurance company will compensate for the loss incurred by the insured due to reasons mentioned in insurance policy. But if losses are incurred due to reasons not mentioned in insurance policy then principle of proximate cause or the nearest cause is followed.
- Subrogation: This principle applies to all insurance contracts which are contracts of indemnity. As per this principle, when any insurance company compensates the insured for loss of any of his property, then all rights related to that property automatically get transferred to insurance company.
- Contribution: According to this principle if a person has taken more than one insurance policy from different insurance Co. for the same risk (Double Insurance) then all the insurance Co. will contribute the amount of loss in proportion to the amount assured by each of them and compensate him for the actual amount of loss because he has no right to recover more than the full amount of his actual loss.
- Mitigation of Loss: According to this principle the insured must take reasonable steps to minimise the loss or damage to the insured property otherwise the claim from the insurance company may be lost. He must act like any uninsured man.
A life insurance policy was introduced as a protection against the uncertainty of life. Insurance company undertakes to insure the life of a person in exchange for a sum of money called premium. This premium may be paid in one lump sum, or periodically i.e., monthly, quarterly, half yearly or yearly. At the same time, the company promises to pay a certain sum of money either on the death of the person or on his attaining a certain age (i.e., the expiry of certain period). Thus, the person is sure that a specified amount will be given to him when he attains a certain age or that his dependents will get that sum in the event of his death.
This insurance provides protection to the family at the premature death or gives adequate amount at old age when earning capacities are reduced. The insurance is not only a protection but is a sort of investment because a certain sum is returnable to the insured at the time of death or at the expiry of a certain period. Life insurance also encourages savings as the amount of premium has to be paid regularly. It thus, provides a sense of security to the insured and his dependents.
Elements of Life Insurance contract: – The main elements of a life insurance contract are:
- The life insurance contract must have all the essentials of a valid contract.
- The contract of life insurance is a contract of utmost good faith. The assured should be honest and truthful in giving information to the insurance company. He must disclose all material facts about his health to the insurer. It is his duty to disclose accurately all material facts known to him even if the insurer does not ask him;
- In life insurance, the insured must have insurable interest in the life assured.
- Life insurance contract is not a contract of indemnity. The life of a human being cannot be compensated and only a specified sum of money is paid. That is why the amount payable in life insurance on the happening of the event is fixed in advance. The sum of money payable is fixed, at the time of entering into the contract. A contract of life insurance, therefore, is not a contract of indemnity.
Types of Life Insurance Policies:-
- Whole Life Police: – Under this policy the sum insured is not payable earlier than death of the insured. The sum then becomes payable to the heir of the deceased.
- Endowment Life Assurance Policy: – Under this policy the insurer undertakes to pay the insured or his heirs or nominees a specified sum on the attainment of a particular age or on his death whichever is earlier.
- Joint Life Policy:-It involves the insurance of two or more lives simultaneously. The policy money is payable upon the death of any one of lives insured and the assured sum will be payable to the survivor or survivors.
- Annuity Policy:-This policy is one under which amount is payable in monthly, quarterly, half yearly or in annual installments after the assured attains a certain age. This is useful to those who prefer a regular income after a certain age.
- Children s Endowment Policy:-This policy is taken for the purpose of education of children or to meet marriage expenses. The insurer agrees to pay a certain sum when the children attain a certain age.
Fire insurance is a contract whereby the insurer, in consideration of the premium paid, undertakes to make good any loss or damage caused by fire during a specified period upto the amount specified in the policy. Normally, the fire insurance policy is for a period of one year after which it is to be renewed from time to time. The premium may be paid either in lump sum or installments. A claim for loss by fire must satisfy the two following conditions:
(i) There must be actual loss; and
(ii) Fire must be accidental and non-intentional.
Elements of Fire Insurance: – The main elements of a fire insurance contract are:
- In fire insurance, the insured must have insurable interest in the subject matter of the insurance.
- Similar to the life insurance contract, the contract of fire insurance is a contract of utmost good faith
- The contract of fire insurance is a contract of strict indemnity. The insured can, in the event of loss, recover the actual amount of loss from the insurer. This is subject to the maximum amount for which the subject matter is insured. For example, if a person has insured his house for Rs. 4,00,000, if the loss incurred for Rs.300000 the insurer liable to pay Rs.300000. if the loss incurred for Rs. 500000, the insurer liable to pay Rs.300000 only.
- The insurer is liable to compensate only when fire is the proximate cause of damage or loss
Marine insurance provides protection against loss by marine perils or perils of the sea. Marine perils are collision of ship with the rock, or ship attacked by the enemies, fire and captured by pirates and actions of the captains and crew of the ship. A marine insurance contract is an agreement whereby the insurer undertakes to indemnify the insured in the manner and to the extent thereby agreed against marine losses. The insurer guarantees to make good the losses due to damage to the ship or cargo arising out of the risks incidental to sea voyages.
Elements of Marine Insurance:- The main elements of a marine insurance contract are:
- The contract of marine insurance is a contract of indemnity
- The contract of marine insurance is a contract of utmost good faith.
- Insurable interest must exist at the time of loss but not necessary at the time when the policy was taken
- The principle of causa proxima will apply to it.
Types of Marine Insurance:-
- Ship or hull insurance: Since the ship is exposed to many dangers at sea, this insurance policy is for indemnifying the insured for losses caused by damage to the ship. It is taken by shipping company.
- Cargo insurance: The cargo while being transported by ship is subject to many risks. These may be at port i.e., risk of theft, lost goods or on voyage etc. Thus, an insurance policy can be issued to cover against such risks to cargo. Taken by importer or exporter
- Freight insurance: If the cargo does not reach the destination due to damage or loss in transit, the shipping company is not received freight charges. Freight insurance is for reimbursing the loss of freight to the shipping company i.e., the insured.
Health Insurance:-Health Insurance is a safeguard against rising medical costs. A health insurance policy is a contract between an insurer and an individual or group, in which the insurer agrees to provide specified health insurance at an agreed- premium. Health insurance usually provides either direct payment or reimbursement for expenses associated with illness and injuries.
Motor Vehicle Insurance: – Motor Vehicle Insurance falls under the classification of General Insurance. This insurance is becoming very popular and its importance increasing day-by day. In motor insurance the owner’s liability to compensate people who were killed or injured through negligence of the motorists or drivers is passed on to the insurance company. It also gives compensation to the damage to vehicle.
Burglary Insurance:- Burglary insurance falls under the classification of insurance of property. In case of burglary policy, the loss of damages of household goods and properties and personal effects due to theft, larceny, burglary, house-breaking and acts of such nature are covered. The actual loss is compensated.
Cattle Insurance:-A contract of cattle insurance is a contract whereby a sum of money is secured to the insured in the event of death of animals like bulls, buffaloes, cows and heifers.
Crop Insurance:-A contract of crop insurance is a contract to provide a measure of financial support to farmers in the event of a crop failure due to drought or flood.
Fidelity Insurance: – It is the insurance protection against loss due the fraud or dishonesty on the part of the employee.
Sports Insurance :To give protection for amateur sportsmen by covering their sports equipments,legal liability and personal accident.
Personal Accident Insurance :-To compensate the loss due to accident (death or injury)
Communication is an important service that helps in establishing links between businessmen, Organisation, suppliers, customers etc. It educates people, widen their knowledge and broaden their outlook. It overcomes the problem of distance between people, businessmen and institutions and thus helps in smooth running of trade, industrial and commercial activities. In this fast moving and competitive world it is essential to have advanced technology for quick exchange of information with the help of electronic media. The main services which help business can be classified into postal and telecom:-
Postal Services: – Every business sends to outsiders and receives from outsiders several letters, market reports, parcel, money order etc. every day. All these services are provided by the post and telegraph offices scattered throughout the country. The postal department performs the following services.
Financial Services:-They provide postal banking facilities to the general public and mobilise their savings through the following saving schemes like public provident fund (PPF), Kisan Vikas Patra, National Saving Certificate, Recurring Deposit Scheme and Money Order facility.
Mail Services :-The mail services offered by post offices include transmission of messages through post cards, Inland letters, envelops etc. transmission of articles through parcel facility, registration facility and speed post to provide security of transmitted letters and articles and insurance facility to provide insurance cover for various risks in the course of transmission by post.
The various mail services are:
UPC (under postal certificate):- When ordinary letters are posted the past office does not issue any receipt. However, if sender wants to have proof then a certificate can be obtained from the post office on payment of prescribed fee. This paper now serves as an evidence of posting the letters.
Registered Post: – Sometimes we want to ensure that our mail is definitely delivered to the addressee otherwise it should come back to us. In such situations the post office offers registered post facility which serves as a proof that mail has been posted.
Parcel:-Transmission of articles from one place to another in the form of parcels is known as parcel post. Postal charges vary according to the weight of the parcels.
Greetings Post: – Greetings can be sent through post offices to people at different places.
Media Post: – Corporate can advertise their brands through post cards, envelops etc.
Speed Post:-It allows speedy transmission of articles (within 24 hours) to people in specified cities.
e-bill post:-The post offices collect payment of bills on behalf of BSNL and other organisations.
Courier Services: – Letters, documents, parcels etc. can be sent through the courier service. It being a private service the employee works with more responsibility.
Telecom Services: –
Today’s global business world, the dream of doing business across the world, will remain a dream only in the absence of telecom services. The various types of telecom services are
Cellular mobile services: – cordless mobile communication device including voice and non-voice messages, data services and PCO services.
Radio Paging Services: – means of transmitting information to persons even when they are mobile.
Fixed Line Services: – including voice and non-voice messages and data services to establish linkage for long distance traffic.
Cable services: – Linkages and switched services within a licensed area of operation to operate media services which are essentially one way entertainment related services.
VSAT Service: – (Very small Aperture Terminal) is a Satellite based communication service. It offers government and business agencies a highly flexible and reliable communication solution in both urban and rural areas.
DTH Services (Direct to Home):- a Satellite based media services provided by cellular companies with the help of small dish antenna and a set up box.
Transportation removes the hindrance of place, i.e., it makes goods available to the consumer from the place of production. Transportation comprises freight services together with supporting and auxiliary services by all modes of transportation i.e., rail, road, air and sea for the movement of goods and international carriage of passengers.
Importance of Transport
- It helps to widen the market
- Creates places utility and time utility
- Helps in large scale production
- Helps in stbilising prices
- Standard of living can be improved
- Providing direct and indirect employment
Warehousing refers to storage of goods. The importance of warehousing arises when there is a gap between the time of production and the time of consumption. The warehouse means a static unit for keeping and storing goods in a scientific and systematic manner so as to maintain their original quality, value and usefulness. They are used by manufacturers, importers, exporters, wholesalers, transport business, customers etc., in India. Today’s warehouses become logistical service providers in a cost efficient manner.That are making available the right quantity, at the right place, in the right time, in the right physical form at the right cost. Modern warehouses are automated with automatic conveyors, computer operated cranes and forklifts for moving goods and also usage of logistics automation software’s for warehouse management.
Types of Warehouses
- Private warehouses: Private warehouses are operated, owned or leased by a company handling their own goods, such as retail chain stores or multi-brand multi-product companies.
- Public warehouses: Public warehouses can be used for storage of goods by traders, manufacturers or any member of the public after the payment of a storage fee or charges. The government regulates the operation of these warehouses by issuing licenses for them to private parties
- Bonded warehouses: Bonded warehouses are licensed by the government to accept imported goods prior to payment of tax and customs duty. These are located at sea port or air port.
- Government warehouses: These warehouses are fully owned and managed by the government. The government manages them through organisations set up in the public sector For E.g. Food Corporation of India, State Trading Corporation, and Central Warehousing Corporation.
- Cooperative warehouses: Some marketing cooperative societies or agricultural cooperative societies have set up their own warehouses for members of their cooperative society.
Functions of warehousing
The functions of warehousing are discussed as follows:
- Consolidation: In this function the warehouse receives and consolidates, materials/goods from different production plants and dispatches the same to a particular customer on a single transportation shipment.
- Break the bulk: The warehouse performs the function of dividing the bulk quantity of goods received from the production plants into smaller quantities. These smaller quantities are then transported according to the requirements of clients to their places of business
- Stock piling: The next function of warehousing is the seasonal storage of goods of some businesses. Agricultural products which are harvested at specific times with subsequent consumption throughout the year need to be stored and released in lots
- Value added services: Certain value added services are also provided by the warehouses, such as in mixing, packaging, labeling, grading etc…
- Price stablisation: By adjusting the supply of goods with the demand situation, warehousing performs the function of stabilizing prices. Thus, prices are controlled when supply is increasing and demand is slack and vice versa.
- Financing: Warehouse owners advance money to the owners on security of goods and further supply goods on credit terms to customers. Warehouse warrant or warehouse receipts etc… given by warehouse keeper as evidence of goods stored is used as security to get loans from financial institutions.