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Collection Letters For Larger Accounts

( Originally Published 1918 )



Handling Larger Accounts

The larger the amount involved, the more care should the credit man exercise in extending credit. On the other hand, customers who wish the larger credits are usually better known and more easily looked up, and the larger account should therefore be a surer risk than the small one. Once credit is granted, however, it is the duty of the collection manager to see that the accounts are paid with reasonable promptness and that the house incurs no loss through any negligence or over-confidence of his.

Illustrative Letters—First Series

As in the case of any other account, the collection manager sends out his statement on the due date. Fifteen or thirty days later, or at such other interval as the policy of the house may determine, a second statement goes forward, and even a third, before anything more aggressive is done.

When the end of the statement period has been reached, a collection letter is sent out calling attention to the account. Until the contrary is proved, it is presumable that the customer is a desirable one, and, while all the letters should be courteous and politic, the first two or three must be phrased with special care to avoid giving offense. The problem at this stage is to get the money promptly, but to do it without driving away or even ruffling the feelings of sensitive customers.

The following first letter is strongly suggestive, but is friendly in tone and should not give offense:

NEW YORK, June 1, 1913.
MESSRS. JOHN H. DAVIS & Co.,
718 Sansom Street,
Philadelphia, Pa.

Gentlemen:

Did you receive our statement of account sent you on the 1st? You may, of course, have postponed its consideration, but you are always so regular in your remittances that we think the statement must have gone astray. If so, we shall be glad to send you a duplicate.

Yours very truly,

MEDFORD SHOE CO.

This serves as a reminder, and, where the concern is first-class, will usually bring a response of some kind. If the customer is new, the explanation that he pays his accounts regularly must, of course, be modified. In such case the following phrase might be substituted: "but we know so well your reputation for promptness that we think the statement must have gone astray."

If no response is received to the first letter, the next letter of the series will follow at the proper interval.

NEW YORK, June 15, 1913.
MESSRS. JOHN H. DAVIS & Co.,
718 Sansom Street,
Philadelphia, Pa.

Gentlemen:

Can you not send us a remittance in settlement of your May account, or let us have a part of it, at least? We are always glad to get money, but we can use it to such great advantage right now that we shall appreciate a remittance much more than ordinarily would be the case.

We know you will understand the situation and shall hope to hear from you by return mail.

Yours very truly,

MEDFORD SHOE CO.

A concern of any credit standing will hardly let these two letters pass without notice. If neither remittance nor reply is received, more vigorous measures are necessary. The following letter may then be used:

NEW YORK, July 1, 1913.
MESSRS. JOHN H. DAvIs & Co.,
718 Sansom Street,
Philadelphia, Pa.

Gentlemen:

We have written you twice in reference to your account and are still waiting for a reply. More serious than this, we are still waiting for a remittance.

As you are aware, your account is much overdue, but you have not given any reason for your failure to remit. If anything is wrong, let us know at once. If not, we shall expect you to send us a remittance in full, or in part, by return mail.

If we do not hear from you by the 10th, we shall draw for the amount.

Yours very truly,

MEDFORD SHOE Co.

If this letter does not secure attention, a draft will, of course, be drawn on the specified date. Frequently a letter is sent at the same time, notifying the customer that the draft has been drawn. Such a letter is, of course, entirely proper, and in some cases will undoubtedly have a good effect. As, however, the debtor has already been notified that the draft will be drawn, a second letter can hardly be considered necessary.

If the draft is returned unpaid, a fourth letter might be written, as follows:

NEW YORK, July 25, 1913.
MR. JOHN H. DAVIS & Co.,
718 Sansom Street,
Philadelphia, Pa.

Gentlemen:

We have written you three times in reference to your account of $325, which is long overdue. We have drawn upon you for the amount. Our letters have been unanswered and the unpaid draft is returned with the indorsement, "No attention."

Why do you ignore the matter? We trusted you with our goods, and your failure to pay us or even to explain your failure is not courteous or even strictly honest.

It still seems to us there must be some misunderstanding in the matter, and we hesitate to involve you in the expense and injurious publicity of collection by legal process unless you force us to do so.

If you can remit even in part, we shall be glad to extend you every possible consideration, but, unless we hear from you in some way before August 1st, we shall place the matter in the hands of our attorneys.

Yours very truly,

MEDFORD SHOE CO.

When the account reaches this point, considerations for the customer's feelings have but little weight; and the account is to be collected in any way that is most effective. Special letters may be tried, or the account be placed at once in the hands of an attorney or collection agency. Such customers are obviously undesirable, save on a cash basis; and if they are handled in a businesslike way, they are just as likely to come back to the concern for their cash purchases—unless they can find someone else who will give them credit—as to go elsewhere.

Illustrative Letters—Second Series

The following somewhat short and summary method of dealing with accounts is employed by a well-known New York concern dealing largely with jobbers. A statement of goods purchased is given the customer at the time the purchase is made. The terms of payment are in-variably thirty days.

No statement is sent out on the due date, as the customers are themselves supposed to keep track of accounts payable. If, however, a remittance is not received within ten days of the due date, a statement is sent out with the following brief letter:

NEW YORK, June 15, 1913.
MR. MILTON A. HARLOW,
816 Euclid Avenue,
Cleveland, Ohio.

Dear Sir:

Please find enclosed statement of your account, due on the 5th. Will you kindly remit in settlement of same?

Yours very truly,

WARDWELL MANUFACTURING CO.

This suggestion is sufficient in most cases to bring in a remittance. If nothing is heard from the account within ten days from the time the statement and letter go out, a second letter is written, also enclosing a statement of the account.

NEW YORK, June 25, 1913.
MR. MILTON A. HARLOW,
816 Euclid Avenue,
Cleveland, Ohio.

Dear Sir:

We enclose herewith statement of your account, which is now twenty days overdue. We shall appreciate an immediate remittance.

Yours very truly,

WARDWELL MANUFACTURING CO.

If this letter does not bring in the desired remittance, ten days later—or sixty days from the date of purchase and thirty days after the due date of the account—a third letter and statement are sent to the delinquent customer. This letter is concise and to the point, and reads as follows:

NEW YORK, July 5, 1913.
MR. MILTON A. HARLOW,
816 Euclid Avenue,
Cleveland, Ohio.

Dear Sir:

As you will note from the enclosed statement, your account is now thirty days overdue. We do not wish to embarrass you in any way, but, if your remittance is not received by the 15th of this month, we shall be forced to place the account in the regular channels for collection.

Yours very truly,

WARDWELL MANUFACTURING CO.

The "regular channels for collection" are in this case the concern's attorneys.

The whole series takes a very businesslike stand that the money is due and there is no reason it should not be asked for, without softening the request or using equivocation of any kind. The general results are satisfactory, as out of a total business of over $ 1,000,000 a year, the average annual losses from bad debts do not exceed $250.

Illustrative Letters—Third Series

The following series of collection letters does not cloak nor conceal in any way the fact that money is due and that the concern wants it, any more than do the summary letters of the preceding series. In this case, how-ever, most of the customers are fairly well known to the house, and the personal element is utilized to assist in the collection. The series, as will be recognized, would not be suitable for use in many cases, but with a certain class of customers will be found very effective.

DETROIT, Mich., May 1, 1913.
MR. JAMES HARRIS,
36 Lincoln Avenue,
Milwaukee, Wis.

Dear Mr. Harris:

Our manager recently made a careful examination of accounts on our books and reported that the aggregate amount now outstanding is more than we are justified in carrying. It has therefore been deter-mined that all past-due accounts must be brought up to date. A formal notice to this effect will be sent out in a few days.

Knowing that you are amply able to take care of the small balance of $75 past due on your account, and not wishing you to be annoyed in any way in the matter, I am writing now to inquire if you cannot mail us a check for $75 before the loth.

If you can do this, it will be a personal favor to me, as I am to some extent held responsible for the condition of the accounts, and it will keep your name out of the past-due list on our books.

Trusting you will make a special effort in this instance, I remain Yours very truly,

JOHN H. MARTIN,

Cashier.

This letter is intended to give the debtor the impression that the cashier is taking a friendly interest in his welfare, and is conferring a favor in notifying him of the condition of his account, so that payment may be made and his credit be kept in gilt-edge shape. It is an easy, friendly tip; and the most sensitive customer should not take offense. At the same time the predominant feature is the fact that payment is desired.

If the first letter produces no results, a second letter follows at such interval as may be deemed advisable.

DETROIT, Mich., May 15, 1913.
MR. JAMES HARRIS,
36 Lincoln Avenue,
Milwaukee, Wis.

Dear Sir:

Your attention is called to the enclosed statement of your account. While the amount is not large, a remittance at the present time will be very acceptable to us, as we have several heavy obligations coming due on the 25th of the month, for which we must be prepared.

Ordinarily we should be glad to extend you longer credit, but the growth of our business has been so rapid that we need all the cash we can collect to keep pace with its demands, and your remittance will play its part.

We shall therefore rely on receiving the balance due on your account not later than the 25th inst.

Yours very truly,

STANLEY-HOWARD CO.

This letter is no stronger in itself than the first, but has the added strength of coming direct from the firm. The need of ready cash is its excuse for writing, and the letter is in much the same general tone as the first of the series. It may, however, be criticized on the ground that it is bad policy to disclose to customers the weakness of your own firm—supposing that such a weakness does in fact exist. This objection holds good as a rule; but such a letter as the above is intended for cases where the debtor is perfectly familiar with the standing of the firm to which he is indebted, and its object is to get the money from him without giving him offense.

If letter No. 2 does not result in a remittance or an explanation of why a remittance is not sent, another letter follows.

DETROIT, Mich., June 1, 1913.
MR. JAMES HARRIS,
36 Lincoln Avenue,
Milwaukee, Wis.

Dear Sir:

Greatly to our surprise, we find it again necessary to call your attention to the balance due on your account. We feel that you must have overlooked the matter, as we know from experience your usual promptness of payment.

We wish to be entirely frank with you and assure you again that it is of the utmost importance that you give this matter immediate attention. As stated in our letter of the 15th, we need the money.

Remembering our pleasant relations in the past, we shall look with confidence to the receipt of your remittance on the loth of this month.

Yours very truly, .

STANLEY-HOWARD CO.

If this letter is not followed by a remittance or an explanation of some kind, something is wrong. As will be noted, the first three letters are an appeal, not a demand. They give the customer a chance to "save his face," if he will, and settle up the account without injury to his credit and with friendly feelings on both sides. If, how-ever, he pays no attention to these courteous letters, it is time to change tactics and to state in a straightforward and unequivocal manner that the account must be settled. The following letter does this :

DETROIT, Mich., June 15, 1913.
MR. JAMES HARRIS,
36 Lincoln Avenue,
Milwaukee, Wis.

Dear Sir:

We have written you several times in reference to your overdue account, but have not received the courtesy of a reply. We do not understand your silence in the matter and must now insist upon your immediate attention. We shall expect you either to remit at once or to advise us if there is any reason why you should not or cannot do so.

Yours very truly,

STANLEY-HOWARD CO.

If this more peremptory letter does not produce results, the following letter may be used. Its suggestive discussion of legal proceedings is frequently effective.

DETROIT, Mich., June 25, 1913.
MR. JAMES HARRIS,
36 Lincoln Avenue,
Milwaukee, Wis.

Dear Sir:

We are forced to infer from your continued refusal to answer our letters that you would evade payment of your indebtedness to us if you could. You cannot. The amount is justly due us, and merely because we have been so considerate you must not imagine that we are going to let the matter drop, or that you can longer ignore it.

You may think that you are beyond the reach of the law, but this is a mistake; and, if you do not remit or write us at once, we will institute proceedings. This will add court costs to our claim, and, in addition, involve you in the injurious publicity of a suit.

We have no desire to misrepresent the matter in any way, but we really believe that if you fully understood how much this small claim will cost you if it is collected by legal procedure, and the injury to your credit which will surely result, you would forward the amount to us at once and thus avoid the necessity of a suit.

Yours very truly,

STANLEY-HOWARD CO.

If this letter is ignored, the following final letter may be used. Employed with judgment, it will save many a lawsuit. It is written in legal phraseology, and the letter paper on which it appears should have the name of the writer printed in the upper left-hand corner. It is usually signed by someone connected with the concern whose name is not known to the customer. This gives the impression that the party writing the letter is outside the business. The customer may think the writer an attorney, though the letter does not so state. The tone of the letter is peremptory and gives the customer unmistakable notice that legal proceedings are about to be instituted. While it savors strongly of the law, it is so worded as not to violate the postal laws or any of the state statutes. It is not a threat, but merely a statement of facts, i.e., that unless the claim is paid, it will be turned over to the legal department for action.

THOMAS B. McCLELLAN

DETROIT, Mich., July 5, 1913.
MR. JAMES HARRIS,
36 Lincoln Avenue,
Milwaukee, Wis.

Dear Sir:

You will now take notice that the Stanley-Howard Co. claims that you are indebted to them in the sum of $75, and that although duly demanded, the sum has not been paid nor any part thereof.

Now, therefore, unless you remit or appear in person or by attorney at the offices of the said Stanley-Howard Co., 275 West Fort Street, Detroit, Michigan, at or before 3 o'clock in the after-noon of the 15th day of July, A.D., 1913, and make payment to the Stanley-Howard Co. of said claim, with interest thereon, or provide for the adjustment thereof, the account will be turned over to the Legal Department to institute such proceedings as are made and provided under the laws of the State of Michigan.

Respectfully,

THOMAS B. MCCLELLAN,

for STANLEY-HOWARD Co.

If this letter produces no results, the matter had better be placed at once in the hands of an attorney.

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