SOURCES OF INFORMATION
The usual sources of credit information are the mercantile agencies, reports from local correspondents, reports from traveling salesmen, and merchants' associations or credit reporting agencies.
Mercantile Agencies. Of these sources, perhaps the best known and most widely used by manufacturers and jobbers, is the mercantile agency. The mercantile agency is the outgrowth of a necessity. About the year 1840, a few New York merchants formed an association for the interchange of credit information. Later, this became a business conducted by individuals who charged a small fee for written reports.
The business has grown to such proportions that a single agency requires about 200 offices, located in the principal cities throughout the world. In the territory of each office, which is presided over by a manager, correspondents are employed, and at certain seasons country reporters traverse every district, gathering data to be forwarded to the branch offices. Every court house in the United States has its paid correspondent, who promptly reports any action—as the filing of suits, recording of mortgages, or entering of judgments—that might affect the credit risk of any business man in the country.
Some idea of the magnitude of the business, and the task of gathering statistics, can be gained when it is considered that the books of a single agency contain the names and ratings of about 1,500,000 persons. About each of these individuals, the latest data collected by the reporters is on file in the various branch offices.
Delays in securing information is one of the most common complaints against the agency service, but the service is probably as prompt as can be expected. Suppose a request for a special report is received this morning. First, the information on file is copied, and proofread to guard against errors. This is sent to the subscriber, but if it is not of a recent date he is advised that further information will be forwarded. Or, there may be no data on file, in which event a reporter is assigned to the case. He may be obliged to make several calls before finding his man, and when found, the man may be reluctant about giving information. If real estate is listed, the real estate man must look up the title and mortgage records. Thus, two or three days may elapse before it is possible to furnish the report.
Some complaint is heard that reports furnished by the agencies are not sufficiently specific—which is probably true in many cases—but it is often quite difficult to obtain information on which positive statements can be based. On the whole, the service of the agencies is of very great value to the subscriber. As to its defects, the best way to overcome them is for the wholesaler to establish a credit organization of his own, to supplement the service of the agency.
Local Correspondents. If the matter is properly handled, much valuable information can be secured from local correspondents. The banker, or a local attorney, is in a position to make confidential reports on local merchants. In fact, the agencies secure much of their information from this very source.
But, in establishing local correspondents, the exercise of good judgment is necessary. The local attorney should not be expected to furnish information without pay, or to go into details that would not be asked of an agency charging $100.00 a year for the service.
An attorney has favored us with a blank sent out by one wholesale house, on which he is asked to make a complete report. Among other information requested, the blank calls for the value of merchandise, realty, cash, total worth, liabilities, and numerous references to his character, habits, etc. Following this statement is the question, "if not paid, can you collect?"
Here is a very complete statement, to compile which would require several hours' research, but without a single suggestion that the attorney will receive pay. And then he is asked if he can collect, after the house has exhausted all usual methods.
A certain other concern, when opening new territory, writes to a local attorney telling him they are entering the field; that they will require information from time to time, for which they expect to pay a reasonable fee; and ask if he is in a position to represent them in this capacity. At the same time the attorney is told that he will receive for collection any accounts on which such action may be necessary.
When a special report is desired, the blank shown in Fig. 2 is sent. The local correspondent is expected to give as full information as possible, for which he is paid promptly.
In this way, excellent results are secured. There is some question about the advisability of leaving the amount of the fee to the correspondent. A better plan is to have the fee to be paid for all ordinary reports decided in advance, extra compensation to be allowed in special cases. The average country attorney will furnish an intelligent report for two dollars—a low price for reliable information.
Fig. 2. Local Correspondents' Report Blank
Traveling Salesmen. Certain information about the business and general reputation of a customer can best be obtained through the salesmen of the house. They are the men who come in direct contact with the customers, acquiring an intimate knowledge of each.
The average salesman objects to making out lengthy reports, but if approached in the right spirit, will give the credit man the benefit of his observations. The salesman's judgment is scarcely to be relied upon in the matter of the financial standing of a customer—his anxiety to sell goods makes him too optimistic—but he is probably the best judge of the character and business ability of a man on whom he is calling regularly.
Frequently a spirit of antagonism to the credit department exists among the salesmen. This condition indicates a decided lack of that coöperation so necessary to the success of any business. The credit man who possesses tact can overcome this antagonism, if he will but drop his cold-blooded attitude and meet the salesmen on a friendly basis. If he will cultivate their friendship, the salesmen will respond with information of great value to him.
Naturally the information secured from a salesman differs from that received from other sources. About the class of information that can be expected is provided in the blank shown in Fig. 3. This can be printed on a standard size card.
Fig. 3. Salesman's Customer's Report Blank
Retail Credit Reporting Agencies. In many cities, merchants have formed associations for the exchange of ledger experiences. Some of these associations have been very successful, but the chief difficulty has been in sustaining interest and in securing the necessary information. This lack of interest seems to be general in mutual associations—every man seems afraid that he will give more than he receives.
ADMINISTRATION BUILDING AT THE PLANT OF STUDEBAKER BROS. MANUFACTURING CO., SOUTH BEND, IND.
Out of the merchants' association has grown the retail credit reporting agency—the exchange of information being conducted as a private enterprise. The expression, exchange of information, is used advisedly, for the service of these agencies consists mostly of reports giving the experiences of other merchants. To quote from the prospectus of one of these concerns:
Our company does for the retailer what Bradstreet and Dun do for the wholesale dealer. We arrive at the result, however, in a different way. We give accurate information as to how people pay their bills, regardless of their financial standing.
This information we get from merchants and professional men by means of a thorough canvass of our entire territory. We visit all people doing business, whether our subscribers or not, and in this way secure the names of all consumers in business or private life.
We are thus able to tell the grocer how Mr. B. pays his butcher, his tailor, his hatter, his doctor, and every other trade or profession he deals with, and each of these in turn is furnished with the same kind of information from the grocer; thus we establish the exact credit standing of Mr. B. with the entire trade of the city.
Acting upon information thus furnished, every merchant or professional man in the city knows from the most reliable and trustworthy source to whom he can safely give credit and whom he should refuse.
For example, we here give a specimen rating with an explanation of the same.
"John Doe, carpenter, 187 Broad St., 5G 2F."
This rating indicates that five different merchants have found by experience that John Doe is a prompt paying credit customer, and two other merchants have found him somewhat slow, but regard him reliable and trustworthy.
Next example:
"John A. Doe, lawyer, 210 North Second St., 4D 3B."
This rating indicates that four different merchants have found him too slow in paying to be a desirable credit customer, and three other merchants have found him bad pay and unworthy of credit confidence.
Other sources of information, which come under the head of exchanges of ledger experiences, are the credit men's associations. These associations, through clearing houses, exchange information about their customers, thus supplying the wholesaler with the same class of information as described above for retailers.
One credit man relates the following incident, illustrating the value of the association clearing house. On one of the reports furnished by the clearing house, he noticed that another merchant had refused credit to one of his own customers. Investigation developed the fact that this particular customer's locality had suffered severely from the destruction of crops by a cyclone. Now it happened that this credit man's house was about to fill a large order from this very customer. The shipment was held up, and the credit man promptly wrote to the merchant expressing regret that his community had suffered so severely, and asking if his house could be of any assistance to him. In closing the letter, the suggestion was made that since collections were likely to be slow with the merchant, they would allow him to cut down his order.
The letter had the desired effect. Instead of turning him down the merchant was made to feel that he had friends in that house, and it is probable that he continued to be one of their valued customers.