Cyclopedia of Commerce, Accountancy, Business Administration, v. 01 (of 10)

by American School of Correspondence

FREIGHT CLAIMS

Freight claims are an ever present source of annoyance. Every shipper, and practically every receiver, of freight finds it necessary to make claims against the railroads for freight overcharges, shortages, and damages to goods in transit. Some houses find occasion to make but one or two claims a year; others constantly have several claims on file, aggregating a large number each year, but no matter what the number, they must be given proper attention.

Handling freight claims is not one of the usual duties of the shipping clerk, nevertheless, it is a proper topic for discussion in connection with the subject of shipping. The traffic manager, when one is employed, handles the freight claims; otherwise the details are handled by some other minor official—as the cashier or the purchasing agent.

The adjustment of claims involves, usually, a large volume of correspondence, and requires a man of tact. He must possess patience and persistence to a marked degree. Diplomacy of a high order is necessary in his correspondence, and promptness is an important factor. Threats have little effect, other than to delay adjustment of the claim.

Before a claim is presented, all information pertaining to the case in possession of the claimant must be assembled, and all facts should be incorporated in the papers filed. A bill should be made against the railroad for the amount of the claim, and to this should be attached the freight receipt or other voucher. These papers should be accompanied by a letter giving a plain statement of the basis of the claim; if for an overcharge, the number of the tariff and the classification on which it is based should be cited. The claim papers should be as complete as it is possible to make them, presenting all facts having a possible bearing, otherwise they will be returned by the claim agent of the railroad for further information. Some of the questions asked by the claim agent may seem trivial to the claimant, but the answers are necessary to him in completing the files of his office. When claim papers are returned through the local freight office, the information asked should be given and the papers returned at once.

Claimants become very impatient over delays in the adjustment of their claims, forgetting that where they handle perhaps a dozen claims a year, the railroad claim agent must handle thousands, involving amounts ranging from a few cents to many hundreds of dollars. They also overlook the fact that a shipment has passed over several roads, and that before the claim can be adjusted, it must be ascertained on what road the damage was sustained. The different roads involved must adjust the claim between themselves, before they can tell where the money with which to pay it is coming from. The papers must pass through the hands of agents at all junction and transfer points, and the claim departments of all roads involved, before the claimant can expect a reply.

On the other hand, it is not good business to rely solely on the railroad. Claim papers sometimes repose indefinitely in the desk of some local freight agent, until brought to light by a persistent follow-up; occasionally the papers are lost. A follow-up of freight claims is, therefore, a necessity. The shipper who is most persistent in following up his claims, is usually the beneficiary of the most prompt service.

Railroads number all claims as received, and invariably refer to them by number. It is an excellent plan, therefore, for the shipper to adopt a numerical system for the purpose of identification. It is quite important that all correspondence relating to a claim be kept together, and this is best done by using a folder for each claim. The number of claims is so small that it is not necessary to use an entire drawer for claims; they can be accommodated in the front of a drawer used for regular correspondence.

Fig. 11. Folder for Freight Claims

The outside of the folder should provide for the name and address of the consignor or consignee, as the case may be, name of the railroad on which claim is made, the shipper's claim number, and the railroad's claim number, as shown in Fig. 11. In this folder, copies of the bill and of all letters to the railroad company should be filed. The folders are filed numerically, in the order of the shipper's claim numbers.

To follow up the claim, and to provide an index to the file of claim folders, a card, similar in form to the one shown in Fig. 12, should be used. This card provides for a complete history of the claim. At the head of the card is shown the name of the consignor or the consignee, shipping point, shipper's and railroad's claim numbers, dates of shipment, receipt, and filing of claim, the railroad on which claim is made, and the name of the claim agent. This is followed by a brief statement of the nature and amount of the claim. The two bottom lines provide for a record of the payment or rejection of the claim. All of the information most likely to be needed is found by turning to this card, without the necessity of consulting the correspondence in the claim files.

Fig. 12. Card for Follow-Up of Claims

The manner of filing the card depends somewhat on circumstances. The usual plan is to file alphabetically, under the name of the consignor, first grouping by railroads. If goods are received and shipped over but one road, all of the cards would be filed in one index. But if more than one road is used, an index card would be used for each road, and the cards arranged alphabetically back of the index cards of the roads involved. This arrangement brings the cards of all claims against one road together, which is a logical plan, since it is the railroad with whom the claimant is dealing.

Across the top of the card is a series of numbers, from 1 to 31. These represent the days of the month, and are used in connection with the follow-up of the claim. Metal tabs are placed over the dates on which it is desired to have the claim brought to notice—that is, if the claim is to be followed up on the 20th, a tab is placed over the number 20. On that day all cards with tabs over this number are removed from the file, and, after the claims have received proper attention, the tabs are moved forward to the next follow-up date, and the cards returned to the file.

Fig. 13. Record of Correspondence on Back of Follow-Up Card

A record of all correspondence in connection with the claim is made on the back of the card, which is ruled and printed for the purpose, as shown in Fig. 13. This constitutes a tracer which shows, without reference to the files, just what correspondence has been required in the adjustment of the claim.

When the number of claims on file is large, there should be another record which will show the amount of claims outstanding against each railroad. Of course, the card file gives this information, but some of the cards are very likely to be out of the file, so that the amount obtained by a recap of the cards at any time may not represent the correct total.

An account with each railroad can be kept on a card, as shown in Fig. 14. This card should be filed with the claim cards, immediately behind the guide card of the road. In effect, it is a ledger account, representing a contingent asset.

From an accounting standpoint, the proper method is to charge all claims to a claim account, crediting whatever account may be affected, at the same time charging the railroad on the card referred to above. If an overcharge has been paid on a shipment received, the entry would be:

Claim Account	$_____
In Freight	$_____

Fig. 14. Claim Account Card

When a claim is disposed of—paid or rejected—claim account receives credit, while the debit is to cash, or the account originally affected. Using the above illustration, if the claim is paid in full the entry is:

Cash	$_____
Claim Account	$_____

If the claim is rejected:

In Freight	$_____
Claim Account	$_____

Fig. 15. Register of Sales

Thus the claim account is a controlling account, the balance representing the total claims outstanding, and agreeing with the totals of the claims against the different roads as shown by the cards. Claim account represents a questionable asset, and should be so treated in the balance sheet, a liberal discount being made in the value represented by the account.