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Collection Letters For Petty Accounts

( Originally Published 1918 )



Small Accounts Unavoidable

It is obvious that a small account does not require the same treatment, and will not justify the trouble and expense, which are properly given to the collection of more substantial accounts. In almost every business some of these small accounts are found, and in many cases their total is formidable. Indeed, in some lines the small ac-count is the mainstay of the business, the number and aggregate amount of all compensating for the small amount of each.

It is true in many cases that these small accounts are more trouble than they are worth, but it is impossible to avoid them. Speaking generally, if the dealer gives credit at all, he cannot discriminate between large and small accounts. As a matter of fact, he is practically forced to bring accounts on his books which he knows, at the time, are not justified by the profits of the immediate transaction.

As small accounts are a necessary evil, it behooves the dealer to devise some means by which they may be handled effectively, and with the least trouble and expense. As a rule, such accounts must be closely watched. If they are not, the customer forgets or neglects them; and they drag along until there is danger of his becoming irritated by the efforts of the concern to collect, or—which is even more serious—alienated by the mere disagreeable fact that the concern holds a long overdue account against him.

It must be remembered that no cast-iron rule can be made for the collection of accounts. The matter is one to be governed largely by conditions. The general rule in small accounts is to collect closely, but thoroughly good customers will frequently allow small accounts to run for months. They have neither forgotten the obligation, nor intend to evade it. As far as they are concerned the matter is one of small importance, and it is merely a matter of waiting until the spirit moves them. Of course, the dealer might make his rule rigid, or, in other words, take the position that if people wish to buy from him they must do so in accordance with his regulations; but the majority of dealers cannot, if they would, afford such independence. Too many good customers would go to more accommodating dealers elsewhere.

Close Collections

Much judgment should be employed in using any set of collection letters where the customers are good and well known. Many houses never send letters out to such customers at all, relying upon monthly statements and their confidence in the individual. As a rule this confidence is not misplaced, though the necessity and the wisdom of the proceeding is open to question.

The whole matter is one of custom, of circumstances and of discretion. Where customers are used to being followed up closely, and it is properly done, they seldom object to it. New customers, used to longer terms or slacker methods in other stores, may perhaps object at first; but if the service and the goods supplied are as excellent as the collections are close, these new customers will usually fall into line and keep their small accounts well paid up.

Where a house has gotten into easy-going methods—where their customers are habitually allowed long and uninterrupted time—where, in short, accounts are practically left to be settled at the convenience of the customer—any change of practice is extremely difficult and is very liable to give offense. In such case, if a more systematic method of collection is desired, it will require a great deal of explanation, of care, and of tact; and even then some good customers will probably be offended and leave—temporarily at least. When such a change is to be made, if it can be reasonably explained by some circumstances, as, for instance, the introduction of a new system of bookkeeping, or a change in the organization of the concern, it makes the matter much easier and less offensive to the customer.

Illustrative Letters—(1) Good Customers

This series was prepared for use where the customers are well known to the concern giving them credit, and are in the main thoroughly good pay. Accounts are considered due on the first of the month following that in which the purchases were made; and an itemized statement is sent out on that date. If the customer does not respond within ten days, a first letter is sent out calling his attention to the account. The first paragraph of this letter is the same for all "first" letters; the second paragraph is "voiced" to suit the occasion, as in the following example, or is at times omitted entirely :

June 10, 1913.
MR. HENRY PEARSON,
198 Pelham Avenue,
New York City.

Dear Sir:

In looking over our books, we find a small charge against you of $2.50 for goods purchased during May. We are sorry to trouble you with so small a matter, but we always like to get these small accounts closed up as near the first of the month as possible. Will you not kindly send us the amount?

Or, better still, can you not bring it in yourself? We should be glad of the opportunity to show you something interesting in loose-leaf ledgers—something quite new, and, we think, much more convenient than the ledger you are now using.

Yours very truly,

JOHNSON & AMES.

This is entirely friendly and could not offend the most sensitive. With a good customer it is very apt to produce a remittance or call. If it does not, the following letter is sent out about ten days later, with a stamped and ad-dressed envelope enclosed for reply:

June 20, 1913. MR. HENRY PEARSON, 198 Pelham Avenue, New York City.

Dear Sir:

The small amount due us on your May account—$2.50 for a half-bound ledger—has not yet been paid. Probably it has been overlooked, or perhaps you are waiting to bring it in yourself. In any event, we are perfectly willing to wait until you are ready to settle the matter, but we should like to know when this will be, in order to avoid the annoyance to you and the expense to us of unnecessary reminders.

We are enclosing a return addressed envelope. If you do not care to settle the matter now, will you kindly advise us just when you will do so?

Yours very truly,

JOHNSON & AMES.

This letter, again, can hardly give offense and should bring a remittance—or a date. If no attention is paid to it, the following letter may appeal to the debtor's sense of humor, and should produce results:

June 30, 1913.
MR HENRY PEARSON,
198 Pelham Avenue,
New York City.

Dear Sir:

Your May account-$2.50-is still outstanding and is giving our bookkeeper much concern. He has been figuring very diligently and now lays before us the following estimate of expense in connection with the account:

One statement 04
Two letters at 6c. each 12
Present letter 06
Total 22

In other words, he says it has already cost us 22 cents to collect $2.50-and the $2.50 is not collected yet. Will you not relieve him from further calculations and ourselves from further expense by a remittance?

Yours very truly,

JOHNSON & AMES.

If this letter does not secure attention, the account, if in the city, had better be placed in the hands of a tactful collector for personal effort. Or, if the house deems payment more important than a continuation of the customer's patronage, a rough-shod letter might be written that would either shame him into paying or drive him away completely. Out-of-town accounts might at this stage be drawn upon—after notice.

As a rule, a customer who lets a small account of this sort run without attention of any kind to letters in regard to it, is not a good risk and had better be dropped from the list. It does, however, sometimes happen that a really worth-while customer lets the matter run over through neglect, or because he feels so sure of his standing with the house that he makes it await his entire convenience. Even in this case he should answer the second letter of the present series.

Illustrative Letters—(2) Insistent Collection

The following series of collection letters was designed for a business much the same as that just considered, in which the customers are good for the most part, but neglectful of their small accounts. Collections are closer and more insistent than in the preceding series, and much less care is taken to avoid offense. It is assumed that the accounts are due and that there is no reason why they should not be paid; and payment is asked for frankly and with some measure of bluntness. Payment is due on the first of the month for purchases of the preceding month.

On the first of the month a statement goes out. If no attention is paid to this, the following letter is sent out on the 15th:

May 15, 1913.
MR. WILLIAM COLE,
13 State Street,
Trenton, N. J.

Dear Sir:

Statement of your account was sent you a few days ago, but we have heard nothing from you. The amount due us-$7.50-is small, and doubtless the matter has been overlooked. We would not bring the matter up again so soon were it not for the fact that we carry a large number of these small accounts on our books, and delays in settlement make us some little expense and a great deal of trouble.

We know you will appreciate this fact, and we trust you will send us a remittance by return mail.

Yours very truly,

ELLIS STATIONERY CO.

If this letter does not bring a remittance or a reply, fifteen days later—or sooner if closer collection seems advisable—the following letter is sent out:

DETROIT, Mich., May 30, 1913.
MR. WILLIAM COLE,
13 State Street,
Trenton, N. J.

Dear Sir:

We wrote you on the 15th, asking for a remittance in settlement of your overdue account of $7.50. We do not wish to annoy you by too great insistence in the matter, but, as you can readily understand, delay in payment means expense and trouble for us, not justified by the size of the account.

Will you not save us any further correspondence in the matter by sending in your remittance?'

Yours very truly,

ELLIS STATIONERY CO.

If this letter does not produce results, the account is usually placed in the hands of a collector for personal effort. If too remote for this, a letter, followed by draft, is tried.

DETROIT, Mich., June 19, 1913.
MR. WILLIAM COLE,
13 State Street,
Trenton, N. J.

Dear Sir:

We have sent you statement and have written you twice in reference to your overdue account of $7.50. Neither statement nor letters have received any attention. If there is any reason why the account should not be paid, we shall be glad to know it. If there is not, we shall expect a remittance.

If we do not hear from you by the 20th, we shall draw upon you for the amount.

Yours very truly,

ELLIS STATIONERY CO.

If neither this letter nor the draft brings any response, the following letter has been found very effective:

DETROIT, Mich., July 1, 1913.
MR. WILLIAM COLE,
13 State Street,
Trenton, N. J.

Dear Sir:

We have an account against you of $7.50 for goods which you have received. We have sent you statements of account and have written you requesting payment. We have also drawn upon you for the amount. Our letters have received no reply. Our draft is returned unpaid.

In the history of our business we have found that there are two classes of men who treat our accounts in this manner : First, those who are entirely honest and fully intend to pay us, but who are slow getting round to it or are forced by circumstances to delay; and, second, those who are plain deadbeats and have no intention of paying unless they are forced to.

We believe you to be of the first-named class, but unless we hear from you immediately with a remittance or with an explanation of your failure to pay, we shall be obliged to treat you as though you belonged to the second class, and put the matter in the hands of an attorney in your vicinity for collection.

We shall wait until July loth before taking this action, and trust, for your own sake as well as ours, that we may have some word from you before that time.

Yours very truly,

ELLIS STATIONERY CO.


Illustrative Letters—(3) Corporation Accounts

In the business in which these letters are used the amounts are small, and the customers are usually excel-lent credit risks. In fact, they are largely found among the well-known and responsible corporations of the country.

Purchasers of this calibre are very apt to have their own rules as to payment of accounts. In some cases small accounts are paid the following month. Others take 30, 6o or 90 days. In all cases they wish accounts to pass through their regular routine, whatever it may be. Hence, even though the nominal terms of sale in the creditor's business are cash on the first day of the month following that in which the purchases were made, the ordinary rules for close collections are not applicable. A close follow-up would undoubtedly in many cases induce a prompt payment; but it would inevitably alienate the customer. In other words, the purchasers recognize the fact that they are desirable customers, and must be dealt with on their own terms or not at all.

In following up customers of this character it is obvious that letters must bring the personal note into play. The amount at stake is a small one for both parties, and, if the account is correct, will usually be paid without question when the pay-day of the customer is reached. All that is needed is to keep the account before the customer so that it is not overlooked or neglected. The various persuasive, forceful and ingenious letters written to individuals and concerns of less certain standing are entirely out of place.

In practice, on the first of the month on which the account is due, a detailed statement is sent the customer. Nothing further is done that month. If the customer likes to remit, well and good. If he does not, no special notice is taken of the fact until the first of the following month. On this date a second statement is sent out, on which is stamped:

PLEASE REMIT.

Or, if a little greater urgency is deemed advisable

PAST DUE!

PLEASE REMIT.

This winds up the collection procedure for the second month, the accounts running over until the first of the following month, or sixty days from the due date. A short statement is then sent out accompanied by the following very simple collection letter:

NEW YORK, May 1, 1913.
HOWARD MANUFACTURING CO.,
79 Calvert Street,
Baltimore, Md.

Gentlemen:

We are enclosing herewith statement of your account, which is now overdue. The matter is a small one, and we suppose it has been overlooked. We shall greatly appreciate a remittance by return mail.

Yours very truly,

HARLEY-WILSON PAPER CO.

With accounts of this character, if the customer acts at all, it will be to send in his remittance. The matter is not of sufficient importance for him to write unless perhaps there is some error in the charge. In such case he is very apt to voice his objections, and, if he does, his complaint should be taken up at once and the matter be adjusted then and there.

If the foregoing letter does not produce any result, the matter rests until the first of the following month, when the account is ninety days overdue. The second letter of the series then goes out:

NEW YORK, June 1, 1913.
HOWARD MANUFACTURING CO.,
79 Calvert Street,
Baltimore, Md.

Gentlemen:

We have not yet received a remittance in settlement of the account against you. The amount is small—$7—but it is expensive and trouble-some to carry these small accounts so long, and we shall hope to receive a remittance in settlement by return mail.

If this does not reach us by the loth, we will draw upon you at sight for the amount.

Yours very truly,

HARLEY-WILSON PAPER CO.

If this letter does not produce a remittance or a reply of some kind, a draft should be drawn upon the loth, or such other date as may have been specified. Unless the concern is a very poor risk, or otherwise has some grievance in respect to the account—in which case the draft will probably provoke a letter of some kind—the draft will be paid. If it is not paid, a short letter is written somewhat in the following style:

NEW YORK, June 15, 1913.
HOWARD MANUFACTURING CO.,
79 Calvert Street,
Baltimore, Md.

Gentlemen:

We have written you twice in reference to the amount due us. These letters have not received the courtesy of a reply. We have drawn upon you and the draft has not been paid. If we do not hear from you by the 20th, we shall place the account in the hands of our attorney.

Why should you subject us to this expense and yourselves to injury to your credit to postpone payment of this very small amount? The account is long overdue. Why not send us a check?

Yours very truly,

HARLEY-WILSON PAPER CO.

If this letter does not produce results, the account might as well be placed in the hands of an attorney or collection agency at once. The concern is, under such circumstances, undoubtedly poor pay; and the size of the amount hardly justifies further direct effort.

Illustrative Letters—(4) Indorsement Plan

In a business such as considered under the preceding series of letters, the same effect is secured almost if not quite as well by means of rubber-stamp indorsements on the statements. The customers are thoroughly good—with a very few exceptions--and the admonition of the rubber stamp will bring the matter to mind almost as effectively as would a collection letter.

Under this plan the first statement is sent out on the first of the month following the purchase, i. e., the due date of the account. The second statement is sent out on the first of the second month, thirty days after the ac-count is due, with the following indorsement stamped upon it :

ACCOUNT PAST DUE !

A remittance will be appreciated.

If this produces no result, on the first of the third month, when the account is sixty days overdue, a statement is sent out indorsed as follows :

ACCOUNT 60 DAYS OVERDUE!

Please remit.

A blank is left in this stamp where the number of days appears and the "6o" is filled in at the time the stamp is put on. As the stamp is always used at the 6o-day period, the number 6o might be incorporated in the stamp itself, but the insertion of the number gives a personal touch that has a certain value.

If no attention is paid the 6o-day statement, a third statement is sent out fifteen days later, stamped as follows:

ACCOUNT 90 DAYS OVERDUE !

We shall draw if remittance does not reach us before the ...............

The numbers are filled in on this stamp with the pen, as before. If this statement does not produce the desired effect, a draft should be drawn on the stated date, and, if this is returned unpaid, the matter is one for the concluding letter of the preceding series, and thereafter for collection by legal proceedings.

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