COLLECTIONS
The duties of the credit man are not ended when he has passed on the credit of a prospective customer; a very important duty follows, and that is to collect the accounts that he has placed on the books. He may assign the handling of collections to another, but the collection desk should be under the supervision of the credit man.
Fig. 13. Branch Office Credit Inquiry Blank
The handling of collections furnishes one of the most severe tests of the ability of the credit man; it calls for the exercise of a certain tact, not absolutely essential in any other work in business life. The successful collector must, first of all, be a good judge of character; he must be able to read character, and govern himself by what he learns of his customer's peculiarities. He must be a diplomat, with the happy faculty of smoothing out the rough spots, and satisfying the chronic kicker. While using judgment in granting special favors to the slow-pay customer, he must be able to differentiate between the temporarily embarrassed but able and honest debtor, and him who continually makes use of a hard-luck story to arouse sympathy and gain time; he must know when to be gently firm, and when to take vigorous action to save his house from loss.
One of the essential accomplishments of a good collector is the ability to write diplomatic letters. Collection correspondence is in a class by itself. The most valuable correspondent is said to be he who can write letters that sell goods. We have no fault to find with this statement, but prefer the way Mr. Cody puts it—"the ability to write letters that make people do things." The collection correspondent must be able to write letters that make people do things.
In a wholesale or manufacturing business, or any business that is not strictly local, practically all of the collections are made by mail, hence the subject of collection correspondence becomes of extreme importance. The extent to which letters are used is naturally governed by the ideas of the collector; by some they are used freely, by others as special appeals or duns only. One very successful credit man, who has handled the collections in one of the largest mercantile establishments in the country, gives it as his opinion that a letter should be sent with every request for payment—even with the monthly statement.
Except in unusual cases, specially dictated letters are not necessary; filled-in form letters answer every purpose—indeed it is claimed by many that carefully prepared form letters, designed to meet certain definite conditions, are superior to letters dictated in the ordinary rush of business. Forms can be prepared for different classes of customers, and to meet any of the contingencies likely to arise in the ordinary business. Form letters used for collection purposes should be exceptionally well printed, and great care must be used to secure ribbons that are an exact match for the body of the letter. There is nothing more calculated to make an unfavorable impression than a letter in which the date, name, and address fail by several shades to match the body.
The exact form of the letters must be varied to suit the particular business in which they are to be used; they will differ in manufacturing, wholesale, and retail lines, in a mail-order business, or for installment accounts. In a manufacturing business, for instance, a letter something like the following might be sent with the monthly statement.
Dear sir:
In accordance with our usual custom, we enclose a statement of your account as it appears on our books at this date. Will you kindly compare this with your records, and advise us of any discrepancies.
That we might be in a position to fill your orders promptly, we have kept our factory running on full time during the past few months, which has involved quite a heavy investment in material. We will, therefore, appreciate a check from you covering the amount shown to be due.
We will also appreciate a liberal order, which we can fill at once, as our stocks are unusually complete just now.
Very truly yours,
Such a letter leaves a very much better taste than please remit stamped on the statement, and yet it plainly asks for a remittance. There is something about the letter that savors of the personal appeal, and gives the debtor the feeling that a special accommodation is being asked, which he should make an effort to grant.
If the first letter fails to bring a response, it should be followed up. The second letter, following the first in about 10 days, might be as follows:
Dear sir:
A few days ago we sent you a statement of your account, showing a balance of $——, of which $—— is past due.
Not having heard from you, we assume that the account is correct, and that it will be satisfactory to you to have us draw on you on the 15th.
In the meantime we will be very pleased to fill your order for any of our goods that you may need.
Very truly yours,
A letter of this kind rarely fails to bring a goodly percentage of remittances. The mere suggestion of a draft often has the desired effect. The average merchant dislikes to have a draft presented; he feels that it has a tendency to injure his credit with the very man whom he may be obliged to ask for an accommodation—his banker. The polite request for an order acts as a sugar coating which covers the suggestion of a dun, and leaves the recipient in a pleasant frame of mind.
The second paragraph of the above letter does not contain a positive statement that a draft will be made, nevertheless, such a course is hinted at, and, unless a communication of some kind is received, the draft should invariably be made on the date specified. The customer should be taught that the collector means just what he says; any other course indicates a lack of sincerity, and gives the customer the feeling that these notices are not to be regarded seriously.
On the other hand, it is possible to go to the opposite extreme in the use of drafts. The writer has in mind a business man who had a habit of sending statements of all accounts the first of the month, without a letter, and following these with drafts about a week later. Many times these drafts were made before it was possible for a remittance in response to the statement to reach him, which caused hard feelings, and the loss of many customers. It is the custom of many firms to pay all bills on a certain day of the month—a fact which the observant collector quickly notes, and governs himself accordingly in the matter of sending drafts.
When a draft is returned, a letter should be written immediately; and in this letter a little sharper tone is justifiable. The following is a good sample of a letter to be used at this point:
Dear sir:
We are disappointed to find that you have allowed our draft to be returned unpaid, as we had counted on this amount to help in meeting our current obligations. While the amount of your indebtedness is not large, the aggregate of the many small accounts makes up the large amount outstanding on our books, and to not receive the amount when due, causes us considerable embarrassment.
As you know, our terms are strictly 30 days net. We must insist on receiving prompt payment when bills are due; our prices are figured on this basis, and our arrangements for meeting supply bills and pay-rolls are dependent on the prompt payment of bills by our customers.
Your total indebtedness to us is $——, of which $—— is several days past due. We would appreciate a remittance of the entire amount, but must insist on the immediate payment of the amount past due. Failing to receive either a remittance or your note, by the 23rd, we will again draw on you, and shall expect you to pay the draft when presented.
By the way, our Mr. Jackson reports that he has failed to secure an order from you on his last two trips. Now if you have any cause for dissatisfaction, we would like to have you tell us, as we are more than anxious to please you, and would certainly appreciate your future orders.
Very truly yours,
One point in this letter, to which special attention is called, is the absence of the word dishonor. Technically, when a draft is not paid it is dishonored, but the word has an ugly sound; the word unpaid is less harsh, yet conveys the desired meaning. While it is sometimes necessary to be quite emphatic, nothing is gained by adopting a tone calculated to arouse the antagonism of the debtor. The time-honored axiom that "More flies can be caught with sugar than with vinegar," is given a special force when considered in connection with collection letters.
Naturally, these letters must be varied to suit the business, the season, and general trade conditions. They are not submitted as models, to be used under all circumstances, but to impart an idea—the idea of tone, the sugar coating which is so essential in keeping the recipient in the right frame of mind. Politely request, ask plainly for what you want, firmly demand, but never threaten until you are prepared to carry out your threat. This is a safe rule to follow in handling collections.