The talking machine world (Jan-June 1928)

Open and Lease Accounts in Phono.-Radio Stores Increasing the Efficiency of the Credit Department— Collecting Past Due Accounts By R. J. Cassell R. J. Cassell, formerly collection manager of Grinnell Bros., Detroit, the author of this interesting article on handling of open accounts, is the author of "The Art of Collecting". Other articles by him on various phases ot the music business will appear in forthcoming issues of The Talking Machine World. — Editor. IN the radio and talking machine business we find two classes of accounts, namely, open accounts and lease accounts. The first of these, open accounts, is unsecured, while the second class is protected by a lien on the goods until fully paid. While the lease accounts will make up the bulk of the business, every dealer will find it necessary to open accounts with customers and extend the usual thirty days for payment. As the open account part of the business is not the largest part it is apt to be neglected, and it is for this reason that it is worthy of careful consideration to the end that this branch of the work may be kept up to the standard. When goods are sold in this manner they are sold without security, and a good rule when collecting from customers who may have both kinds of accounts is: Open accounts first, interest on contracts second, and lease accounts last. Many customers prefer to reverse this order, but if my advice is followed it will insure the collection of the unsecured accounts first, which is obviously the only safe method. See that your cashier and collector are so instructed. Monthly Statements It is the almost invariable rule to send the customer a statement on the first of the month following the purchase of the goods, and right here let me state that it is .very important that these statements on open accounts be sent out so they reach the customer on the first day of each month to insure prompt payment. Many customers will pay the first bills that come in, and then, if they have used up all the available cash, they will put the other over until a future date. Let me therefore urge you to realize the importance of getting statements on open accounts out on the first of the month following purchase. Second Statement We will suppose that the first statement gives the terms as cash, which usually means that payment is due on the mailing of the first statement where credit has been extended. Some houses do not send out another statement until the first of the following month. It is to be noted that the particular customer and his general standing will influence the method by which the account is handled. Many customers will call or remit on receipt of the first statement. To those who do not pay by the 15th of the month a second statement is sent out. The second statement is not itemized but gives merely the amount "as per statement rendered," thus referring to the itemized first statement. The fact that a good many houses do not send out a second statement will show the customer that you expect him to pay according to. the terms under which he purchased the goods, but at the same time he cannot take exception, as, you have said nothing that could be criticized. Try out the second statement on your open accounts. Nature of the Follow-up At this point, that is thirty days after sending out the first statement, put the account in the hands of your collector or write a personal let ter. Some houses follow the practice, which used to obtain quite generally, of placing the account in the hands of their collector soon after the first statement was sent out. The practice is, however, nearly obsolete, and as a rule is neither economical nor advisable. Many business men of the present day are accustomed to receive statements and remit in payment by mail, and as long as they pay up promptly they are inclined to resent personal collections. Where collections can be made by mail, the economy is obvious. The letter — usually a form letter even though written to the individual, and signed — costs but a few cents to prepare and deliver to the recipient. A collection in person, on the other hand, requires the time of a collector, and in most cases, carfare, and save in the case of near-at-hand accounts, the expense is material. Nor are the results produced such as to justify the extra cost. Indeed, in many cases better results are produced by the use of letters. Follow-up Letters The nature and number of the letters sent to delinquent debtors will be governed by the condition of the particular account. Form letters are sometimes used for this purpose, with blank spaces left for the insertion of the name, amount due, and any other special data. Where, however, an account is material in amount, or the customer is a regular or important one, it is much better to have each letter written on the typewriter, even though the wording is taken from form letters, and to sign it either with the name of the collection manager or the name of the house. When this is done the letter becomes in fact a personal letter, and it will receive far more consideration than would be accorded a form letter, no matter how excellent. Operation of the Follow-up When the time for an active follow-up is reached, two statements have already been sent to the delinquent debtor; his account is, nominally at least, thirty days overdue; and the first of the month has been reached. On this day the first letter is sent to him, and if the followup is to be close, this is followed on the fifth and tenth of the month, or, in other words, the letters go out five days apart. The number of letters will depend on the nature of the account. The matter is then allowed to rest until the first of the following month. The debtor has now been given sixty days from the date of sending the first statement, and if neither payment nor any word of explanation has been received, the statement should be given to a collector with instructions to see the debtor and bring personal pressure to bear. The number of delinquents for the collector to look after will usually be small, as the statements, together with the follow-up letters, are effective with all but the most difficult cases. The collector must use every effort to see the delinquent customer, and by direct request, argument, persuasion, and any other lawful methods, try to secure payment. If the customer succeeds in eluding the collector, or the conditions are such that the collector cannot see him, a special delivery or registered letter will generally impress him with the importance of settling up or explaining why he cannot settle, or, better still, induce him to call at the store and thus give an opportunity for a personal interview. The latter is most satisfactory. R. J. Cassell If the debtor can be influenced to call at the store, the collection manager has him on his own ground, and before he gets away, should be able to make some adjustment of his account. It is obvious that the debtor has some income at least, that this will be spent, and that some one is going to get it; and the question is whether that some one will be your collection manager. He should keep firmly in mind the fact that the money is due; that the debtor is unjustly keeping it from your house, and he should not allow the debtor to take an injured air or in any other way place him at a disadvantage. The collection manager has a strong advantage in his surroundings and the conditions, and he should make the best of it. In any such case the debtor is almost sure to start out with the usual hard-luck story, which may or may not be true. Whether it is true or not, the collection manager should take an interest in it, and let the debtor feel that he is sympathetic and disposed to be friendly. This will frequently lead the debtor to tell more than he had originally intended and will thus give a better idea of the actual conditions, and show whether these really stand in the way of payment. It is usually good policy to make no offers of compromise or adjustments, but to take it for granted that the debtor will pay the full amount. There is a moral effect in this, for the debtor, feeling that the entire amount is expected, will frequently of his own accord suggest payment of a part. In such case he should be allowed to state just what he can do, and then such action should be taken as the conditions seem to indicate. Keeping in Touch With Delinquents Another point to be impressed on the debtor is the importance of keeping the house fully informed of his exact address, street and number, as much valuable time is lost in tracing debtors who have moved and who — though perhaps with no intention of evading payment — have failed to send their new address. It is a good plan to stamp on receipts, letters, and statements the following notice: IMPORTANT! Pleaso do not move without notifying us of your new address. This suggestion may seem simple, but in practice it will be found a great aid in keeping in touch with small debtors of the "moving" class. You want all the business you can get but you must have the money for the goods sold; so see to it that your credit man is careful to whom he extends credit and that your collection department follows-up the open accounts consistently and without loss of time. 10