4. Reciprocity a necessary element.—Obviously such a system demands of each participant absolute fairness and constant readiness to furnish such infor mation as may legitimately be asked. Without the whole-hearted cooperation of all, the best results are not attainable.
In order to avoid abuses of this nature, the Credit Men's Association, under whose auspices the report form above illustrated was prepared, has drawn up a series of rules to govern exchange of credit informa tion among its members.
An example of reciprocal exchange of credit in formation is furnished by the manufacturing hat ters who sell to the jobbing trade. Their entire prod uct is put on the market thru about a dozen commis sion houses. These commission men cooperate in handling the trade. An actuary is hired by them, and to him all orders and payments are submitted.
5. Operating thru a central bureau.—While a sat isfactory system of credit interchange may be con ducted without the aid of a central bureau, partic ularly if operated on a small scale, it is usually found more convenient to maintain such a bureau, since this permits the information sought by members to be obtained more quickly and thereby to be made more readily available to them.
The following describes a way in which this work is commonly carried on: Let us assume that fifty wholesale houses agree to participate in exchange of credit experience, and that a central bureau is established and provided with a clerk or secretary in charge. The first step consists of giving to each member a number, and of preparing and distributing among such members a list of firms with their respective numbers. The next step is to file with the bureau a complete list of active custo mers, including all who have bought goods within a certain period—say, two years. A card is made out for each of these customers and is filed alphabetically. Upon each of these cards are entered the numbers of those houses that are shown to be selling the dealer whose name the card bears. Accordingly, as the clerk picks up a dealer's card he can tell at a glance what members are interested in that particular cus tomer. He knows, therefore, where information about that dealer may be had, and he also knows what members among the fifty will be interested in learn ing of any change, favorable or unfavorable, that may occur in that dealer's condition.
Suppose an order comes to one of the fifty from a dealer with whom he has had no previous business. He promptly sends this dealer's name to the central bureau, and the clerk, upon examining the cards on file, discovers on this dealer's card the numbers of, say, three of the members. He thereupon enters the
three numbers upon the inquiry form and returns it to the inquirer, thereby informing the latter where information about his new customer may be obtained. The desired information may then be obtained by means of three letters or three telephone calls. The inquiring member may learn in this way that the dealer's credit is being shut off by his former supply houses on account of delinquency or unfair treatment, and may find in this fact an explanation of the re ceipt of the unsolicited order that prompted his in quiry. His treatment of the order henceforward will, of course, be governed by the information he has ob tained thru the bureau. He may decide to request a financial statement before consenting to fill the order, or if the information justifies such a course, he may even demand cash in advance. If on the other hand the inquirer should learn that the dealer is pay ing his bills promptly, that he buys his goods care fully, and that in other respects he acts the part of a model customer, he would of course be disposed to fill the order on the usual credit terms, even if he should deem it advisable to carry his investiga tion a little further before actually shipping the goods.
Such a method can be used to advantage only when all the participating members live in the same city or within easy communicating distance of one an other.
6. Credit clearing.—Under another plan, also op erated locally, tho gradually extending its field of operation, both inquiries and the information are re ceived at a central office, and from there distributed among the members. Suppose that the morning's mail brings to the central office ten inquiries concern ing dealers who buy in the local market. The names of the parties inquired about are entered upon a re port sheet, and this sheet is distributed by messenger among the members. Thereupon each member to whom the sheet is sent enters opposite the name of each dealer a statement of his experience with that dealer. In other words, if the dealer is or has been his customer, the member enters upon the sheet the amount now owing, what part of this amount is past due, and such other information relating to the custo mer's payment habits, etc., as is called for, or as may seem advisable to communicate.