iirli HOW TO COLLECT MONEY BY MAIL 327 TESTED ANS, LETTERS AND SCHT" ^^> THAT MAKE THE MAIL 1 .NG MONEY DUE HP . HI HOW TO COLLECT MONEY BY MAIL HOW TO WRITE EFFECTIVE COL- LECTION LETTERS— TESTING COPY- PLANNING A SERIES— RETAIL. INSTAL- MENT AND DEALER ACCOUNTS— CREDIT SYSTEM— COLLECTION SCHEMES AND LEGAL STEPS — HOW CREDITORS COOPERATE TO CURE "SLOW PAYS" AND BAD ACCOUNTS 157 MONEY GETTING PLANS ADOPTED BY 43 CORRESPONDENTS A. W. SHAW COMPANY CHICAGO NEW YORK A. W. SHAW COMPANY, Ltd.. LONDON 1913 THE MAGAZINE OF BUSINESS SYSTEM "HOW-BOOKS" How TO Increase Your Sales How TO Increase a Bank's Deposits How TO Systematize the Day's Work How TO Increase the Sales of the Stork How to Sell Real Estate at a Profit How to Sell More Life Insurance How TO Sell More Fire Insurance How TO Write Letters that Win How TO Talk Business to Win How to Write Advertisements that Sell How to Sell Office Appliances and Suppliss How to Collect Money bv Mail How to Finance a Business How to Run a Store at a Profit Others in Preparation FACTORY "HOW-BOOKS" How to Get More Out of Your Factory How Scientific Management la Applied How to Get Help How to Cut Your Coal Bill How to Handle Workmen How to Systematize Your Factory Ot • in Preparation STANDARD VOLUMES AND SETS THE KNACK OF SELLING {In Six Books) BUSINESS CORRESPONDENCE LIBRARY (Three Volumes) BUSINESS MAN'S LIBRARY {Ten Volumes) BUSINESS ADMINISTRATION BUSINESS MAN'S ENCYCLOPEDIA (Two Volumes) THE SYSTEM OF BUSINESS {Ten Units— Thirty Volumes) In Preparation ml MAtAZJNE fl/MANAC£M£WT Copyright, 1913, by A. W. SHAW COMPANY CONTENTS PART I PERSONALITY LETTERS THAT SETTLE MOST ACCOUNTS Make Your Letter Talk Cbaptek Page I How TO Rouse the Wilx, to Pay 7 II How TO Write a Collection Letter 16 III Persuading Dealers to Pay up 26 IV Collecting Retail Bills by Letter 34 V How to Line up Instalment Accounts 40 VI Blocking out a Letter Campaign 46 PART II TESTED SCHEMES FOR SPECIAL CASES Set Him Thinking VII Effective Appeals to Debtors 59 VIII Enclosures That Reinforce Your Letter .... 65 IX Details to Watch and Errors to Avoid 69 PART III WHEN AND HOW TO FORCE PAYMENT Set the Pace X Personal Work That Saved Bad Accounts .... 75 XI How Far Can I Legally Push Collections? ... 79 XII How Creditors Work Together 84 XIII Handling Collections through an Attorney ... 94 PART IV HOW TO KEEP YOUR LISTS AND RECORDS Keep Dovm the Burden XIV How Credit Records Hold Down Bad Accounts . 101 XV Making Collection Routine Automatic 108 4 CONTENTS PART V CUTTING COLLECTION COSTS Test and Temper Chapter Page XVI Economies That Increase Profits 117 XVII Tests That Show Your Strongest Letters . . . 124 COLLECTION METHOD CHARTS Chart Page I make tour letters classify tour debtors .... 6 II CREDIT information AND ITS SOURCES 14 III FITTING TOUR LETTER TO TOUR MAN 18 IV HOW TO SELECT A COLLECTION APPEAL 21 V HOW TO WATCH DEALER ACCOUNTS 28 VI COLLECTING BT LETTER FROM DEALERS 30 VII HOW TO COLLECT FOR THE RETAIL STORE 36 VIII HOW TO COLLECT DIFFICULT INSTALMENT ACCOUNTS ... 42 IX HOW TO GET BETTER RETURNS FROM THE COLLECTION CAMPAIGN 48 X COLLECTION SCHEMES WHICH BRING IN THE MONET ... 58 XI HOW TO CROWD THE DEBTOR INTO PATMENT 74 XII LEGAL POINTS TO WATCH 81 XIII HOW TO COOPERATE WITH OTHER CREDITORS 90 XIV HOW TO USE THE COLLECTION LAWYER 97 COLLECTION FORMS Form Pagb I RETAIL CREDIT ASSOCIATION RATING SHEET 87 II ASSOCIATION CREDIT RATING CARD 92 III CORRESPONDENCE CARD AND INDEX 96 IV WHOLESALERS CREDIT CARD 100 V RETAILERS CREDIT GUARANTT FORM 102 VI ENVELOPE FOR FILING CREDIT INFORMATION 103 VII INSTALMENT HOUSE QUESTION BLANK 105 VIII INSTALMENT LEDGER CARD 104 IX WHOLESALE CREDIT STATEMENT BLANK 106 X COLLECTION CORRESPONDENCE CARD 110 XI CORRESPONDENCE ENVELOPE WITH DOUBLE TICKLER . . . Ill XII RETAILERS COLLECTION CARD Ill XIII READT REMINDER FOR INSTALMENT BUTEB8 112 XIV NOTICE OF PAYMENT PLAN 113 XV SCORING THE COLLECTION LETTER 117 Part I PERSONALITY LETTERS THAT SETTLE MOST ACCOUNTS Make Your Letter Talk ]\/f EN neglect at long range — they cheat in ^ •* the crowd. It's the stranger that is sent off with scant consideration. When a man dodges payment, he dodges creditors. Neighbors are easiest remembered — close-at-home debts are first paid. Get close to your man. Keep your debtor in sight. In your letter, "talk it over" with him personally. Most accounts are lost because the debtor feels sheltered by the mass — because your let- ter comes as one of hundreds put out to delin- quents you follow in droves. Make the man who owes you money feel your presence. Stand him out alone. Get to him with your reminder on the day. Talk to him man to man. Make his debt a matter between neighbors. Keep a shrewd but kindly eye upon him. Let your letter show 'precisely — undeniably — why it is an advan- tage to him 'personally to pay you in particular. Go to him with your letter as you would in person. Let him feel that you know and read him. Make your letter talk. Ba b3 ■ ii: :ii« MAKE YOUR LETTERS CLASSIFY YOUR DEBTORS When Your Debtor Seems Remind Him That Good Pay Slow Pay BecauBe He Is Careless Tighten — ] Up on Him by Because Payment Is Not Convenient Show Reason for Paying by Bad Pay Because He IsDissatisfied with Purchase Re-sell Him by Your Accounts Must Be Kept Straight He May Have Overlooked BiU You Need Money for Special Purpose Small Accounts Must Be Closed Promptly Hinting at More Drastic Measures Threatening to Put Him on Cash Basis Following Up More Closely Shaming Him Offering Inducemeott Holding Up Orders Showing Mutual Gain Showing His Loss in Slow Pay Using Tact and Patience Giving New Proof of Value Re-awakening Need for Goods Satisfactorily Adjusting Complaint Thinks He Can't Pay J Help |_ Him by Because Intentions |— Are Dishonest Coerce Him by Suggesting Collection . Scheme for His Trade Personal Talk Extending Payments Accepting His Note Taking Rate Payments Warning Him Threatening Him ^ Using Collection Agency CalUng in Lawyer Bringing Him to Court CHART I: The debtor's reply to a letter denotes the kind of talk neces- sary to bring in the balance due. Begin with "good pay' arguments and proceed through the chart until the attitude of delinquent is determined ■ II liia CHAPTER I How to Rouse the Will to Pay McGRAW, a newspaper man who had worked his way up from typesetter to business manager, took a position as collection correspondent in a whole- sale paper house. "Your experience in writing and in dealing with paper buyers must have fitted you for this work," said his employer. Results, however, did not justify the conclusion; sluggish collections did not pick up. When the situation was analyzed, one peculiar cir- cumstance stood out in relief: remarkable returns from delinquent printers were counterbalanced by uniform failure to collect from mercantile concerns. The "hard-luck" stories McGraw received from print- ers had recalled problems in his own newspaper ex- perience. The memory of his emotions in similar situa- tions influenced him when he answered. Evidently it was his sympathy and understanding of their problem that gave his letters a personal pull irresistible to har- assed printers; unconsciously he classified and individ- ualized them. But with other customers he had a hit- or-miss style which missed oftener than it struck home. Like man^ other correspondents, McGraw discovered 8 PERSONALITY LETTERS that eolleetion letters, to produce results, must have a vital, man-to-man appeal. Carelessly compiled form let- ters, followed by perfunctory personal appeals, sight drafts, collection agency work and hot-headed appeals to the law will not bring in the money. The modern col- lection man must be an originator, a man of intuition and of discernment; he must understand and touch the various human motives which actuate a debtor. Shaping his course to the new idea, McGraw and his employer fixed upon a policy in regard to credits, a plan of payment and other details of collection method. They then devised methods of applying automatic rou- tine to the numberless details which clogged the gears of the collection machine. Records were prepared which gave the correspondents an idea of delinquents' habits and characteristics, and became more valuable year by year. The schemes for collection which suggested them- selves from time to time were not accepted on their face value as before, but were tested on selected lists of delinquents. Results so secured served as sign posts to the whole- saler and pointed the way to greater efficiency. How to Classify Delinquent Dealers — the First Move in Bringing in Overdue Accounts Deciding upon the kind of debtor with whom you have to deal is a trick which appears difficult at first glance, but, when you get the knack, is comparatively simple. Collection correspondents group debtoi's into three great divisions : good pay, slow pay, and had poAj. Every business, no matter how small or how large, can get information that pigeonholes most debtors in their proper class. ROUSING THE WILL TO PAY 9 The retail store man, for example, has his personal knowledge of his customers. That failing, clerks from various neighborhoods or mutual friends can throw light on the character of delinquents. If you have a multitude of accounts to handle, get the needed intimacy by a study of the personality be- trayed in the debtor's correspondence. Look over the letter twice before attempting to picture your debtor to yourself. The first reading brings out facts. The second develops an impression of the man. See if your debtor is trying to evade your question ; whether his excuses ring true or false. See if he is craftily playing you for more time. Is he ignorant, obstinate, careless, dull ? These are some of the facts to be sought between the lines of a letter. When a successful correspondent encounters an ob- durate debtor, he puts off the writing of his letter until he has made a regular round in search of data. He examines the credit man's records, finds what people of the house know of the prospect's business policies, com- petitors and methods of holding trade. Traveling sales- men are called upon occasionally to help with the per- sonal peculiarities of a delinquent. But if you find your sources of information limited, make the collection letter clear the ivay. Avoid the common mistake of showing irritation in your first let- ter to a debtor. Begin in a friendly, genial manner, and malie the delinquent classify himself by his answer. Then take the proper steps to make him pay up in quick time. One or two form letters filled in and mailed by inexpensive assistants will dispel the doubts existing about a debtor and put a definite problem up to you. Your task then narrows down to that of selecting and present- 10 PERSONALITY LETTERS No regrets necessary. Too much "We" again predomin- ates. Weak. No argu- ments. Trite. Practically an invitation to delay. Lacks "do it now" ele- ment. Dear Sir: We regret to be compelled to again call your attention to overdue payments en your account. You agreed to make us a remittance regularly each month and we have, naturally, planned on receiving the payments in this manner. This notice is sent where a list of cus- tomers is small and where it does not pay to send a collector or where you have moved from the place where the goods were leased and taken them with you. It is our impression that you do not realize that by doing this you forfeit all claim to them by violating the terms of the lease. "Honesty is the best policy," and, there- fore, an immediate settlement will save all future trouble, annoyance and ex- pense for all parties interested. We shall continue to remind you of your duty in this matter from time to time un- til the account is settled or until you compel us to resort to harsher methods. We do not intend to be offensive or im- polite, all we want is the money you owe us. Trusting that you will give this matter your prompt attention and awaiting the remittance requested, we are. Respectfully yours. Letter written by a New England furniture dealer as second of a series of collection letters. The "we" element prevails throughout. Instead of showing the delinquent why he must pay or making it to his advantage to do so, the letter bristles with weak reasons as to why the writer needs the money. The collection methods of the writer and the system in use are of no par- ticular interest to the customer. The writer's "impression" that the customer may lose title to goods raises doubt instead of con- viction in the debtor's mind. The fourth paragraph is, practically, an invitation to continue to delay. "Trusting" instead of "insisting" in the clincher paragraph is the final touch of absurdity. ROUSING THE WILL TO PAY 11 Straightfor- ward appeal for a square deal. Specific, tactful, warning, tolerant, without weakness. We'll help you attitude We dislike to belleTe that our two preT- iou3 letters relative to the amount due on your contract have teen ignored by you either through a lack of courtesy or to evade the payment of a Just debt. We certainly feel that we had a right to expect at least an acknowledgment of our letters, but we are still desirous of extending every possible courtesy to you consistent with good business policy. Bear in m-'iic" +hat the piano is our prop- erty until fully paid for. When you vio- late your contract you forfeit all rights to payments made. But in view of our friendly rela ions, we shall defer any further action in the matter for a few days in order to permit you to arrange for making the payment. If there is any valid reason why you are unable to meet this obligation at the present time, you should arrange to come to our office Immediately that we may talk the matter over together. let U3 hear from you, therefore, within the next day or so, either by a personal call or letter. Confidently awaiting a remittance by re- turn mail , we are Yours truly. In re-writing the furniture company's letter, the correspond- ent took a more hiunane view of the debtor and wrote in a frank friendly tone certain to rouse good feeling in the heart of the debtor. (In earlier letters an opening of this sort was followed by selling talk such as excerpts from testimonials by other pur- chasers.) In the second paragraph the writer, instead of hurling platitudes at the debtor, appealed to his sense of fair play and shame. Then, without weakening his demand for payment, he showed that he was willing to be fair, emphasizing his attitude with a hint of the power that he held over the debtor. In closing, the writer, instead of tossing a hackneyed maxim at the reader, implied his real belief in the debtor's honesty by "confidently awaiting" a remittance. 12 PERSONALITY LETTERS ing the kind of talk which fits the case. Straightforward talk, teeming with human interest, is the magnet which draws the dollars from the debt- or's pockets. When you have classified your debtor, get on his side of the fence and see the situation through his eyes. Make him feel from your first word that j^our interests and his are mutual. The correspondent who learned that a customer's home has been destroyed by fire and offered an extension of time on an overdue ac- count showed a lively appreciation of his delinquent's troubles and established cordial relations which settled a recurring business worry. Playing Upon the Debtor's Personality — the Key- note of Every Successful Collection Letter Get the " I '11-help-you " attitude in your letter. You will draw big dividends on that small investment. Let your debtor realize that your desires are his desires in a similar situation and state your case frankly in terms of a square deal. There need be no lack of dignity or firmness. You need no note of apology or humility. To give your letters life, get in intimate touch with your prospect. An analysis of proved collection letters shows this "you" interest appearing in dozens of ways, limited only by the skill and experience of the collection cor- respondent. Wherever the motive appears and how- ever it is applied, it can be placed under one of five great divisions: pride, utility, caution, money, and self- indulgence. All these are common to humanity, and all human endeavor can be traced to them as causes. Study them and select the form in which you can best apply them to the cases which worry you. ROUSING THE WILL TO PAY 13 If your records show the delinquent to be a man of prominence in his community, to bear down on the pride motive will get returns. Dwell on the humiliation and embarrassment which attend a suit for debt. Awaken bis moral sense to the necessity of paying. An appeal to his sense of honor and fair play gets results. By showing your high esteem of the debtor's character and ability, you convince him that payment is his only way of keeping himself on the pedestal where you have placed him. Caution the cunning man who seeks to take advantage of your liberal business policies. Show him that his action is losing him more than the amount of his bill. Proof that you are in touch with his other creditors will do the trick. Utility touches all of your debtor's solid interests in life — the conveniences, necessities and uses which credit, good reputation and freedom from collection embarrass- ment supply. Remind the dealer, the consumer, the man who owes for trade or professional service, that inconvenience — loss of reputation — perhaps want — trails at the heels of non-payment, and you have made a strong case for your house. How to Shotv the Debtor that Prompt Payment Is to His Advantage When the owner of a general store wrote his slow pay customers that a prompt payment of their bills would enable him to take advantage of a break in the market and buy at a heavy discount, his customers saw the money appeal in the reduced values which the dealer promised to share. He said: "This letter will show you how you can save tig 14 PERSONALITY LETTERS money on goods you buy of me. Hereafter you ivill share in the profits on such purchases. This is my profit- sharing plan.'* Debtor's Past -| Correspondence Suggests Credit Information and Its Sources Your Sales Records Indicate I p Debtor's Business Capacity Past Credits with You - Sales Value a£ a Customer Debtor's Education Characteristics Business Background Mutual Friends Know Debtor's Popularity Social Standing Public l*osition Your Salesmen Can Describe r- Debtor's Business Ability Attitude to Your House Personality Agency Reports Show Debtor's Rating Business Record in Full - Standing with Vour Competitors Personal H Interviews Develop Impression of Debtor Business Affair& Intentions andAmbitions CHART II: Get a line on your man. Every correspondent has within reach a mass of formal and informal information about customers. Consulting these sources will de- termine collection methods and suggest arguments to fit every case. He followed this attention-getting paragraph by a heart-to-heart talk, showing that prompt collections en- abled him to buy and sell cheap, and that prompt pay- ROUSING THE WILL TO PAY 15 ment meant profit sharing. Other creditors apply the money appeal by offering premiums and discounts, or by pointing out the debtor's chance of losses. Every debtor's account shows some twist, some turn, which by merely casual inspection will suggest a scheme of collection. The reader of a collection letter is torn by conflicting emotions. His instinctive prompting to pay is followed by the impulse to delay. Appeal then to the feeling and not to the intellect. Force and threats of force, except in extreme cases, lead to nothing. Write from the salesman's point of view — for there is salesmanship in the right kind of collection letter. In one case you sell goods, in the other you sell satisfaction. In both cases you play upon iden- tical human instincts. Logic, tact and diplomacy, clever wording and deft argument in a letter are appropriate to progressive busi- ness methods and will arouse a friendly willingness to pay. Keep Your Trade Alive GOOD collectors put salesmanship into their letters and think not only of keeping bad accounts from ris- ing above the established allowance, but also of increasing the volume of business their house is doing. They look to the future as well as to the past. CHAPTER II How to Write a Collection Letter HUNDREDS of arguments can be made in hundreds of ways to a debtor of any class. When you have classified your man, therefore, think — deliberate. Don't dictate the first idea that pops into your mind. The "you" appeal does not require a page riddled with the personal pronoun. Get a mental picture of your prospect. Try to forecast the mood in which he will receive your letter and write in a way that meets that mood, for the best collection letter is a mirror to your reader. He looks at it and sees himself. To be effective, make your letter play upon traits common to mankind, but which your reader thinks peculiar to him- self. In a specially dictated letter, you can get in contact with your customers by touching upon personality. In your form letters, build your argmnents upon oddities of mind and temperament which the individual can ap- ply to himself. But even after you have pictured your man at his desk and selected the motive to move him, your task is only half done. Make your letters remove, as far as possible, the disturbing influences which sur- round every busy man. Then, in composing, aim for 16 WRITING THE LETTER 17 the four points which make up a good collection letter. Get attention, hold interest, present arguments and inspire action. Give Your Letter ike Direct "Drive" of a Powerful Selling Talk Keep your man's education and business experience in mind. Write as nearly as you can the kind of letter he would send you in similar circumstances. When you dictate, keep your man's classification in mind, or if he has written you, take another look at his letter and make it picture the type of man with whom you deal. Use language that your prospect will understand. The untaught country man is irritated by the crisp business tone of a letter which sounds "pat" to the busy city man. On the other hand, the rural reader will leisurely assimilate a wordy appeal which the hurried townsman dismisses in contempt. No matter whom you address, strive for simplicity. Be direct, straightforward and clear in composing, for the reader has at each point but a limited amount of mental power available. To interpret your word- symbols requires part of the reader's power; to get the thought suggested by them requires a further part; and only what mental power remains can be used for the decision you want. Hence, the more time and attention it takes to receive and understand each sentence, the less time your debtor can give to your idea — the less vividly will that idea be conceived. Adopt a habit of using short words and short sen- tences. State your points so that the man need not go backward and forward to connect them. Ideas should be understood as they appear. Be brief. Find the 18 PERSONALITY LETTERS contrast, the likeness, the thought-flash and word short- cut to your points. A New York credit man found the idea for a suc- cessful collection series by watching passengers in a suburban railroad station. The commuters, attracted by the piles of magazines, idly thumbed the pages. Some passed on; others remained to read. "When they Rousing Debtor's Caution throtJgh Make Your Letter Personal by Touching Debtor's _ L Pride through Sense of Honor Sense of Fair Play Fear of Lost Credit Standing Fear of Notoriety Showing Advantage of Payment throogh Chance of Gain Chance of Loss Demonstrating the Utility of Better Credit Better Terms Suggesting Self-induigence through p Appeal to Vanity *- Appeal to Love of Ease CHART III: Upon the proper application of the "you" interest depends the value of a collection talk. An analysis of the chief characteristics played upon by credit corre- spondents in many letters shows in the chart heard the rattle of the approaching train, they groped for a coin, tossed it on the counter and joined the rush for seats. "Their attention was attracted. The timely interest of the article said, * Buy me. ' The approach of the train compelled decision," mused the credit man, as he re- view the incident at his desk the next morning. Adopting the idea, he broke away from the stereo- typed openings which had hampered his former let- ters. He first tried his new scheme on the safe but care- WRITING THE LETTER 19 LETTERHEAD Date Name and Address of Debtor Dear Sir:- Compel Attention By a startling statement, or By awakening curiosity, or By advancing a new proposition Arouse Interest by an Approach Which Is timely, or Is intimate, or Has new value Argue for Payment because of the Debtor's Profit as Regards Money Utility Caution Pride Self-indulgence Impel to Prompt Action by Making remittance easy Concise suiomary of advantages payment will bring debtor Rousing debtor's instinct to act without reflection Advancing a further advantage or condition that hingea on immediate payment Yours very truly, Sigttature Good or bad "make up" in the collection letter has much to do with its effectiveness. A neat note will get action when the careless letter fails. Best usage limits the collec- tion note to four paragraphs. The first hooks attention by means indicated in the chart. The second paragraph lays the ground for argument by interesting the reader. The third paragraph presents reasons for paying, while the fourth realizes on the good intentions called up by vitalizing them into action 20 PERSONALITY LETTERS less delinquents, and opened the letter with the ques- tion: "Will you be good enough to let me know if the enclosed statement is correct?" "That will get attention," he thought, "for even the man who won't pay his bills doesn't care to be dunned for more than he owes." Realizing that the reader would be liable to throw the letter aside on recognizing it as a dun, the collector reassured him in the next paragraph by saying : "Please do not consider thi^ note in any way a de- mand for direct payment." The delinquent was then adroitly led into an argu- ment which explained that the books of the company were to be audited and that prompt payment would establish credit. The letter concluded with this sug- gestive sentence: "Checks should he mailed as heretofore to the store from which goods have been purcha-sed." In this letter, attention, interest, argument and clincher followed each other in logical sequence, and through their clean-cut appeal brought in the money. A scheme for getting attention, such as used by the New York man, must lead every letter. The average reader picks up a collection letter as one of a dozen. He is hurried. His head seethes with business problems important to him. You have to make your business as important as his own. The salesman who fails to get attention with an opening sentence can make a quick change of front. The letter writer has to take com- mand in the first sentence and batter down a wall of opposition in quick, sure strokes. Any one of men's five classes of motives may be used. WRITING THE LETTER 21 A Denver collector depends upon curiosity to get attention and lead into interest. He opens his first let- ter with the remark: How to Apply the 'You"Interest Try Utility on Ambitious Man Married Man i. Successful Man Stmggfing Man Suggest Caution to Cunning Type Slow Ptodder Mao Staoding Still UoscrupDlous Man I Show Money Value to Man With Scant Capital Close Buyer Tight Fisted Bargain Hunter DvreUoo Pride to Alan Witfi Social Position Of CiTJc Affairs - | With Eacpenaive Children | *- Wkb Good Record ToHch - Self-ifuSalgeDce of Man Who A Lives Well Has Other Interests Has ExpensiveTastes CHART ly. When in doubt about the motive on which to thread the arguments in your collection letter, get a line on the character and circumstances of your man and follow out the appeal indicated '^Wc irere talking about you in the office this morn- ing." The record of results from the letter showed that many readers had their attention fixed by the phrase. 22 PERSONALITY LETTERS They read on to find out what was said and turned their thoughts to the overdue account. The argument which followed secured payment. With attention won, your next step is more difficult. You have to secure interest and make your man get well into your letter before he realizes he is being dunned. The schemes which you use to compel attention can be used to hold interest, or you can compare the advan- tage of paying with the disadvantage of not paying. Play up your customer's interests at this point and sub- merge yours. A Cleveland shoe dealer achieved interest by tempting his reader's curiosity. He led the second paragraph with the statement: "This frank explanation is due you.'* The line had a seductive ring that made the debtor read on. A wholesale correspondent gets the same effect by hurling questions which every man would like to have answered . "WJiat makes every merchant big? What makes every hig merchant rich?" is the way he begins the interest paragraph. His answer, "credit," forms an argument for payment. How to Make Your Argument Reach the Climax of "You" Interest By getting the reader's attention, you turned his thoughts from other matters. When you roused his in- terest, you led his thoughts to mutual affairs. Now spring the trap. With swift flowing sentences, brisk, brief, to the point, make your argument. Always pre- sent your case from your reader's point of view, avoid- WRITING THE LETTER 23 ing as far as possible the question of benefits accruing to you and emphasizing advantages to the debtor. Select the motive — profit, pride, safety — most suitable for the prospect. You have, you remember, five classes of ap- peals to choose from — caution, utility, pride, money and self-indulgence. The classification you have made of your debtor indicates the proper motive. Your knowl- edge of him, gained through letters, business dealings, salesmen, friends and other sources, indicates the way it may be applied. Caution, for instance, is always a timely appeal. Here is one of the hundreds of ways in which it has successfully been applied: *'W.e wish to call your attentiwi to your contract, which is draimi according to the laws of the state. And you unll understand, we can not only re-take our mer- chandise, hut may retain as liquidated damages all pay- ments you have made, and, in addition, secure judg- ment for any depreciation in the value of this merclian- dise while in your possession.'* In six lines, the reader is cautioned as many times. Among the distinct thoughts advanced are fear of the law, loss of goods, money damages and expense of suit. In a similar way and with as many variations, utility may be run into the argument. Or if utility or cau- tion seems inapt, the remaining motives may be applied. Pride is the easiest motive of all to touch, for it is hard to find a man who doesn't care to stand well in the esteem of his neighbors and friends. Consequently strong collection letters carry the pride appeal well em- phasized. One effective paragraph of the sort which has been used with great success by a Boston instalment man reads as follows : 24 PERSONALITY LETTERS ''Have you not sufficient personal pride to protect your reputation for integrity? Would you care to have your neighbors and your friends know that you have tried to obtain part of the furnishings of your home without paying for themf And would you care to have nn officer of the law replevin these furnishings from your hom£? I will ask you to stop and consider the notoriety and embarrassment which you would be forced to undergo should ymi be made the defendant in a suit for unpaid debt and have these detoMs become public." Here is a picture vivid enough to budge any man over the border of indecision. Pierce a man's pride and you have a compelling arsrument. Make him act because of love for family, through business or social standing, or through the reputation for fairness and square deal- ing which he would maintain. In a similar way, pic- ture the ease and freedom from worry of the man who pays his bills and place it before one who is inclined to be self-indulgent. But whatever appeal you make, be sure that you have a knock-out punch at the end of the letter. Getti7ig the Check Signed at Long Range — The Let- ter that Brings Acti/)n Too often a letter which gets attention, holds interest and contains strong argument loses its force in the final lines, because it lacks a "do-it-now" element. The writer "hopes to receive an early reply," or "trusts that the matter will receive prompt attention." The reader, already moved to payment, turns from his pur- pose at any such confession of weakness. Make it easy for the debtor to follow the chain of thought you have started. Enclose an envelope or a WRITING THE LETTER 25 coin card, or if you know his bank, enclose a checK which only needs his signature. Ask him, if the bill ia small, to pin currency to the letter at your risk. The line, ^^ Don't bother with money order or draft; simply send us your check," often is sufficient. Finally, in- stead of "hoping" or "trusting", end with a sentence which expresses your confidence in getting prompt pay- ment. One man says, "Thank you for prompt pay- ment," Another closes with, "Will you kindly see that this matter gets the attention it deserves?" There are dozens of other ways of closing your letter with a crash, but in every case select the method which best fits the reader and prompts him to immediate, unreflective actioQ. Collections Win Business CUSTOMERS who keep their ac- counts paid up feel a certain sat- isfaction in deahng at that store. They are privileged persons — always wel- come. If they lag, there is an irresistible temptation to cross to the other side of the street, so it is not always so much a matter of getting the money as of keeping the customer's conscience clear that prompts a credit man to keep the buyers up to date on their bills. CHAPTER III Persuading Dealers to Pay up ANYTHING from Brown this morning?" inquired the sales manager for a middle western shoe factory. "Nothing yet," said the collection manager. Week after week he heard the same question — had to give the same answer. He tried various novel collection ideas. Brown, the shrewd shoe dealer in a little Ohio town, remained unmoved, counting on the fact that he was rated "slow, but good." Finally the credit manager hit upon a new twist for the old sight draft procedure. First he wrote Brown a "selling" letter, pointing out the trade advantages in price, in quick service, in good quality and in easy transportation which his factory represented to Brown — and might represent to Brown's competitor across the street. He pointed out the prestige and accumulated value which had accrued to Brown through his own local advertising, linked with the manufacturer's. ''One hig item in any dealer's working capital," ran the letter, "«s this advertising and this prestige. It is such a valuable asset that its loss often cripples the dealer who is divorced from his standard lines." 26 DEALER ACCOUNTS 27 The collection manager's next note was curt. It built upon the effect of the previous letter. It notified Brown that a draft had been drawn on him and warned him that his credit would be cut off if he disregarded it. The former letter had made Brown appreciate credit as never before; with the final ultimatum before him, he reflected that shattered credit standing with his best source of supply meant more than six per cent to him. He saw his lines and his advertising in the act of pull- ing customers in at his competitor's doors. He realized that he stood between this alternative and that of cash buying, "When he grasped the importance of this warn- ing, he honored the draft. Brown's correspondent knew that refusal to pay a sight draft no longer suggests insolvency and that such a refusal may be made with impunity. He knew that to send a sight draft in the routine way usually delayed payment, irritated the customer and led to open war. It was an empty threat — how could he put force be- hind it? Obviously, he could cut off Brown's credit. Would that mean anything to the slow-pay dealer? Would it threaten his business and make him see prompt payment as profitable? Instantly a successful collection plan shaped itself: to sell the dealer }iis need of credit standing with the house; to warn him that the refusal of the sight draft might mean loss of his credit privi- lege; to send the draft on the day. From the city newsboy to the country storekeef er, men who buy to sell again can be made to realize that their credit standing with their best supply sources has much to do with their success. When they buy promis- cuously, the collector has only a slight hold on them — • 28 PERSONALITY LETTERS credit standing, therefore, must be awarded such pur- chasers only after rigid scrutiny. Where service, prices, shipping facilities and long continued advertising tie the dealer to the manufacturer and jobber, however, dam- aged credit standing means that the whole business limps. This is the advantage which the wholesale collector can play in urging prompt payment — the disadvantage he can threaten — the club he can swing: lost credit standing with your best source of supply. No matter what routine form of collection is used — whether the statement, the personal note, the sight draft, the scheme, the letter holding up orders, or the personal interview — put into it some new twist or angle that points a warn- ing finger to loss of credit standing. You can find your leverage in the fact that the debtor's buying facilities and advertising achievements may overnight be turned into the cash drawer of some competitor. How to Watch Dealer Accounts Exchange Credit Advice with Other Wholesalers Outside Help Use Credit Agencies Keep Debtor in Touch by Correspondence Have Salesmen Report on Debtors Information through Your Concern Require Branch House Statements Send Special Men on Important Cases CHART V: Mail collection for the producer and wholesaler hinges on knowledjje of the debtor. Know his ability, responsibility, personal characteristics, social position, business standing and dependence on you for merchandise. This chart shows your avenues of information A blow at credit standing touches all the five elemen- tal human promptings: pride, caution, utility, money DEALER ACCOUNTS 29 and self-indtilcence. It strikes pride, because no one wants to be told that trust can no longer be reposed in him; caution, because injured credit standing spells in- jured business and makes every hard money situation dangerous; utility, because of the conveniences, the ad- vantages, the necessities of profitable business which hinge on credit buying; self-indulgence, because a busi- ness man who has credit is not forced to keep the tight rein required every day where cash buying is done; and money, because low credit standing clips discounts, over- turns buying routine and inflicts costly transportation methods. The expert collector in the office of the factory or job- bing house has all this in mind when he writes to his debtor. He remembers that back of every claim for payment stands his power to withdraw credit. If his sales department has given service — if it has made buy- ers realize that the house offers them unusual advan- tages, the collector can put this new note into all his efforts and force attention, interest, compliance. How io Make Your Collection Letter Play on the Dealer's Fear of Lost Credit Standing The wholesaler's collection chief deals with business men. Letters to them may be plain requests for busi- ness justice. You can put a curtnesa into your re- minders that would lose trade if used by a retailer in dunning his customers. Even the smallest business maxi is familiar with the forms of collection. He recognizes business routine, so long as it is coupled with power, system and fairness; he is equally quick to recognize the "bluff." Talk to your debtor on paper just as if you were in- 30 PERSONALITY LETTERS terviewing him in his own office — fairly, frankly, directly. An Omaha credit man lets this idea dominate his whole collection plan. Instead of a form letter se- ries or exclusive use of personal letters, he sends one standard note which is little more than a polite state- CoUecting by Letter from h Dealers Remind Debtor That Lom of His Credit with You Mesas His Uosa of Vou; Advcrtuing and Trade Pfeatige Hia Loss of Your Service aod ■M«rket Advantages Hi* Competitor Will Carry Your Lines His Competitor Will Cash on All AJvertisJQg of Your Lines - Threaten Loss of Credit by r Proof That You Know Debtor's Situation Hints of Credit Withdrawal Mention of Outside Inquiries as to His Standing Warning of Credit Withdrawal - Insistence on Reduced Order or a Paynaeot *- Holding Orders for Remittance on Account CHART VI : Know your man — then let him know that you know him. Make him realize what credit standing means and show him how essential settlement is by writing your letter on these vital themes ment of the account and follows with a series of one- paragraph letters increasing in urgency. His third note, designed to develop the debtor's attitude, reads: A business- like note Our draft on you of October 8th has been returned to ua. We have notified you twice about this account and have received no answer. Please he prudent about this; let us know your position. Kindly name us the date on which we may expect the amount due, $54.40. Another executive carries the business tone still fur- ther. "Bills and statements," said he, "speak the every- day language of the retailer. Save the letter for the DEALER ACCOUNTS 31 special cases where you need diplomacy or sledge- hammer force. Until notice of suit, I send merely four consecutive statements of the account, writing upon each a long band line or two of personal comment, such as: (1) **Not a duB — merely a reminder." (2) "Help us in our invoicing by getting tliis in as soon as possible." (3) "Shall we be obliged to give you unpleasant notoriety by bringing suit ? ' ' Because your customers are in business themselves and, therefore, have collection difficulties of their own, thej"" will feel the fairness of your claims upon them, if your letters talk man-to-man. Play upon this bond of sympathy. One collection man combined this tone with a hint of lost credit standing like this : Reaching the You have a store of your own. Isn't it debtor-dealer true that 80«e debtors are bo peraietently slow u luer ^^ ^^ make you wish sometimes that you had never try a man-to- taken their orders? You know how good it feels man para- when a man pays up promptly — how it makes you feel ufn-nh like extending him favors. Let us feel that way *^ '^ ahout you. Whether muffled by tactful wording or not, the force of the personal note, the statement and the "fair-play" letter, lies in the power to cut off the debtor's credit with a supplier who represents profit to him. Some- times it is necessary to give him a taste of lost credit standing in order to make him realize what is at stake. Row to Exercise Tact in HoMdling Orders from Your Poor Credit Risks Tact in delaying shipment of new orders until payment is made on account often retains the customer's trade. 32 PERSONALITY LETTERS "Insufficient credit reports,'* This tactful phrase pulled a Western collection correspondent out of a pre- dicament. Here was Hardy's order for a big fall ship- ment, lying beside a statement of his overdue account for $329.00. Manifestly it would be impossible to fill that order with Hardy already beyond his credit limit, although his record was clean. The sales department was putting on pressure. An abrupt refusal of the order would drive off his trade. How, without offend- ing the customer, could a payment be brought in such as would warrant the shipment? This letter by special delivery answered the question: How a coUec- Inoufflolent credit reports compel us to tion corre- hold your order of the ISth. We regret that we iiv I cvrr - have not been able to obtain Juet the information sponaent put necessary, for our inability to do this causes us "you" interest both annoyance. In order to make your delay In inin n nn.ih'i'n- Retting the goods as brief as possible, I am ^T^w aiw-sni.p- writing special delivery to say that I am author- ment-ilU-pay ized to have your order made up and to release It letter immediately on receipt of your check for $125 on account. This problem of a big order from a poor risk who has gone his limit, often causes friction between the credit and sales departments. The sales department believes that its efforts are being uselessly discounted, while the credit man thinks that ultimate profit has been over- looked in the effort to establish a sales record and feels justified in the attitude he has taken. Handling the case requires quick wits, keen appraisement of the circum- stances and diplomatic phrasing. The condition of the account, together with quickly available credit informa- tion, dictates the course of action in any individual case. Often advice to the debtor to reduce his order for his own safety points the way out. Here is a letter that held DEALER ACCOUNTS 33 down an account, made the merchant feel that his sup- plier had saved him from over-buying and rang the bell of warning which pulled payment back to the basis of promptness : How to veil Te have your order for one dozen Beateyer a threat of Cream Separators. This is double the usual J oT ^'4 slee of an order from a merchant of your rating lost credit in the middle western territory. We are holding Mtanding and ^^e shipment while we write to suggest that un- mnJce the loos you have customers lined up for this stoolc, J , ' , you let us reduce the first shipment from twelve deaierfeel to six. your 'personal inij>rt"tf in Then you consider that you have a oonsider- ""r,. *" able account with us now, $437.63. we feel that buiiaing up tor your own interest as well as ours you will his business hot want to stretch your credit by an unusually large order. If you have places for twelve separators, however, and can arrange to make us part payments of $50 on the 12th, 22nd and let, we believe that you can buy safely, and we will be glad to ship you. This letter was effective, not so much because it sug- gested a reduction of the order, but because it cautioned the customer that he was going beyond safe limits and touched his pride in his good standing. It flashed the possibility of lost credit as an impersonal necessity which lavish buying would soon bring. It made him feel that he must pay his account in ^der to keep his business running well and to avert the sure fate of a C. 0. D. rating. The "you" interest that brings in wholesale accounts is this; prompt payment means continued credit and buying favors for the debtor from his most profitable sources; delinquency means the loss of these advantages. This is the power that must be felt in your strongest "suit" letter and your most intimate personal request, whether hinted in diplomatic phrases or shouted in un- derscored "caps." '■^^ ^M|| ^ S^^ liVi^OiE CHAPTER IV Collecting Retail Bills by Letter WHEN Hilton failed, he learned his collection les- son. He reviewed the causes of his insolvency. At a critical point in his affairs he had found needed capital tied up in bad accounts. Unwise credits? They could not fairly be called that. Most of his debtors were good for amounts far greater than their debts; loose collection methods were to blame. Hilton remembered customers who had transferred their trade without apparent reason ; others because they were offended at his plain letters; and some who had left town owing him money because his letters were not plain enough. He remembered a senator who was furi- ous at monthly statements and a society woman who bought beyond her means because statements were not sent promptly enough. Hilton knew that he had been wandering in the dark. Finally the ** trouble man" for one of his wholesale cred- itors showed him that his mistake had been not to clas- sify his customers. Hilton had sent the same form letter to J^ohn tlones, laborer, as to John Smith, senator — and he should not have sent a form letter to either of them. John Jones 34 RETAIL ACCOUNTS 35 needed a week-end statement. Quick work would have brought a cheek from his extravagant woman customer. A "mere reminder" when the account was two months old would have saved Senator Smith's patronage. When Hilton got on his feet again he classified his customers, in order that he might keep correct touch with each group and follow every debtor in the way which collec- tion practice has found most effective. Debtors to the retailer, the public service company and the professional man need special groupings. Most of the retail merchants' customers are women, and very few of them have any technical knowledge of business. The retailer has to handle accounts of non-property owners guaranteed by their acquaintances, charges by irresponsible buyers, "skips," people who are wealthy, but slow to pay and quick to resent a dun, salaried cus- tomers, wage earners who are dependent on local day labor, and professional "dead beats." Nor can retail accounts be reduced entirely to tickler routine, for they are the most intimately personal of all business debts. A local strike or lockout may upset an entire collection campaign — personal work on many of the names is essential week by week. Making Retail Collection Individual. Classifying the Debtor, then Reaching Him on Time Promptness is the great essential in dealings with re- tail debtors. All classes of retail delinquents are tempted to transfer their trade when their accounts get formidable. Your debtors may do this more easily than the wholesaler's, who realize how much their business depends on their credit standing with one or a few well- located suppliers; or instalment buyers, who are iLsually '36 PERSONALITY LETTERS bound by contracts and mortgages. Educate your cus- tomers, therefore, to pay promptly; show them an ad- vantai?e to themselves — ^sell them the peace of mind, the good standing in their community or the credit extensions they will enjoy when they pay their bills as Debtor Regular Statements and ••Good as Cash" Informal Reminders Monthly Statements - Salaried Employees - - Prompt Letter Follow-up ^ Hint ol Garnishment Workers - Week-end Ststements Wage Earners - Personal or Form Lenet* How to Collect for . the Retail Store - Hint o( Garnishment Minors Warn That Statement Win be Sent Gnarantor Guaranteed L Accounts 1 Women Men Witboot Property . *- Refer Bill to Gnaraitor TooSmaUfoc Ordinary FoUow-np - Petty Accounts - Remindn Srhetnm sad* T - Scattered Purcfaaacs - Locate througti Trade Co-opefatk)0 Transients and "Sklpe" - "Dead-beats" - - l,ocal Trade Sbitters - Bring Quickly to a Legal Usoe CHART Vll: Your collection letter is like a. good prescription. This chart will help you diagnose every case, so that you can make your letter coataia the ingredients whicn will effect a settlement they come due. Here is a letter whose success hinged on hinting that postponed payment would only bring more insistent appeals and showing a disadvantage in RETAIL ACCOUNTS 37 allowing the account to remain outstanding any longer, it gets action. A letter that Yes; another bill. reads -itself . _you are tired of getting them. It coats us tells satisjac- money to send them. tion and in- amrpv nrt-inn — Let's save each other a lot of trouble. Mail tjnres action that check for $6. 00 today. You will be saved more bother; we will be saved time and postage. Thank you. To keep your debtors paying promptly, collect promptly. "Promptly" for a wage earner or a busi- ness worker on a low salary means a statement within one or two weeks of the due date of the bill. After two such statements have been sent, successful credit stores often complement the third statement with a short let- ter, which points out that the bill is overdue. The working man who has lost his job or who has had sick- ness in his family, must be dealt with as carefully as a "good as cash" patron. Here is a letter that gained a permanent customer and pulled regular payments on a bill that seemed hopeless: An offer of We were very sorry to hear of your recent rrfidii p^itt. misfortune. We are not going to push the collec- f^tuut^ixu ^^^^ ^^ y^^^ ^^^^ ^^ $23.00. for we realize what sxomn a case g^jj accident such as youra means. where it vxmld have been ask- ^® "•'"^ granting you an extension of thirty days on your present bill. At that time wa would appreciate a part payment, and can arrange some easy settlement of the balance. Call when you can and let us plan this with mutual fairness. edfo Wishing you an early recovery, we are. After the debtor class whose pay comes to them every two weeks or oftener, is a second great division of your 38 PERSONALITY LETTERS debtors; those who own property or are well -employed, good for reasonable amounts and need only monthly statements and mild letters to rouse them to payment. Selling talk often strengthens the letter to such a debtor ; to use one paragraph for advertising attractive lines softens the point for unbusinesslike readers, and makes sales. A large group is made up of wealthy customers who must sometimes be disregarded for months before col- lection is attempted. A large Chicago retailer collected from a delinquent Senator with this letter : One carefully- Your account with us now amounts to phrased vara- ^I'S-OO We appreciate your extended patronage r of ou*" Store. At this time we are trying to clean ffrapn more up all of our accounts preparatory to a hookkeep- effectual than ing change, and we would thank you very much to showers of look up this till. We do not wish you to take , ... ■' this letter as a dun, but only as a reminder, and tnlls y,Q ]£now that you will welcome it as much as we will your check for $175.00. When the big divisions have been made, and letters have been built that are aimed at representative debtors, special eases come up. The peculiarities of each indi- vidual ease will suggest the way to apply the principles of collection — for instance, don't bother the man who has just changed positions, and is trying to catch up. Finding the Paying Impulse in Special Deitor Classes That Make Trouble for the Retailer Is there a pampered son of some wealthy family run- ning a bill at your store as if the family purse strings had been untied for his special benefit? Send him a brief note saying that if he does not pay by a certain date, the collection routine will forward the bill to his RETAIL ACCOUNTS 39 father. If the money doesn't come in, a letter like this will usually bring it : A successful letter to the father of a spendthrift minor, after a warning had failed Your son Charles has a considerable account with us. We have had several promises of payment from him hut we have not yet received a check. This carelessness on his part is only natural — he has not realized the position in which he places himself. As the amount of his bill is now $85.00, I have thought it wise to call your attention to his oversight. Will you not speak to him or ad- vise us as to what we should do in the matter? Have you an extravagant woman customer who is arousing your anxiety by her continued heavy buying on credit? The tone of this letter has been found effective in hastening payment and holding the trade : How the sting is taken out of a reminder to women cus- tomers with flattery and selling talk No doubt you had overlooked your little ac- count with us, for we note that you made a large purchase yesterday. In fact you have gone Quite beyond our usual credit limit. We are glad to have your trade and appreciate serving such a discriminating buyer. We feel, however, that you would now prefer to settle this account as so on as possible; so we are writing this, not as a re- quest for payment, but merely as a reminder to you. Our new Easter models have arrived and are attracting thousands of ladies to our millinery department. You will find something there, we are sure, which will delight your taste. The same common-sense method applies to other classes. Trace the "skip" by means of merchants' asso- ciations in other towns, or by co-operation with other retailers. Bring him to time with direct threats of the law. Hint to the salaried slow payer that you may be forced to garnishee. Classify; subdivide j'our three large groups; then study the paying impulses of every class. CHAPTER V How to Line up Instalment Accounts DISCOURAGED buyers or "give-ups" were crip- pling the profits of a large furniture instalment house. Goods were ordered with the minimum payment down, kept until collection efforts were exhausted, and relinquished with a "hard-up" plea — after three months' usage. The head correspondent traced the whole trouble to collection letters that collected too well. Though well- written and carefully mailed, they defeated their pur- pose. They laid stress on prompt payment; demanded, coaxed, threatened. They set debtors to thinking only of their obligations ; and encouraged return of goods. Re-selling letters lowered return losses and helped collections. Strong sales paragraphs made the delin- quent want to keep his purchase. Purchases by others on similar wages stirred the debtor *s pride. "Cash-up" offers were ruled out, because experience showed that a cash-up reputation made for delayed instalments. Spe- cial terms in the way of smaller instalments or more convenient intervals were proposed in the second or third letter of a form series, but with no reduction in total price. 40 INSTALMENT ACCOUNTS 41 A collection letter serias planned on these lines turned the tide. The "skip" who leaves with unpaid property over- night is a case not so much for the instalment collector as for the detective and the lawyer. The instalment "slow payer" is little different from the "slow payer" in retail trade. The "give-up," however, requires your best thought; diplomacy, keen selling ability, judgment in making terms — all of these are necessary. The ' ' give- up " is within the law ; he may or may not be dishonest. Don't coax or threaten, but sell Mm. Here is a form letter that was successful with mem- bers of a kitchen cabinet club who got so far behind that they seemed prospects for the truck-router: A sales-and- coUection letter ickich forcibly dexribed the inconvenience of giving up the purchase Surely you do not mean to let your kitchen cabinet lie forfeited after securing It at such a bargain and making two payments on It. Think what It means to you every day to he relieved of all the little baking day troubles which the Sxcelslor eliminates. How annoylnc to go back to the old-fash- ioned flour sifters that allow lumps to form, and either clog or scatter flour all over your clean kitchen floor. That would you do without the grooved cutting board that is an exclusive feature of the Sxcelslor? Don't you like to keep your teas, coffees and epices in spick-and-span labeled canisters handy to your work table? These features alone are worth the price of the cabinet, when you remember how long it la going to last. The amount now due (the last two payments) la only $10. Send us this today, while you are thinking about It. Long after you have forgotten the monthly payments of $5. you will think of the work your Excelsior saves you day after day. A second letter offered reduced payments and exten- sion of time, with renewed selling arguments which made the transaction seem a personal matter between 42 PERSONALITY LETTERS debtor and collector. This very generous and sympa^ thetic treatment generally puts tiie goods in the stay sold class. How to Handle the Delinquent Who Disappears Leaving Unpaid Bills An instalment house found that a debtor had moved away, taking with him the property on which several instalments were still unpaid. After the usual routine To Collect Difficult Instalment Accounts r New Proofs of Value in Purchase Re-sell the "Give-up" by -- Showing Him What Others Have Done - More Convenient Terms Prompt Follow-up Line up the 'Slow Pay" by Personal Interview to Adjust Payments - "House" Agency Pressure Warning of Replevin or Garnishment Personal Inquiries Trace the "Skip" by Co-operation with Other Houses Credit Agencies C«rio8ity Schemes That Draw Him Out CHART VIII: The "give-up," "slow pay" and "skip" make the instalment collector lie awake nights. The chart shows some of the ways of handling these classes of debtors of quiet investigation following ' ' tips ' ' from other cred- itors, a registered letter receipt located the debtor. As the instalment man well knew, however, this was only INSTALMENT ACCOUNTS 43 the beginning of his problem. He saw no profit in the law-suit which seemed inevitable; he knew that only quick work could shock settlement out of the "skip." Searching for a scheme emphatic enough to get in- stant attention, impressive enough to force respect and energetic enough to induce action, he found a printed paragraph of law decidedly effective. The man who lags — who instalment by instalment loses ground — must be trained to promptness. Some- times he over-buys — "his eyes are bigger than his pocket-book." An early instalment finds him without money. A second and third instalment pile up and he grows careless or hopeless. Sometimes he is avoiding payment as the more convenient plan — the incubator is to pay for itself — the collector's only resort is "to wait till pay-day." Slow pay demands treatment at the first symptom — it grows worse every day it runs. Get on the trail quickly. Use every effort to keep customers from getting more than two instalments behind. Have the over-due ac- counts reported to you with exact promptness. Follow them immediately and often with ammunition held in reserve for the action — form paragraphs into which you can inject close personal appeals — form letters so closely adapted to the class and circumstances of the debtor that they seem intimately personal. At the first "feeler" which the debtor puts out in his plan of delay, teach him that you are on guard. If your first follow- up fails, find some plan to get into personal touch with the delinquent and if a satisfactory adjustment does not result, follow fast with agency pressure or better yet, with suggestions of legal action. Often the disadvantages of piled-up bills furnishes 44 PERSONALITY LETTERS the theme for your letter. A first letter especially- effective with women customers follows: o e J Two Instalments due! Successful with a woman Ho, we are not nervous. customer; a "first" letter But we know how much easier it is to clear up two instalments than to have three or four discouraging bills past due. In order to help you not to fall behind another paymant — to make it easy for you and give you the satisfaction of knowing that you are paid up to date, we offer you this arrangement for immediate acceptance. Mail the first past-due instalment tomor- row — pay the second with the third when it comes due next Wednesday. That will clear up things — we will look for your first remittance before February 9th. One of the most effective instalment letters a suc- cessful city trade furniture dealer has developed is this: Effective with if convenient to you- can you drop in n f~ti*i/Ymj>r nf Tuesday, October 18th, to talk over your account? u ctwttrwwT- cy j^ ^^ ^^^ considerably in arrears; two instal- gOodlTUenilons ments— $8.00, are due. You want us to know what is the matter, dom't you? The result of this letter was to arouse the curiosity of the debtor, at the same time making him somewhat uneasy. His response at once developed his attitude and suggested an adjustment or severe action. The elements of the final collection notice are curtness, a definite action required, a definite date set and evi- dence that the account will be pushed. An effective "last letter" was worded thus: Applying Save court costs by calling at our store the "thumb before February 15th. in regard to your past due screw' account of $68.00. As his adverti.somonts say, the instalment man must grant "credit to all," so that he may expect the maxi- INSTALIMENT ACCOUNTS 45 mum percentage of trouble-making debtors. In a sense, your instalment buyers take their cue from you. If you are too harsh, they are ready to surrender the merchan- dise aad give up trying to pay. If you are slow or un- systematic, they fall into line behind you. If you ac- quire the reputation of letting "skips" get away, this will become a big source of loss to your house. Prompt- ness, fairness, inevitable certainty in tracing men and enforcing payment, make instalment accounts line up and keep step. Know Your Man CREDIT men should draw an imag- inary circle about each customer. The circle may be only a mile in cir- cumference or it may be several hun- dred miles, but it represents the sphere of the customer's activities. Every- thing in that circle having any bearing on the customer's business should be recorded on the credit man's cards or in his brain. No limited range of in- formation will suflSce, for it is only by knowing all about a man that you can judge him accurately. CHAPTER VI Blocking out a Letter Camp)aign BRINGING in the money without making enemies or losing trade — the aim in every collection problem — depends upon the tactful persistence with which you keep to your debtor's trail. Results hinge on the use of a letter series adjustable to the conditions surround- ing every individual debtor. By adopting a system of clock-work precision to lure in the dollars due, you rid yourself of many minor details. Work out two points: (1) a close organization of the collection department, and (2) a comprehensive letter series for delinquents. Within the department, the system hinges upon a clean-cut policy towards outstanding accounts, and an automatic system of follow-up which will keep the debt uppermost in the delinquent'? mind. Fix upon the matter of terms for customers; then, whatever your choice may be, carry your terms promi- nently on sales slips, bill heads, invoices and statements. In fact, all of the credit department's notes and papers should show the sales term, so that there can be no pos- Bibility of misunderstanding. The second step of organization within the house is 46 MAPPING OUT A CAMPAIGN 47 promptness in handling accounts when due. The gen- eral rule is to submit a bill or invoice with goods, follow with a statement on the first of the month — or a stated period after date of invoice — and with a first letter in from ten to twenty days. See to it that delinquent bills appear on your desk at regular intervals. Determine the time between letters by the distance of your cus- tomer from the office, the possibilities of delay in the mail, and your classification of the prospect. If you assume a lenient attitude towards a customer, the re- minder may be withheld longer than where prompt com- pliance with terms of sale is insisted upon. A fifteen- day interval, as a general rule, has been found satis- factory. But be prepared to make any variation from the automatic routine dictated by good judgment. How to Make Your Letter Series Carry the Details of Your Campaign "When you have your house organization complete, work out a letter series planned and tested not only for the strength and length of the letters, but especially for their flexibility. "Write each letter so that a reply will allow a change to a secondaiy series, a form paragraph book or a specially dictated letter. Look ahead and if the answer to your first frequently hints dissatisfaction with the goods, have a stock letter to dispose of the ob- jection, or turn to a "paragraph book" in which you have indexed strong paragraphs written to fit various situations. Instead of dictating a letter, write on the bottom of the debtor's letter the numbers of the para- graphs which fit his case. If a secondary series or a para^aph book is impractical, dictate a special letter in reply to any regular letter and after the proper interval '48 PERSONALITY LETTERS has elapse, been allowed to resume the letter series. In this way a number of stock letters are often drawn - Secopd Letter Vour Talk First Letter - I- MiketbeTooe - Put P"ir*Tfrit fi - -j p G«atal 1 FhttertoB | L Diptomatic | f Faitoes* j Pride 1 >- Re-seHiog { pi M^« 6m Toot - -T \ .ft }-£ Urgent ■ Warning iuMice of C3aka Laat Attempt taR*«cU - Third Letter - MMkedttTone £ Cotd BkMtoeas A^ipeol ThreateniDg ~| Bosiness Error Not tofc^y K PMCffifriMltOO _ CoDsequeoces PaadMK Legal Proceediat* I— Fourth Letter f— Make tfae Tk to one principle. Debtors who refuse to pay are in the wrong and know it. Pajrment follows the use of a scheme which brings to a focus the elements of anxiety and uncertainty which lurk in their minds. The Stitch in Time CUSTOMERS go to an instalment man because they are offered long time credit — a concession they cannot get elsewhere. They are, therefore, under more than a mere obligation to pay — they are under emphasized obli- gation to respond promptly to any reasonable request of yours. It is far more difficult to collect two instalments than one and the farther behind a customer falls the less profit- able his purchase becomes to you. Early persistence is better than later sacrifices. w^ ^ MU *'••■: Y ^B' .:' . ^ wBrniL. i CHAPTER VIII Enclosures That Reinforce Your Letter PATRONS of a depot news stand in a New York suburb had the habit of grabbing a magazine in a rush for a train and calling instructions to charge it over their shoulders as thej'^ hurried to the cars. The news stand man found the little items of a few cents to one or two dollars a month were sometimes almost impossible to collect at a profit. Customers forgot their indebtedness on account of the extremely small amount due, but the monthly items when totaled made a difference between profit and losa He disliked to dun a man for a few cents and yet it was just this sort of account which was getting him into serious difficulty. Money rolled in when he hit upon a plan of substituting aluminum checks for regular state- ments. The metal blanks reads "Wayne Wagner, Sta- tioner. You owe me." These coins, about the size of a quarter, were mailed in coifi cards which carried a good natured suggestion of the difficulty of collecting small accounts and asked the customer to place the check in his pocket-book or change pocket as a reminder. The scheme was suc- cessful. ]\Ian after man turned back his check and the 65 66 TESTED SCHEMES amount due with a happy comment on the dealer's plan. "Wagner, confronting a situation which retailer and manufacturer, professional man and service company, all encounter, picked it to pieces and by his analysis found the reason for non-payment. "Every one of these men intends to pay me," he thought. "Every one has at any moment money needed to pay, but hardly a man would not resent my most tactful public request for payment. The only way to get the money is to pro- vide them with a shrewd and silent reminder." In a similar way, analyze the problems of collection which baffle you. Is your problem that of the stationer ? Vary his scheme to fit your needs. Send the debtor a duplicate sales slip or provide him with an easy-to-carry reminder which will keep the bill uppermost in his mind. Must you remove an obstacle in the debtor's way? Send a self -addressed envelope. Offer to accept the risk of currency sent through the mails. Make pay- ment easy by furnishing him the convenience that would good-naturedly spur you, A Prize Essay Contest Which Drew ilie Net Arourtd Slow Fay Customers A Kansas storekeeper cleaned up his bad accounts by a subtle threat of notoriety. Driven to close financing by his bulk of slow pay accounts, he startled the popu- lace in his town of 2,000 with an advertisement. In it he pointed out the efilccts of the loose credit system which he had adopted. He announced his purpose of making a change and ofFered cash prizes for the best essay of two hundred words on "How to Collect Slow Accounts. ' ' He printed the best essay in the newspaper and had facsimile clippings struck off. A lurid head- ENCLOSURES THAT WIN 67 line on the clipping attracted attention when enclosed in a collection letter and debtors crowded into the store. They feared that he might actually adopt the suggestion carried in the prize-winning essay, that of publishing the names of the people who owed him. Nobody was hurt, no one was angered by importuni- ties for money. The dealer studied his case and found a remedy for it. He made possible gossip a potent col- lection assistant. The good collector is a quick tliinker and stands ready to turn slight incidents to his advantage. A New Orleans correspondent of this class found the way out in an interview with his employer. Persuasion That Wins the Debtor's Co-operation and Lines Up One Entire Class of Accounts "We're spending entirely too much time on these little accounts," growled the chief, when the collection man answered his summons. "I'm going to make an example of some of these fellows and see if we can't get our money when we want it instead of waiting until they are ready to pay. Read this." The letter handed the collector was addressed to the delinquent's employer. It briefly outlined a history of the case, showed that the debt had been regularly con- tracted and continued with the story of collection at- tempts, quoting excuses made by the debtor. The letter concluded with a request that the employer "use his in- fluence" to make his employee pay. "Let me take that letter. I'll get the money without sending it," and after an argument, the collector got his employer's consent. He had the letter copied and enclosed it to the delinquent with one of his own in 68 TESTED SCHEMES which he related the circumstances by which he got it. Following paragraphs warned the debtor, pointed out the effect of the letter on the employer and suggested immediate payment. ''I've done my best to help you and I'll be in bad if you don't help me," was the way the collector's letter ended. By return mail, came a check in full and a letter thanking the collector for his good offices. While other ways of offering help to a debtor suggest themselves, some collectors reverse the proceedings and offer the debtor a chance to help them. One collector encloses an interdepartment note which, signed by the president, carries a "call-down" for lax collection methods. The correspondent in forwarding the note writes that he has to his loss been lenient with the debtor and concludes by asking the debtor to help him. Proof of the collector's dilemma is in the debtor's hands and it has an effective pull on the good-fellow class. Selling talk, suggested for the first collection letters, can be strengthened by the addition of a sales circular of proved pulling power. One house which has made effective use of this plan encloses circulars in all ** first" collection letters. The reader, eager to secure the new article, proves his good faith in ordering by paying up his indebtedness. Novelty is the magnetic force in any collection scheme or inclosure. Don't use the stale and transparent de- vice. Get the idea — ^build upon it for yourself. All of the schemes outlined are susceptible to change by the collection man. They merely need some twist or turn or presentation from a new angle to lend freshness to your methods. Follow the principle of business analysis and fit the idea to the man. CHAPTER IX Details to Watch and Errors to Avoid PUTTING a premium on procrastination, that's what weVe been doing," said the president of a specialty house to his collection manager. ' ' We 've been offering discounts and inducements to the settlement of bad accounts until our debtors sit back and wait for the * cash-up' offer that suits them. "And we're going to stop it. Now. Hereafter our favors are going to the people who pay their debts when due." The new policy was followed to the letter, and tests showed its wisdom. More money was received by de- manding payment on a business basis than was re- ceived under the cash-up system. Debtors, knowing the house policy, had deliberately deferred paying and awaited the payment in full offer that suited them. When letters showed that the house would go no farther in its cash-up offers, they sent in their money. Inducements were the short end of the expense and loss involved. The offer canglit only the cream of the trade — the men who would have paid anyhow. Delay in bringing in accounts, extra stamps, stationery, clerk hire and bookkeeping all combined to run up collection costs. 69 70 TESTED SCHEMES The new plan — that of sending clean-cut collection let- ters which wound up with notice of suit — shortened the time of collection and won over debtors who had tossed the cash-up offers into the waste basket. Though condemned by a majority of collection men, the cash-up scheme of bringing in money is still used. The unthinking collector fails to realize that he is train- ing the debtor in delinquency. By rewarding the slow pay man, he takes away the incentive to prompt pay- ment. He not only rolls up obstacles for other business men, but he destroys chances of prompt payment in other business bargains with his debtors. If it is advisable from the nature of your business to give discounts for cash, give all the customers a chance at the savings. Show the list of premiums or discounts on your bill of sale so that the buyer knows in advance all the profits which lie in cashing up. Getting Away from Blunders and Makeshifts Which Clog the Gears of the Collection Machine Another time-honored scheme as ancient and as in- effectual as the cash-up is the sight draft which many collectors depend upon to force debtors into line. But a draft only irritates a customer, throws a week's extra routine between you and your next move, and destroys chances of a peaceful settlement. Credit and collection men now unite in condemning the method. They use sight drafts only with some dis- tinctive variation or when the method has been agreed upon in advance. Generally, sight drafts are attached by agreement to the bill of lading when partial pay- ment of a big shipment is to be made on delivery. A sight draft which has some effect, but which is los- COLLECTION LETTER DONTS 71 ing its efficiency through general use, is the credit asso- ciation's form. This is the regular sight draft form with the association's name printed on it. If it is not paid on demand, the bank turns the draft over to the agency's attorney, who proceeds to collect. You can raise your average of collection returns greatly by watching the little details which may seem at first to be inconsequential. Don't threaten a debtor with punishment in one letter and be contrite in the next. If your man forces you into threatening suit, sue on the date set. Your action will increase his respect for you and make your delinquents pay quicker there- after. Don't heap abuse on the head of the debtor. Abuse rolls off the back of the dead-beat, makes the honest man angry and may rouse a spirit of obstinacy which will further delay matters. Organize, develop a method and system in your collec- tion department, but don't blindly follow the rules you lay down. Make your schemes yield to judgment. Run your system; don't let it run you. Don 't request payment as a favor. In asking for your money, you are demanding your right. Make the debtor see it in that way. Don't, by your lax methods, educate a customer into taking his own time for payment and blame him for the fault when you happen to need money. If your cus- mers are slow pay, examine yourself. The chances are that you are to blame for their delinquency. Study the state and federal laws regarding libel and blackmail Keep these laws in mind when collecting by telegram. Don't write a dun on a postal card or send a bill 72 TESTED SCHEMES under a one-eent stamp. You may r\m foul of post- office regulations. Don't indicate on the envelope the contents of a col- lection letter. Be careful what you say to a debtor if your remarks go by mail. Consult the pamphlet of in- formation issued by the postal service. Remember that the post office includes as unmailable matter, letters which are scurrilous, defamatory, threatening or dun- ning in character and obviously intended to reflect in juriously upon the character or conduct of another. Know the Debtor's Mind REMEMBER that most men want to pay their debts and do not con- sider any man dishonest until he has proved himself so. Do not resort to threats of severity until conditions absolutely demand them. The debtor who has been hardened and aggravated by the ordinary "give- me-my-money" letter will have a pleas- ant surprise if you first show him a personal understanding of his case. Your cordial willingness to be reason- able will get your money while the man who flies to early threats waits for his. 5" tH Part III WHEN AND HOW TO FORCE PAYMENT Set the Pace V\7HEN an account lags, put it back to your pace. When a debtor balks, make a test of him. Find the trouble — get a settlement. If it's your mistake, get right. If your debtor only is at fault, find whether it's his cheat or his blunder. When a debtor blunders, help him pay. You can get your money and his friendship by quick action. When he cheats, use tlw whip. Make him pay. Train him to come to time. Look ahead. Make yourself familiar with collection law. Learn how far you can go — what help you can enlist — when and where the final steps to force collections and make ex- amples of debtors are worth while. Know the road. Hold the whip. Then set the pace and train your debtors to keep it. m Dj 1ili: If ■ ■ HOW TO CROWD A DEBTOR INTO PAYMENT m Aid Him with His Collections Help Him Get Money _ Arrange Time Payments for Him Check His Losses and Extravagances Personal Work In an Interview Apply Pressure By Cutting o« Credit Through Banks Withhold Credit Have Credit Organization Trace "Skips" Last Resorts in - Collecting ^ Force Payment Cooperation with Other Creditors - Help Debtor over Crisis ■ Consolidate Accounts to Conduct Forced Sale - Have Receiver Appointed Libel Watch Legal Points Blackmail The Law Fraud , Make Up a Merit List of Lawyers Work with Attorneys Follow Thorn Closely for Action CHART XI ary methods ^ catcs methoc : When your deb [ail to move him tr> Is successfully usee tor stubbornly bai ' cooperation and in brinKing relu Its at payment and ordin- the law. The chart indi- ctant deh'nquents to time ■ ■ii: :iii CHAPTER X Personal Work That Saved Bad Accounts HARLOW, a credit man for a wholesale house, saved his company a loss by accepting a note secured by apparently worthless timber land. A few years after the retailer failed, the property was sold for more than the face of the note. Wilkins, seeing that one of his customers was on the rocks because of poor collection methods, went over the debtor's books and set out one of his own men to col- lect from the debtor's customers. Wright, in talking over store affairs with a delinquent, discovered that the dealer was over-loaded with stock which could not be converted into cash by ordinary methods. Combining with other wholesalers, Wright sent a sales expert to the delinquent's town, closed out the stock on a narrow margin and got enough cash to pay all debts and leave the dealer with sufficient balance to begin over again. Personal resourcefulness of these collectors brought in the money where routine methods would have failed. Collection work is to commerce what diplomacy is in international affairs. The aim of the collector and dip- 75 76 HOW TO FORCE PAYMENT lomat is to adjust tactfully without employing extreme measures. To resort to force is costly both in immediate expenditure and future loss, and the best collector puts compulsion far in the background, while keeping it in sight and within reach. It is at this point that the col- lection man proves his worth. His cleverness, his inge- nuity and his varied forms of appeal or attack are what convert debts into dollars. Here he makes the personal equation count by adapting himself to the special con- ditions which confront him. How Applied Personality Binds the Delinquent Customer to the Retail Stoi*e Personal resourcefulness counts greatly in getting money from the prominent citizens with prestige but without cash. The dealer has to extend credit courte- sies in accordance with the customer's place in the com- munity, and yet such purchases must be kept as nearly as possible on a cash basis. Their accounts have been termed "influential but not good". Your plan in dealing with these debtors must be in- dividual. You may find a premium or discount scheme which makes cash trade fashionable and economical. You may circulate advertising matter showing cash pur- chase savings and selling that policy to your customers. One marketman who changed from a credit to a cash basis retained his former trade by securing a cash de- posit from his customers at the first of every month. Purchases made were charged against this deposit. The system did away with the greatest objection to cash trade, that of having to keep money on hand to pay the grocery boy. Often an exchange can be arranged, so that the dealer handles art work, needle work, fruits, PERSONAL WORK 77 truck or preserves for the customer and thus keeps the balance of trade favorable. A New York store owner writes a personal letter to the doubtful retail customer and asks him to call. The little talk on credit which takes place during the inter- view influences the debtor to pay up. Frequently the story told by the customer exposes bad blunders in your system and selling methods. By bringing these to the head of the store and having them corrected you can often hold the complaining customer and prevent other symptoms of loss which appear first on the charge pages of the ledger. Warner, a retail merchant, found his worst trouble in holding customers who had been extended credit. These, instead of continuing their trade and giving him the little cash they had, turned to a competitor because they were ashamed to face the man they owed. When a delinquent shows a tendency to break away, Warner calls him by telephone and asks him to come to the store. The customer cannot refuse, knowing himself to be under obligations, but when he comes in he is not dunned. Intead he is shown a nice line of goods just unpacked. He is told why the new stock is specially adapted to his use and is asked to make his choice while the lot is unbroken. Disconcerted by the new method of treatment and flattered, the cus- tomer sometimes buys and pays his old bill on the spot. How to Get Into Personal Touch with the Delin- quent and Bring Insialm.ent Accounts Up to Date This scheme of approaching a bad pay from an en- tirely unexpected angle is similar to the method adopted by the collector for an Omaha instalment house. Abuse 78 HOW TO FORCE PAYMENT is the keynote of his rival's methods in collecting. Debt- ors are scolded and threatened. The Omaha man has developed a system of faee-to-face collections and made it win. His men call on a bad pay debtor and endeavor to encourage him, instead of devitalizing his efforts by con- demning him for passing bills. The delinquent's con- fidence returns as he sees that men of less ability and earning power than his are crying and praying for sim- ilar comforts. As a result of the talk, the delinquent generally makes an offer of payment. He either over-estimates or under-estimates what he can do. In the first case, he is cut down. "We don't want to rob you," is the tone of the collector's talk. If he under-estimates, the col- lector confidentially informs him that the house is about to begin strenuous collection methods and that it would be well to get under shelter before the storm breaks. One or the other point — raising or lowering the man's proposition — seldom fails to win. If you are an instalment collector like Parker, a retail man like Warner, or a wholesale man of the Wright stamp, do as they did — turn from the time-worn trail, find a new way. Try for human interest. Sound the situation by letter or agent. Send your bank or credit or attorney service to investigate. Better yet, as a last resort, get on the ground yourself and use your judg- ment. Consider a new basis of payment — plan co- operation — make an exchange bargain — look for sal- vage. Apply your latent personal resourcefulness to solve the individual difficulty and bring the money in. CHAPTER XI How Far Can I Legally Push Collections ? ROUSED by a debtor's pert insolence, a St. Paul collector wrote the man's guarantor a sympathetic account of his behavior and added a blustering opinion of his conduct. The delinquent got hold of the letter. His lawyer brought the collector into court on charges of libel and blackmail, and the firm was glad to send a receipt in full to avoid further trouble. The correspondent who wrote the letter had always understood blackmail as the extortion of money for the promise of silence about a disgraceful secret. Libel he considered to be false statements which injured the rep- utation of a man. But he found blackmail to be "extor- tion by intimidation ; especially extortion of money by threats or accusation." Libel, he learned, is "any state- ment published without just cause or excuse, expressed either in print or in writing, tending to expose another to public hatred, contempt or ridicule." The fact that his remarks about his debtor were true, or that he be- lieved them to be time, did not alter the case. He had committed libel and could have been punished severely had the case not been settled out of court. The lesson, 79 80 HOW TO FORCE PAY]\IENT though a hard one, made him careful of the points of law which infringe on collection problems. Libel and blackmail, however, are not the only pitfalls for the unwary. Fraud is a trap for the careless cor- respondent. Apparently unimportant points in the wording of a contract may get him into trouble. To be safe, the experienced correspondent keeps exactly posted on Postoffice Rulings, Interstate Laws and State Stat- utes. Little Points of Postoffice Billing that the Corre- spondent May Unwittingly Violate The postal laws have been enacted to prevent the use of the mails as an instrument of fraud, to protect citi- zens in their right of reputation and of property, and to secure generally a higher standard of morality. The question which puzzles the average correspondent is what language or style of display the courts consider as falling within the condemnation of the statutes. Where a creditor wrote on a post card, ^'I can see very plainly that you do not intend to pay any atten- tion to my letters or your agreements.. I propose to get the balance due on that claim. I shall wait no longer, hut will see what can he done,'' the court held that the writer intended to reflect on the character of the debtor. The words accusing the debtor of not paying any atten- tion to his agreements were defamatory in nature, and the sender was liable to the postal law. In another case, the writer concluded a postal card message with these words: "I will garnishee and foreclose, hut I dislike to do this, if you will only be half white." Had the writer of the card omitted the last clause, he would have been free from the penalties of the law, for the court LEGAL LIMITS 81 intimated that a request to pay, accompanied by the statement that the creditor intended to foreclose, might not be of such a character as to render the postal un- mailable; but the last sentence was clearly intended to reflect upon the character of the debtor, and the writing was illegal. On the other hand, the following language which was written on a postal card was held not to be illegal: "Why do I iwt hear from you? I see plainly I shall have to press this matter. I must hear from you hy Wednesday night. I shall wait no longer." Obviously, the words used may relate to an account, but at the same time they may relate to something else. Moreover, the wording is such that the character of the receiver is not attacked and there is no publication of his delin- quency to the world. Legal Points to Watch State Statutes Blackmail Federal Interstate Laws Libel Fraud Post Office Regulations CHART XII: Before writing the collection letter be sure your case is defensible in law and be careful not to violate the courts' definition of libel, blackmail and fraud The opinion of a famous New York lawyer on the postal laws is to this effect : That a simple request by postal card to pay is not illegal. The illegality occurs only when the language is libelous, scurrilous, defama- tory or threatening, or when by its terms or style of display it is written to reflect injuriously upon the char- acter or conduct of another. It follows, therefore, that an account may be rendered on a postal card. A simple 82 HOW TO FORCE PAYINIENT request for payment may be made, together with a state- ment of any conditions such as discount or time. State- ments on cards, asking for payment on. or before a cer- tain day and indicating the discounts, if there be any, are proper, but it would be bad policy and of doubtful legalit}^ to accompany the statement with a threat that the account would be placed in the hands of an attorney or professional collector if not paid on a certain day. Furthermore, any remark on an envelope which in- dicates the character of the letter and shows that the debtor is being published is as illegal as if the fact were stated on a postal card. The only difference is that the card accomplishes the purpose by actual written no- tice, whereas the envelope accomplishes the same pur- pose indirectly. Common intelligence and a sense of business pro- priety usually prevent a collection correspondent from violating the law. The law, whether it originates in a state or a federal congress, is merely the state's method of enforcing what it consider common justice and a due regard for the rights of others. To Make Collections Certain, Instruct Salesmen and Make Contracts Read Right Legal precautions in collecting are generally begun when contracts are drawn. Sales managers at this point clear the way for the collector by avoiding prospects immune in case of dispute. Such persons include gov- ernment employees, who cannot be gamisheed. In some states the same distinction holds true of a state em- ployee. Sailors and soldiers are sometimes refused goods on instalments, as the government will not aid col- lection efforts, and frequent discharges and transfers LEGAL LIMITS 83 make it hard to follow men in these services. Houses which do interstate business clear away the dead wood in the credit department by keeping a digest of the collection laws of each state. They know when a man is immune to collection efforts or what creditors are preferred under state laws. In many states, deal- ers in food supplies have first rights in collecting. In other states, landlords' rights over the tenants are well established. Such information, when combined with notes regarding chattel mortgages and conditional sales, make the way of the collection man easier. Other simple precautions which must be taken when drawing up a contract include saving clauses such as * ' goods remain the property of the seller until final pay- ment is made," and "lapse of two payments makes all other payments immediately due." The latter clause protects the creditor who forced to sue to get a first payment for goods could otherwise be forced into court on each succeeding payment. Salesmen sometimes misrepresent. The contract, therefore, should bear the statement that "no verbal agreements will be accepted by the company unless noted on the face of the contract." Very often the statement "this order is not subject to cancellation" is printed prominently on the contract. While no contract of any importance should be drawn without the advice of a lawyer, the most successful sell- ing contracts are worded in language so simple that it is easily understood by the laymen. ]\Iost men read a con- tract before signing it, and the ordinary man is far more ready to sign a simply written agreement than he is to put his name to a ponderous legal form which he scarcely understands. CHAPTER XII How Creditors Work Together MERCHANTS of one himdred and twenty-eight Illi- nois cities and towns are organized to beat the professional bill dodger at his own game. In each city a local credit association acts as a clear- ing house for information regarding bad debtors. As a result of information exchanged, the man who refuses to pay his bill in one store of a town finds it impossible to secure credit from another dealer. His record is known. If he moves to another part of the state his situation is no easier, for the first question asked by a member of the association in getting facts on which to base credit is "Where did you live last?" The customer's record, forwarded from his former place of residence, imme- diately checks his attempt to live at the expense of oth- ers. The association thereby saves its members from loss and automatically locates the debtor for the benefit of his creditors. The members of this organization have taken from the Illinois delinquent his most effective means of running up debts, which was to trade on a dealer's ignorance of his rival's affairs. The bad pay customer, after eX' CO-OPERATION AMONG CREDITORS 85 hausting his credit at Smith's grocery, has usually gone around the corner and repeated the trick at Jones's store. Jones, at the start, is delighted to get a castomer from Smith, and each grins at the thought of his com- petitor's predicament. The customer has the last laugh. Lack of cooperation between retailers is the source of common trouble. When the fault is eliminated, profits begin to show. Wholesalers cooperate through the use of the merean> tile agencies to head off bad pay dealers. Large organi- zations also have salesmen, correspondents and systems of exchanging information which keep up credit stand- ards. When the big companies are caught, they com- bine as a matter of course and put their accounts in the hand of one agent, appoint a receiver or conduct forced sales. Similarly, many houses have suffiicient organization to secure an accurate line on the credit standing of the people they ** trust". Mutual jealousies have made it difficult for retailers to develop along this line until the pressure of competition has driven home the elementary lesson that sticks easily broken one by one stand the strain when tied in a bundle. Hoiv Small Retailers Combine to Keep Bad Pay Accounts Off the Books A local association to furnish merchants with infor- mation similar to the wholesalers' commercial agency service can easily be organized. The dues required are low and are merely sufiieiont to maintain a secretary and office organization. Such associations investigate the exact responsibility of every one of the buying pop- ulation of a town, and, when possible, cooperate with merchants in nearby towns in order to obtain informa- '86 HOW TO FORCE PAYMENT tion concerning new residents. Every member pledges himself, on joining, to extend credit to no one on the delinquent account of the organization. In one typical case the retailers of an Indiana town began war on sulky debtors by an announcement in the local newspapers outlining the scheme and accenting the benefits of giving credit only to people entitled to it. Editorials demonstrated that the man who defrauds a merchant compels the honest customers to make up the loss by payment of higher prices. The announcements and editorials, carefully worded to secure the sympathy and cooperation of the public, aroused sentiment in favor of the dealers. Every merchant in the association reinforced the news- paper publicity by a circular letter which called the attention of delinquent customers to the new scheme. On the first of the month, the letter went on to say, every merchant had to furnish the association with a list of credit customers. The writer tactfully suggested that a payment of the balance due would put the cus- tomer's name on the approved list. Notices and letters got immediate results. Slow and doubtful accounts poured in without any of the hard feeling that gener- ally follows dunning letters. Then each member sent to the secretary the name of ev^ry credit customer on his books, good as well as bad. The sheets used (Form I) classified the buying pub- lic in five divisions. The merchant's number, known only to the secretary, identified the customer list from each store. Use of this secret "key" prevented any dealer from getting a surreptitious peek at a compet- itor's past due accounts and thus estimating his finan- cial strength or the percentage of his losses from bad CO-OPERATION AMONG CREDITORS 87 'S a ^ -a sz "■§- u o OS § q 2^2 jsaAvo jCijadojj 3120(8 N J ^ ^-1 ^^ i ^. :S ■U ^ 1^ n .!;-Q S8 ^J3 3-2 88 HOW TO FORCE PAYIMENT debts. This numbering eliminated all doubts which might otherwise have arisen as to the safety of submit- ting such information. The dealers estimated the standing of customers by placing a check in one of the five numbered columns. The secretary transferred the information carried on the sheets to a customer's card index (Form II). As a rule, several merchants reported every buyer. These various ratings checked on each other and were all noted on the customer's card by merchant's number and col- umn number. The secretary investigated any discrep- ancy in rating. The cards, filed alphabetically in a flexible horizontal file, readily permitted the insertion of newcomers' names. As a result, the secretary had up- to-the-minute credit information about everyone in his town. The information contained on the credit cards is sup- plied to associated dealers on mimeographed sheets as follows : Peinstein. Yetta, 323 Yesler Way : : : :3: $41. Perdinand. Oscar (Wid. ) . 232 Howard St. :1:4: Pernald. L. T. (Martha). 716 Mich. Av. 1: : : : : Prank, George, 321 State St 2:3: : : : These are compiled by the secretary. The pages, filed in loose-leaf binders, are revised from time to time. Five columns at the right of the page correspond to the five ratings. The figures in any column show the number of the merchants who have reported a buyer in that town. By the book, a member may instantly discern the credit standing of anyone in town, and if the show- ing is unfavorable, he is required to withhold credit asked. CO-OPERATION AMONG CREDITORS 89 Retailer's final letter to delinquent A3 a member of the Oklahoma Retailers' Association, we 'desire to advise that on the day one week hence the record of your credit dealings with this firm, as evidenced by our ledger entries, will be given into the hands of the credit mana- ger of this organization for entry on its credit files. Our books show that you are indebted to ua in the sum of $48.00. Since this amount is past due we must ask that you call at once upon the writer hereof and arrange a settlement that is mutually satisfactory. We make this request in order that our estimate of yourself as a credit customer may go to our credit manager clear and clean. In explanation permit us to say that it is not the purpose of this organization's members to work a hardship upon any of its patrons. Being joined together. howcTer, for work- ing out problems of common interest to all retailers and for mutual benefit and protection as well, we desire in all deference to apprise you of the fact. Trusting that the above may have your careful consideration and prompt atten- tion, we remain Yours respectfully. Final letter to a delinquent debtor used by members of an Okla- homa association when other collection methods fail. As a rule, the debtor succumbs to the threat of lost credit standing, but if he does not pay up in ten days the account is turned over to the association for collection. The fact that all the members use the same form in dealing with delinquents impresses the debtor with the power of the organization. The printed letterhead has much to do with the effectiveness of the note. It carries the names of national and state officers of associations with which the local union is affiliate.d. Names of collection lawyers employed, names of prom- inent members and the line "equitable legislation, mutual pro- tection against the dead beat, advertising grafter and catalog house" warn the bad pay that he confronts a stone wall. 90 HOW TO FORCE PAY^IENT In addition to providing credit information, a retail- ers' organization in the middle west collects "hopeless" accounts for members. Three form letters are used, and no other attempt is made to get money due. Credit information secured through these collection efforts ia furnished members in the supplemental bulletins. The first letter is mailed by the merchant after all regular collecting schemes have failed. Failing to get a reply, he turns the account over to the association. The seeretaiy writes two form letters, and dispatches them ten days apart. The burden of their argument is the credit-killing power that lies in the association and the result of loss of credit. The letters generally secure an interview. If the bill is an unjust one, or if a just complaint is made by the customer, the matter is settled to the satisfaction of buyer and seller by the secretary. Co-operate with Othe Creditors by Fix Amount of Credit Thwart Adempts to Defraud Check ExtravaRance Force Dfhnquenis to Pay Up Conduct Forced Sales Arrange Voluntary Receivership CHART Xni: Cooperation prevents bad debts and is a powerful lever in moving a delinquent to payment. It is the most useful tool of the collector and is the mainstay of the credit department Whenever a debtor has forced a member of the asso- ciation to submit a just bill for collection, the debtor's name is added to the following supplemental bulletin, mimeographed in the following style : Wilson, 'U. M. (Single) . 16 Sixth St $12.00 CD** Winslow, A. D. (Wid. ) , 230 Chicago Av. ...$56.34 A*'** Wisler. T. 8. (Martha). 34 Elm St $25.00 J* This information, while accurate, is anonymoiis. The dealer who looks up a customer on the bulletin finds CO-OPERATION AMONG CREDITORS 91 Sear Sir: We have had placed in our hands for Collection the account of Walts & Co. amounting to $39.00. Your failure to pay the same we presume has been caused more by neglect than from any intention not to pay or of keeping the money from the creditor. We have concluded to ask you to call within ten (10) days and arrange for some settle- ment. We are sure you will appreciate the Association writing you and giving you this further opportun- ity for adjustment. Yours truly. P.S.-Our members are advised of the exact be- havior of parties having accounts on file herein by meana of our report which is issued to them monthly. Sear Sir: We have given you ample time and every opportun- ity to arrange for some adjustment of the account filed against you in this department in favor of Walts & Co. amounting to $39.00, and as you have made no effort to do so we beg to advise you that we shall now resort to more definite action . Our Collection Department keeps a record of the names of all persons who fail to adjust their ac- counts. This is published for the protection of other merchants in the city and keeps them from incurring similar indebtedness. Any person who happens to appear upon our records in this manner will find it not only annoying, but very difficult to obtain credit to any extent, and such information will act as a cloud upon their reputation for honest and fair dealing with their creditors. Yours truly. Before turning accounts over to a retailers' association, the dealers in an Indiana town warn the debtor of their proposed action by means of a form letter supplied by the organization. If the warning fails, the secretary sends these letters ten days apart. He then bands the account to an attorney. 92 HOW TO FORCE PAYT^IENT that a storekeeper of a certain class — indicated by key letter — has reported a customer. But he has no means of knowing who the informer is. Stars followincr a cus- Frank, George 432 State Street. ^^ ^ % •^^ FORM II: On this card the secretary enters the ratings given customers by each mer- chant with whom he has dealt. The merchant's code number appears in connection with his rating tomer's name picture the collection efforts made. The code is: (*) account paid since last bulletin; (**) making irregular payments; (***) absolutely refuses to pay; (****) makes indefinite promises of settlement; (*****) difficult to locate, address wanted. The speci- men bulletin shows that Wilson owes $12, his creditors being a hardware man and a clothier, and that he is making irregular payments. Winslow, reported by a grocer, owes $25 and is making indefinite promises. When a customer pays up, his name is retained on the bulletin. The merchant who looks him up may decide whether the past performance will be repeated. This plan of fixing retail credit and making col- CO-OPERATION AMONG CREDITORS 93 lections has been adopted with success by associations in largre cities as well as small. The system has been found satisfactory by professional men, especially doctors and dentists, who require specific credit information. flhis plan of cooperation and organization enables the dealers of a town or state to cut down debts and increase the margin of profit. Good pay customers also reap a share of the benefits from this financial system. Hence the plan wherever tried has proved popular with the public. Commercial clubs and chambers of commerce have made credit associations valuable depart- ments. The good feeling and the fellowship engendered in the business community leads to better town spirit by bringing your men of affairs together on common, ground. Be Fair THE successful collection man should have that most precious of all characteristics — human sympathy. He must not as some believe be a born pessimist and skeptic. In dealing with men he should be fair and meet them on this ground. He should make customers believe in the fairness and liberality of the house. CHAPTER XIII Handling Collections through an Attorney WHEN tlie debtor remains obdurate and you hand the account to an attorney for collection, dan't stop there.. Remember that collecting is often the pot- boiling medium of the attorney's practice. It demands much work for a comparatively small fee and is liable to be side-tracked for more pressing duties. Dozens of reasons — business, political and social — may keep the lawyer from following your debtor with the severity you demand. To get the best results from accounts in the hands of the la\\yer, keep a merit list of the local col- lectors and maintain a special follow-up system to keep your agents focused on their work. A New York collection manager's method of handling accounts through out-of-town lawyers- has reduced the cost of legal collections to an average of three per cent of the claim. He keeps a card list of attorneys, indexed by states and counties. Each division shows the name of one of more tried collection attorneys. Salesmen in their weekly rounds keep track of the lawyers in their territory and report any change, whether by partner- ship, death or removal. Frequently a score of changes 94 USING AN ATTORNEY 95 in the list are reported from these sources in a week. In the New Yorker's system there is no groping in the dark when a lawyer is needed. Even in remote districts, where lawyei*s are seldom required, an account placed in legal hands gets action. The list carries the names of men who need business and consequently will make the most of it. Such men are amenable to suggestion and instruction; they work with the house, apply its collection policies and methods, and reduce friction be- tween correspondents and themselves to a minimum. A Minneapolis house goes a step further and closely keeps track of the work done by men entrusted with its accounts. "When a bill is handed to an attorney, the order number in dispute is written on the back of the lawyer's card. When the account is settled the result is noted in the same way. In this way a tested list of attorneys is always on hand. When lawyers quit or are dismissed, a successor is chosen by his record. When an out-of-town attorney is at work on a case his knowledge that the creditor is busy and wide-awake regarding the account keeps him on the jump. Regular follow-up is essential. Modify the card tickler to the purpose on hand. The following scheme has been found effective by a national collection agency and can be adapted to any business: Cards 6 x 10 (Form III) are made up as a quadruple index. The top lines carry the tickler dates. Following lines carry names, description of account and space for condensed correspondence. The cards are filed alpha- betically, according to client's names and lie flat in the drawer. A tickler divides the cards in each drawer so that they will automatically appear on the date wanted. Labels attached to the sides of the cards allow instant 96 HOW TO FORCE PATMENT reference to be made to attorneys or debtors. The law- yers have their names written in red ink and the debt- ors are distinguished by the use of black ink. A small A B C D E F G H I J M t..(A. J>JtUjAjLO/ Vc ~ ''A - ^^ - Vs T No. /f6^ Red. TTla^ /. f9jl. Dealer VS. 0.771.7/9/ C/uyi^^ jijudjj. - rltt Debtor <o^ . y-tcu. DescriptioD (BjUJ, ^ ^'yj^.o^y ^-T/^ 90 Sent to Atty. 1/9- ^^.^. .o, aj N o p R T u V FORM III: Instant reference to client, debtor and attoraeys, is allowed by this cor- respondence card, which can be modified to fit the needs of any collector company can adapt this system by filing cards accord- ing to salesmen's territories instead of clients' names. How to Follow the Out-of-Town Collection Attor- ney with Best Results Frequently complaint is made that attorneys rated high as collectors are lax in keeping a house informed of progress with the debtor. Very often, however, lack of report is due to legal delays. The lawyer handling the case expects the collection manager to know something USING AN ATTORNEY 97 about the time needed for legal routine and is conse- quently irritated by letters asking information before any can be given. Consideration of the lawyer's duties in handling accounts will save time and anxiety for you Use Your Collection \- Lawyer to Mediate or Threaten by ^ Letters Personal Talks Appear in Courts to Sue Garnishee Attach Watch Property Records of Delinquents as to Land Transfers Wills *- Incumbrances CHART XIV: Recognize that your attorney's position enables him to act as mediator or prosecutor. By watching public records, he often locates attachable assets, real and potential, hidden to the routine collection manager and annoyance for your man of law. Each period of a suit is followed by a wait of from ten to twenty days and lawyers' letters meantime consist of a mere repe- tition of news which has gone before. Legal routine varies slightly in different states, but the account which your attorney has failed to settle out of court generally follows this final course: 1. The lawyer notifies the customer that a suit is to be started within a few days. He waits five to ten days for an answer and settlement, and then — 2. He files a precipe. This is a petition for a summons by the court and is accompanied by an affidavit as to the amount due. The clerk immediately issues a summons, which is a writ issued out of court, signed by the clerk, and com- mands a defendant to appear on a certain date. The lawyer takes the summons to the sheriff, who serves it. 98 HOW TO FORCE PAYIVIENT 3. Ten days generally elapse between the time the sum- mons is issued and appearance day. At that time the de- fendant can get from five to ten days to file an aflBdavit of defense. This defense may be legal, such as an appeal to the statute of limitations or it may be a defense of fact, such as a denial. 4. On the day set for trial, the court hears the evidence and enters judgment according to the laws and facts. 5. If the judgment is in favor of the plaintiff, execution Issues. This writ directed to the sheriff commands the debtor to pay judgment and costs to the bailiff and provides that if he wishes to file an exemption, he has ten days to do it. If he fails to do so, any of his possessions may be levied on and sold at public sale to satisfy the judgment. The sale has to be advertised for four weeks before the debt can be satisfied. By listing the attorney's duties in this way, you can time your follow-up and thereby show an intelligent consideration of your man's work without lessening the pressure necessary to keep him up to the mark. Whether you select your attorney from lists made up from your experience or a bonded list compiled by some commercial agency, keep your man's interest keyed up to collection pitch by cooperation and helpful suggestions. Turn the energy formerly devoted to the debtor into channels that will help the lavtyer. Follow him closely but sympa- thetically for action. Part IV HOW TO KEEP YOUR LISTS AND RECORDS Kee'p Down the Burden "C'ALSE steps in selling, in credit extensions *■ and in collecting are an extra burden on the collection balance. Successful collection is rooted far back in sound credit methods and honest salesmanship. Find the straight line — keep down the weight — organize your credits and collections. Sell satisfaction. Grade your credit risks. Then line up to the dates you make with dehnquents — teach the debtor that you keep your collection promises. Make the man whose account is in your collection file feel that his card moves up a notch every day — that his name is on your desk pad at the proper date, for your personal follow-up. Show him that your thought focuses on him every time his account becomes due. Train him to keep step. Make him measure himself by your accuracy. Make him pay by the clock dial of your reminders. Collect by plan and schedule. Don't add I and carry losses. Keep down the burden. oS ■ ii: iia HOW TO KEEP A CREDIT RECORD ■ 1 J 3 4 5 6 7 8 9 1011 12 13 14 15 16 17 18 19 20 21 22 23 24 2526 27 2829 30 31 LMT 9lu^^ t^-. (^ State 3m.. ^o^oUla^ ^MJl Q.f LH &3 Jll^ ^^ '/i V'^ lAj^ ■^ Net Worth Ability Exp. '01 'A — ^ili Dates of the receipt of special credit re ports from commercial agencies, attor- neys. banks and trade references. These reports clear up knotty prob- lems for the credit n. The Ire- icy itb 571^ _pa-^ Record •0<) 3tn-So H50-tS lil-fil -^ ^ ^ 'f/O ^JJ.d,. SO"^ i//0(PS/u2.juJ vhicli reports have bee> asked 3 a customer isaa ifidicadoo of bit iotesrity ->(2) History of account; S700 order ac- cepted January, 1907: Notes for $560 run- ning to Mch., 1910. received in Apr . '07 Series paid in full June. 'JO; some sent to at- torney fof collection June, '08, (note in red ink);Aug. *08 opened account of $45.60 charged to bad debts, but collected later direct: Jan. "10. firm allowed debtor $50 on claim considered unjust; May, "10, properly statement asked and refused. -^' (3) House ledgerexperience sbowingtotal amount of business and highest credit limit with customer during '07, '08, '09 and '10. -^ (4) Personal history of customer; morals, iocludtn^customer'sstandingas to honesty, integrity, habits. Abilitycarriessaroeclass- ification. Business record shows facts as to bankruptcy anJ judgments or may be clear. ''////fn'''//j Udger Past Due mi J4jn .^J- Jil JH^ ■a vi" -»-(5) Ledger ac- counts past due. la Oct. 07. $25 was past due; In 1908 notes were due in April, May and June. Open Account of $4J past due inluly and August, 1908. ^ (61 Special meov oranda accepting extension of credit. Order for $1000 accepted Dec 'It to be shipped May '11. (7) Space for commercial agency reports. These show the successive ratings of the customer from the time be opened his account. ' (8) Name, address and business of customer I pencil when the credit man desires to refer agaio to the card - (9) Tickler date*. Checked i at a certain date (10) Credit limit; figures Indicate that a limit of $75 to$100 was set Sept.. 'It Accounts la - arrears must be sent after thirty days to the generol office for collection. FORM IV: Records which permit the credit man to make accurate de- cisions cut down the percentage of bad debts. This card, used by a Chicago wholesale house, carries a succinct account in cipher of a cuttomer's standing and trade history III IIB CHAPTER XIV How Credit Records Hold Down Bad Accounts CREDIT and collection records will reduce bad debts to a minimum and keep bad pay orders off your books. While methods of keeping lists vary according to facts which require emphasis in any particular busi- ness, whether retail, professional, public utility, instal- ment or manufacturing and jobbing, the general prin- ciples underlying record keeping are the same. Make your files show in every case: 1. The business and social record of the prospect who applies for credit. 2. A condensed record of the customer's business re- lations with the house. Your first file, in greater or less detail, outlines the customer's ability, responsibility, morals and social standing as judged by his neighbors, by banks, by commercial agencies, and as noted by personal observa- tion or by your special investigators. The second record shows amount of sales, habits of payment, past credit records, apparent increase or decrease of customer's business, activity of competitors ; in fact, all information on which the banker or credit man bases judgment in 102 LISTS AND RECORDS passing on any application for a loan. The retail storekeeper, as a general rule, knows his customers personally or depends upon his observation by neighbors and clerks to keep him posted on the charge buyer's affairs. Becavise accounts in the retail store are generally small, and because customers are as KAYNOR BROS Fourth and Pearl Sta. EUenstnirg 191 ..^ For value received aod jncQnsideratioD tbatKAYNOR BROS sell goods and mercbaadite upon /•>«■<;««/» of I ■ County oi _^_— ___-—__— ^—— and State of ,1 do hereby guaraoteeto saidJlAYNOR BROS the paymeat, at nuturity. ot all bill* of good) and merchandise so sold by them to the said from timc^to time, 00 and after the date hereof, uotU written notice of the withdrawal of this guaranty has been served by upon thetaid gLAYNOR^BROS This guaranty is executed with the onderttaadiOB that liahiiify shall at no time exceed — . . Dolttl*. FORM V: This guaranty requested when the worth of an applicant for retail credit is in question, is as acceptable as a promissory note in protecting an account a rule unacquainted with business ways, you will care to do very little direct questioning of the applicant. If your preliminary questions develop the fact that the prospect is a property owner, or otherwise ought to be able to pay, ask for three or four references — the best are names of other stores with which he deals — and let him go. In case you doubt the worth of the applicant, ask for a guarantor. The guarantor fills out a blank (Form V) which effectually protects the merchant. Lay the greatest emphasis on the store record of your customer. Watching it will develop pertinent credit facts which you will need to know. The retail credit HOLDING DOWN BAD ACCOUNTS 103 man has learned to depend upon a record of goods bought and the method of payment as a final check in raising the credit limit or closing an account. Week by week figures trace the buyer's financial health. How the Instalment House Credit Man Fixes Upon the Worth of a Prospective Custcmer Instalment men practically reverse the methods of the retailer in keeping credit records. Where the retail dealer takes people on trust and then watches their store NAME.....Zx^..sZ. RESIDENCE. . SjM.'Uh Change of tddrew. . }.K?J. .?f au^. Busioess AddraM ..J.]. .ZiXsn/Uftf^. ^i . Account Opened ..ShAk^tHl^J'jJ.tL^.: Account Closed ... .. .. Reiil Estate .2^".7..'y:.r^.7?J( Reletencc. . .•^/<^V^.. ?le^. .Q^?-^'-^ . i3*-JWkA<.i<^=WVi&^ Tina .JP..?(-?<^.. FORM VI: As information regarding a credit customer gathers, it is 5Ied in this enve- lope which carries on its face a condensed statement of its contents transactions to get a measure of their worth, the instal- ment man makes a final estimate of a prospect before goods are delivered. He deals largely with the improvident. He usually operates over wide areas. Unable to keep in personal touch with his people, he makes a searching first investi- 104 LISTS AND RECORDS gation of character and worth of the applicant. Later the size of a regular customer's account and an increase of credit depends solely upon the record of payments. The collection man takes one plunge and learns all that he can from his experience. touo^ 0«Tt ORDCH NO. PURCHASC ..TPA»M. II BALANCE 1 NAMC AOORCSS OCCUPATION ■ALCSMAH 1 DATE out AMOUKT DATCPAIQ DATIOUC 1 AMOUNT DATIPAIO DATceuc AMOUNT DATE PAID FORM Vnit Prompt payments fix the credit of the instalment customer. This ledger card easily accessible tells its story to the credit man Lead the instalment house prospect to buy when he enters the store. Wait until after his order is taken before bringing up the question of credit. Then your salesman may put the questions printed on the back of the sales slip (Form VII). Before your customer gets the goods, rigidly check the references he gives and the statements he makes. Question neighbors and acquaint- ances and probe every possible avenue of knowledge. When credit is decided on, make up an account card (Form VIII) for the customer. This gives you an abso- lute guide to your buyer and is all you need to consult when a re-order is made. Only the customer who pays his bills is good. If he does not show up as good pay, deny him further credit, unless the card shows that some HOLDING DOWN BAD ACCOUNTS 105 CONFIDENTIAL Acquaintance Blank Name in full (not initials) Husband lA/xXL^Ay,^-^ ^i^vyuiX^ x>-^ Present »^AAtcu>. S J S. / C^^u^^uLl QyiM^. Has lived there ZX'i^ years -py-nyt^ months Previous address S^ Ji/ CcuoJ^' ELa^j^ ^2o^ Lived there TliA^n*/ years months Will move to '>VT. Married or Single - Age (about) . (If single) Living at home or boarding . ¥2. Where employed: ^"'^ ^K\<;(n i= j^^ S. Bought on Monthly Payments before ? \kjSL. From whom: Firm ______________ Address . References: Name (ZA-o,^i^ / /ito^A^rrU Address T/^ O t^Xv S-c^ fiUL tfl^ .- FORM VII: These searching questions made by clerks give the instalment credit man a line on the desirability of the credit prospect 106 LISTS AND RECORDS extraordinary circumstances prevented him keeping the contract he signed. Keeping Track of Dealer Accounts for the Manu- facturer or Wholesaler Records in the wholesale house combine all the fea- tures of the instalment and retail schemes. An applica- tion for credit requires a sweeping examination of the STATEMENT rtRMNAMI , A0ORC86 PARTNCRS- NAMES. coon SINGLt , I BHOWINQ OF^ I EDWARDS & SON STOCK ON HAND. NOTES AND ACCOUNTS CASKONHANO. CMATTtL MORTGAGE ON STOCK. OWING ON STOCn. BonRoweomoNET. Due. NOT CUE, REAk ESTATE. EKEMPT REAk ESTATE. NOT EXEMPT. OTHER Pf RSONAL PROPERTT,. OTHCRASQETS TOW HOMOwmq. TOTAL ASSETS. CNCUMSRANCEli ON MOMCSTCAD. _ ENCUMBRANCE ON OTHER REAL ESTATE. _ MORTGAGE ON OTHER PERSONAL PROPERTT. . OTHER LIABILITJCS. _ TOTAL LIABILTIES, NET WORTH, INSURANCE ON STOCtS HOW LONG IN BUSINESS. 4 OTHER PROPERTY™ LESFORiPAST VEAR . n£reRENCEs:fr«« t ABOVt IS COFtRCCT. THA' lAiO COWARDS A. SON I i CXCCPT AS ASOVK G FORM IX: By this statement of assets and liabilities,^ the wholesale credit man hai definite facts upon which to ba.se judgment HOLDING DOWN BAD ACCOUNTS 107 prospect's affairs, in which the credit man not only ex- hausts the possibilities of personal investigation, but turns to his many outside aids for help. Make your applicant write a schedule of his assets and liabilities (Form IX) in as great detail as if he applied for a loan at a bank. Check this by reports from agencies, banks, lawyers and other sources devel- oped in your business experience. After credit has been allowed, keep your record revised by additional reports from time to time and by a study of the customer's rec- ord within the house. This will show the possibility of expanding business. It will give a line on your com- petitors and act as a barometer of business conditions. It will determine the tone of your collection efforts in case your man falls into the bad pay class, and will, in other ways, help to eliminate guesswork in regard to credit business. To allow the transaction of credit business with the deft sureness and mathematical certainty that prevents accumulation of bad debts requires the choice, record and study of significant facts. In the measure that you train yourself to choose vital facts and read them clearly will your records be brief and helpful. LET your debtor know that a per- sonal interest attaches to him — a real personal interest that is not meas- ured wholly by his orders and his dollars. — Daniel Louis Hanson CHAPTER XV Making Collection Routine Automatic PROMPTNE SS— Accuracy— Regularity ' '—the three words printed on white cards, and occupying prom- inent places on the walls of the credit department, con- tain the essentials of the collection system of a St. Paul wholesale house. The concern has little trouble with bad debts. Method, perfected after years of experimenting, has reduced col- lection routine to automatic system. Reminders and cor- rections for merely careless and stupid debtors are standardized and the time ordinarily spent upon them is devoted to handling accounts which are shaping towards serious losses. The credit man, relieved of detail, busies himself with schemes which will bring the department up to a point of greater all-around efficiency. The sys- tem rests on these principles of collection : 1. Automatic regularity in following delinquent debtors. 2. Close cooperation between bookkeeper, cashier and collector. An invoice is first enclosed with the notice of ship- ment. On the first day of the following month, unless other terms of sale have been agreed to, a statement is 108 MAKING ROUTINE AUTOMATIC 109 mailed. Thirty days later a second statement is sent out with the conventional "Past Due" stamp upon it. If the debtor is not heard from in fifteen days, the book- keeper marks the ledger page with a red clip showing that the amount is in collection. He then fills out a card (Form X), with the name and address of debtor and a statement of the account, including any information which will assist the collector in obtaining settlement. The credit man on his part keeps the bookkeeper posted as to collection methods. A green marker on the ledger pages show that the debtor is in the bad pay class, while a black marker shows that the account is precarious and final efi'orts to secure payment are being made. The collector in using the cards follows the debtor at regular intervals of fifteen days, A check mark in the blank space below the number at the top of the card shows when the second letter is to be written. The card is kept in a file numbered with the days of the month, and every morning the office-boy picks out the cards of the day and places them on the collection man's desk. As each collection letter goes forward a condensed state- ment of its contents is noted in the lines marked "in action" and the debtor's replies are "boiled down" in the same way. Before the new system was adopted, debtors were angered at receiving duns after having paid. To avoid this error, a summary of the ledger account was placed on the card. The bookkeeper in making out the card shows in the top line the date and the balance due. When remittances are received, the cashier enters them on the credit column before turning money over to the bookkeeper. In this way collection efforts are instantly stopped on receipt of remittance. 110 LISTS AND RECORDS MAKING ROUTINE AUTOMATIC 111 Copies of letters and replies are filed in an envelope (Form XI) for detailed study when desired. The top ..... 1 [ 3 6 7 9 11 13 15 17 19 21 23 25 27 29 31 TOWN N*MC successon eR*NCM FILE «N rce MAO .P« «.v JUNE JUL *uc SCPT OCT NOV oec .« FORM XI: Quick reference to correspondence is necessary in handling accounts Envelopes with double ticklers save footsteps line of tickler dates refers to the live files, and as long as dates are checked in the top row of squares the cor- respondence is kept in the office. rOLIO 1 LIMIT DATE MONTH AMOUNT NAMC ncsiocNce ausiNcss Aooncss PMONE LETTEB COLLECTOn rOBWABD ^„^ ^^ ,.-. '— . -^ y \ FORM XII: Retail cards carry in addition to a statement of debts, three ways of showing an account in action When an account becomes dead for any reason the filing clerk notes in the bottom row the date of remov- ing correspondence to the dead files. Correspondence that has not been handled in one year is removed. Year 112 LISTS AND RECORDS and month are noted in the proper square and manu- script is sent to storage, where it remains five years be- fore being destroyed. A retail man uses a similar system whan making mail collections, except that in order to keep a tight rein on KEEP THIS CARD Memorandum of Account Account No.. 7/.SS Total amount of Contract, Amount paid, Balance, Due in Chicago the first day of each month, % J/ — £^-0 s <:>-e> Keep your record of payments here. FORM XIII: Cards sent to instalment mail order buyers are ready reminders and allow the buyer to check his payments and prevent disputes delinquents, he sends a second statement on the loth of the month succeeding date of sale. As telephone and street collector supplement mail efforts, the retail man MAKING ROUTINE AUTOMATIC 113 uses a tickler card (P\)rm XII) which has columns show- ing the methods of collection efforts. When the account is placed in the hands of a street collector, a special card is made out. This carries a statement of the account on its face. The reverse side is As our low prices and easy payment plan depend upon regu- larity in collection methoda, we have arranged for your conTenience this Uemorandum of Account card. We believe that you would prefer NOT to he annoyed each month with even the simplest kind of a reminder regarding small payments of this kind. It is therefore suggested that you keep this card in a place convenient for reference which will obviate the pos- sibility of payment being overlooked when due. Yours very truly. FORM XIV: The back of form XIII carries this notice of the instalment pajonent plan for brief reports by the collector. When the account is first placed in the collector's hands, he gets a white card. When the debt gets old, the white card is replaced by a red one as a signal to "go the limit." Some instalment houses successfully use duplicate statements as collection records. These are filed in the tickler, to appear a few days before the date on which the debtor has agreed to pay. As a result, the debtor gets a gentle reminder at the time the bill is due. When he falls into the bad pay class the triplicate statements, which are made up similar to the wholesale card, are filed in a special drawer and the collector proceeds by mail according to the system used by wholesale houses. When debtors can be reached by street men or tele- phone, the system adopted by retail stores is used. The purpose of routine collecting is in its last analysis that of keeping a steady hand on delinquents. Like the horseman who keeps a constant, friendly grip on the reins, the creditor must exert an even, firm pressure on 114 LISTS AND RECORDS the delinquent. An experienced driver allows the colt to prance a bit when in the driver's judgment it is nec- essary, but he never uses the whip unless the animal is inclined to be mean. So treat the delinquent debtor. Humor him often, but never allow him to go back. Arrange your system to hold him constantly to your purpose — paying up. Save your personality to manage hard prospects and untie the hard knots of collection. Drop the Inefficient Debtor CONSIDERABLE proportions of profit in nearly every business are lost to parasites of the commercial world whose finances are rated as "No good", who from sheer inefficiency, lack of judgment and "push" not only inflict serious losses upon those with whom they deal, but seemingly get no advantage out of it for themselves. This sort of a bad debt should be placed in the hands of a collection agency and is the sort that the creditor is pretty sure is worthless. Part V •^ CUTTING COLLECTION COSTS Test and Temper /^HECKS brought in by your third or fourth ^^ letter cost three or four fold collection ex- pense — plus the interest on capital rightfully yours but unavailable when due. Accounts followed to last resort— even when collected — pull down the average. Finally comes a point where cost overshadows returns. It's the collection steps before the successful one that knock oflF your charge account profits. Test those steps. Temper your collection tools to their tasks. Find the best letter — the shrewdest para- graph — the cleverest device — the best follow- up. Play your best cards first. Cut down the follow-up lists. Keep discontented; keep trying; watch for something new — more intimate — more personal and far-reaching — more profitable. Perfect your collection schemes and crowd down the cost. Test and temper. uS ■ii: :iiB SCORING THE EFFECTIVENESS OF YOUR COLLECTION LETTER Ltyyt^ /'Z.ayi.ycJL' ^ 6^^^-voC. JQA^d^ G-yvX a^ L. ^30 1221 'ill m Qi tun. la ^ 21 m^ pi Lk i^JlA i^ U n^ qja.:fA M. [At lA ^ HlilniliL:^! £^ i^ -^7 ii^ lA ^ ^IllL till m. tti ^ llA £2 c$ 2ii in tfo^. AH II^IL Ml tai^ lAl Al '1^ iC LiL III. lA Ak To m ^ /Of 11 iHL JA U. iiai Al ^ IL LJtf Jl m iik^ lit U2 J2 4 letters lacked. Following the hint brought out by the test, he substi- tuted the third letter for the first and checked the results as before. Returns, however, did not fully justify the change. Further study suggested the worth of the open- ing paragraph in the first letter. This was added to the argument and close of the third letter and made up the most effective letter he has ever developed. The tests secured a saving of time and routine, stamps, station- ery and interest on the deferred payments. How a Credit Man Tested, the Value of Enclosures in His Collection Letters In another section of the country a mail order col- lector conceived the idea that a selling circular would HOW TO TEST LETTERS 127 get results if enclosed in the first collection letter. ITie office council scoffed at the idea of selling goods in con- nection with a dunning letter, but the collector finally- won permission to test the scheme on a list of five hun- dred letters. The idea was successful ; tests and records — cold figures — disproved office guessing and theories. "Whenever a wholesale house collector on the Atlan'^ir seaboard encounters the necessity of changing the te^i of a collection letter, he writes his copy and submits it, not to the critical whims of his office associates, but to some of his debtors. Often the tests run over an inter- val of six months, but the records so secured make up a table of results which allow the collector to predict with certainty just what his average of returns for the year will be. If the time between collection letters seems too long, select a list of debtors, key trial letters and send them out on shorter intervals. Keep a record of results and let the debtor tell you by his payments whether the new idea is a good one. How to Make Your Returns frmn Collection Letters Prove the Value of New Schemes The greatest danger of new schemes lies in depending upon impressions. Take no man's opinion, no matter how expert he is, on whether a new scheme is good or bad. Try it. Selecting the list is merely the applica- tion of business sense. Be sure that it is representative. Consult your credit records; consider the time of test and of letters; watch locality, race and creed; note the little thing, such as weather and season of year. The time spent in making up lists for trial letters will pay for itself. 128 CUTTING THE COST One man found the value of selection when a letter which tested well in the city failed utterly in the coun- try. Analysis showed that the crisp, clean-cut business talk which won city dealers had no appeal to the coun- try man who had time to read a long letter. A new let- ter tested on a country list accurately forecasted results, The experiment failed the first time because the differ- t-j-ce in temperament had not been considered. Thus tests mold your "copy" to suit your reader. In another business, cause of failure lay in the differ- ence in type between northern and southern men. Sim- ilarly, an implement man who was about to reject a let- ter which pulled in tests, but which failed in practice, reconsidered his action at the thought that the tests had been made in an off-season while letters had been mailed during the farmers' busy months. Tests demonstrate the folly of blindly following prece- dent and routine. They point with unimpeachable accu- racy to good and bad letters. Tests show costs, estimate returns, detect blunders, check mistakes. Tests turn on the light in the collection department. The records are the proved charts by which the course of the collection correspondence may be accurately laid. PERSONALITY furnishes the key- note to every business proposition. Men, not money, are the determining factors in commercial and industrial undertakings. — Frederick W. 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