Collecting City Accounts
( Originally Published 1918 )
Location of Accounts
Accounts may be roughly divided into city accounts and out-of-town or outside accounts. City accounts as here considered are those located in the same city or town as the office of the concern to which the accounts are due. The general methods of collection are the same for both classes of accounts, but in some particulars they require different treatment. The present chapter will therefore consider the collection of city accounts, leaving out-of-town accounts for another chapter.
It is the almost invariable custom in the mercantile world to send a statement to the customer on the first of the month following the purchase of goods, and to list on this statement the goods purchased during the month, with the terms on which these goods were sold. As it is a custom to send out these statements, they do not have the effect of "duns," but are looked upon as merely memoranda of goods which have been purchased by, or charged against, the customers.
These statements give the customer the record of his purchases as they appear upon the books of the house. If, then, there is any error or misunderstanding on either side as to the goods purchased or the prices charged, such differences are discovered and can be adjusted at this point; and the matter being fresh in the minds of all those concerned, this can usually be done without arousing any ill-will on the part of the customer—something very desirable in this age of competition.
It is a frequent practice, and a practice to be commended in certain lines of business, to include with the statement a letter to the customer, or perhaps printed matter, calling attention to some special sale, or to a line of goods in which the customer might be particularly interested. This not only advertises the goods, but also conveys the impression that the dealer's interest does not end when he gets the customer's money—that he desires a continuance of the customer's patronage.
The First Statement
Unless there is some reason to the contrary, the statement of account is sent out on the first day of the month following the month of purchase. We will suppose that this gives the terms of the house as cash, which usually means that payment is due and expected within a reasonable time after the first of the month. Even though this is the case, some houses do not send out another statement until the first of the following month, particularly where the customers are so thoroughly good that there is no uneasiness as to the eventual payment.
It is here to be noted that the particular trade and the character and standing of the debtor, will influence the method by which an account is handled. In almost every trade there are special customs as to time, terms, payment, etc., which control; and the collector must be familiar with these before he is qualified to conduct his department intelligently. Also, in many cases, houses of known standing and reliability have their own payday on which their accounts are paid, and with these houses payment cannot be secured sooner without giving offense. In such cases it practically amounts to the purchaser fixing his own terms; but usually these terms are not far different from those of the house from which the purchase is made; and, the purchaser's trade being desirable, the selling house is willing to meet the purchaser's requirements as to terms. In such case a statement is sent on the first of the month, but no further attention is paid the account until the purchaser's pay-day comes round. If payment should not be made on this regular pay-day, the account will then require prompt attention, the delay indicating some oversight or other irregularity, or possibly a change of condition in the purchasing house.
Leaving out of consideration any special customs or cases, we will suppose that systematic and fairly close collections are the rule. In such case, at the time the first statement is sent out, a duplicate statement is put in the collection file ten days ahead, and this fixes the date when the account is. to be followed up if it is not previously paid.
The Second Statement
On or shortly after receipt of the first statement many customers will call and pay their accounts, or will send in remittances in settlement. When payment is thus made, the customer's duplicate statement is removed from the collection file; and as far as the collection manager is concerned, the transaction is closed. To those who do not pay up on or before the expiration of the ten-day period, a second statement is sent out. The fact that a second statement has been sent out, and the date on which it was sent, are noted on each of the duplicate statements, which are then once more filed ten days ahead. The second statement is not itemized, but gives merely the amount "As per statement rendered," this referring to the itemized first statement.
The Third Statement
The second statement serves as a reminder to the customer, and will usually bring in many remittances. To those who are still delinquent a third statement is mailed on the 20th of the month, and the facts are noted on the duplicate statement, which is then carried forward to the 30th in the collection file.
At the end of this third period the large majority of the accounts will have been paid, if credits were wisely granted. It usually happens, however, that a few ac-counts at least are found on which nothing has been paid, and which are still being carried thirty days after the due date, although no extension was granted.
Up to this point the customer has had no possible reason for taking offense, as nothing has been sent him but a bald statement of his account—merely enough to keep before him its condition. Something more strenuous is, however, clearly necessary with the accounts still unpaid, and the customer's duplicate invoice is taken from the regular files, placed in the past-due file, and a systematic and persistent follow-up is begun.
Nature of the Follow-Up
At this point some houses put the accounts in the hands of their collectors for personal attention. Indeed, some few houses still follow the practice, which used to obtain quite generally, of placing the account in the hands of their collectors as soon as the first statement has been sent out, or, in some cases, send out the first statement by their collectors. The practice is,. however, nearly obsolete, and as a rule is neither economical nor advisable. The business man of the present day is accustomed to receive his statements and remit in payment by mail, and, as long as he pays up promptly, is inclined to resent personal collections.
Where collection can be made by letter, the greater economy of this method is obvious. The letter—usually a form letter, even though written to the individual, and signed—costs but a few cents to prepare and deliver to the recipient. A collection in person, on the other hand, requires the time of a collector, and in most cases car-fare, and, save in the case of near-at-hand accounts, the expense is material. Nor are the results produced such as to justify the extra cost. Indeed, in many cases better results are produced by the use of letters.
The nature and number of the letters sent to delinquent debtors will be governed by the character of the business and the condition of the particular account. Form letters are sometimes used for this purpose, with blank spaces left for the insertion of name, amount due, and any other special data. Where, however, an account is material in amount, or the customer is a regular or important one, it is much better to have each letter written out on the typewriter, even though the wording is taken from form letters, and to sign it either with the name of the collection manager or with the name of the concern. When this is done the letter becomes in fact a personal letter, and it will receive far more consideration than would be accorded to a form letter, no matter how excellent.
Suggestions and forms for follow-up letters will be found in Chapters ix to XIV of the present volume. The number used in a series is seldom less than three or more than five. To send a greater number would seem to be worse than useless, as any debtor who can receive five logical, adequate, well-adapted, dunning letters, and not pay up in whole or in part, or make an adjustment of his account, or give an indication of financial vitality in some other way, will require something more forceful than letter-writing, if his account is to be collected.
Operation of the Follow-Up
When the time for an. active follow-up is reached, three statements have already been sent the delinquent debtor; his account is, nominally at least, thirty days over-due; and the first of the month has been reached. On this day the first letter is sent him, and if the follow-up is to be close, this is followed up on the 5th, 10th, 15th, and—if five letters are sent—10th of the month; or, in other words, the letters go out five days apart. The matter is then allowed to rest until the first of the following month. The debtor has now been given sixty days from the date of sending the first statement, and if neither payment nor any word of explanation has been received, the statement should be given to a collector, with instructions to see the debtor and bring personal pressure to bear. The number of delinquents for the collector to look after will usually be small, as the statements, together with the follow-up letters, are effective with all but the most difficult cases.
The work of the collector is considered more fully in Chapter XV, "The Collector and His Work." For present purposes it is sufficient to say that he must use every effort to see the delinquent customer, and, by direct request, argument, persuasion, and any other lawful methods, try to secure payment. If the customer succeeds in eluding the collector, or the conditions are such that the collector cannot see him, a special delivery or registered letter will sometimes impress him with the importance of settling up or explaining why he cannot settle up, or, better still, induce him to call at the store and thus give an opportunity for a personal interview.
The Personal Interview
If the debtor can be induced to call at the store, the collection manager has him on his own ground, and, before he gets away, should be able to make some adjustment of his account. It is obvious that the debtor has some income at least, that this will be spent, and that someone is going to get it; and the question is whether that someone will be the collection manager. He should keep firmly in mind the fact that the money is due—that the debtor is unjustly keeping it from the house; and he should not allow the debtor to take an injured air or in any other way place him at a disadvantage. The collection manager has a strong advantage in his surroundings and the conditions, and he should make the most of it.
In any such case the debtor is almost sure to start out with the usual hard-luck story, which may or may not be true. No matter whether it is true or not, the collection manager should take an interest in it, and let the debtor feel that he is sympathetic and disposed to be friendly. This will frequently lead the debtor to tell more than he had originally intended, and will thus give a better idea of the actual conditions, and show whether these really stand in the way of payment.
It is usually good policy to make no offers of compromise or adjustment, but take it for granted that the debtor will pay the full amount. There is a moral effect in this, for the debtor, feeling that the entire amount is expected, will frequently of his own accord suggest payment of a part. In such case he should be allowed to state just what he can do, and then such action should be taken as the conditions seem to indicate.
In instalment work the amount of the debt and the character of the debtor will necessarily influence the manner in which the account is handled. When an instalment debtor pays no attention to notices and letters, it is usually found that he is possessed of but little property, if any. As a rule such a debtor has no intention of defrauding the house he is dealing with, but finds it inconvenient, difficult, or at times impossible, to pay. Tact and judgment are necessary to realize on such an account; and it is usually a question of working the amount out.
Frequently—and particularly in the case of wage earners—it may be wise to arrange for very small weekly or monthly instalments. Let the exact amount to be paid in each instalment be clearly understood, as also the exact date on which these payments are to be made. If the amount of the instalments suggested by the customer seems smaller than he should make under the circumstances, the importance of larger payments should be urged upon him—payments which will relieve him of the liability more promptly and also give the instalment house its money sooner. Once an agreement is reached, let the debtor feel that it is really an agreement, and that the collection manager not only expects him to live up to it, but has implicit confidence that he will. Impress upon him the advisability of calling at once if any unforeseen reason comes up that might possibly prevent him from meeting any of the payments exactly as arranged.
Keeping in Touch with Delinquents
Another point to be impressed upon the instalment debtor at this stage is the importance of keeping the house fully informed of his exact address, street and number, as much valuable time is lost in tracing debtors who have moved and—though with no intention of evading payment —have failed to send their new address. It is a good plan to stamp on receipts, letters or other communications sent to instalment purchasers the following notice:
Please do not move without notifying us of your new address.
This suggestion may seem simple, but in practice it will be found a great aid in keeping in touch with small debtors of the "moving" class.
The collection manager's desk should be in close proximity to the cashier's window, so that he can see customers who call to make payments or for other purposes, and talk to them when he deems it necessary. If customers who call do not pay according to agreement, the cashier should acquaint the collection manager with the fact at the time, so that he can take the matter up at once with the debtor. This should be done in an unobtrusive manner that cannot give offense to the debtor; as, for instance, if a payment is not in accordance with the agreement, the cashier might quietly inquire of the collection manager if he had changed the conditions of Mr. So-and-So's payments, or if such a payment were correct. This is in accordance with the general principle that the debtor should never be unnecessarily antagonized or his feelings be hurt more than is necessary to insure collection. There are times when the "big stick" must be used in collecting, but it should not be used except when it is obviously necessary for the collection of the debt.