CREDIT OFFICE ROUTINE 1. Essentials of a credit system.—The selection of a definite system for handling the work of the credit department is largely a matter of individual prefer .
ence, altho in every case certain fundamental con siderations must be given due recognition. Thus, the character of the business as well as its size and the many local conditions that exert an influence upon it, will in a large measure determine the various de tails of such a system. It is always desirable, how ever, that the system adopted should as far as possi ble automatically take care of the routine work of the department in order that the credit manager may be free to give adequate attention to matters of greater importance.
The system selected must in every case care for data of two kinds: (1) Outside information, such as agents' reports, the experience of other dealers, and so on; (2) inside information, such as is gathered from the correspondence and the ledgers, and from the records of the collection department.
Every well-organized credit office system will, more over, provide for a close cooperation, not only with the accounting department, but with the sales and order departments. It will also, as a matter of course, be in constant and immediate touch with the collec tion department.
Broadly speaking, the test of a good credit office system is that it provides, with the least delay and chance of error, the information desired, and that it guards against mistakes and omissions on the part of the credit man himself by warning him automatically of dangerous accounts and of weakening customers. It will be of interest to see how this is clone in the case of an ordinary wholesale house. Tho the method de scribed will not, of course, fit equally well every kind and condition of business, it should, nevertheless, be suggestive as to the essential points to be covered by such a system.
2. An illustrative method.—Usually, the credit man begins his business day by examining the con tents of the morning's mail. From this source lie obtains considerable information with regard to the state of collections without having to consult the led ger accounts every day. He sees, for example, what
customers are taking advantage of cash discounts, and knows also at once when a draft has been re turned by the bank uncollected. He also sees what new orders are received without having to wait for the reports that are sent in by the sales department and by other departments. At the same time, he is kept in touch with the latest news concerning business conditions within the trade, complaints of customers and matters of a similar nature.
In admitting a new customer to the firm's ledger, the most important question concerns the credit stand ing of the newcomer. It is also important that the name and address be correctly recorded, and that a system be devised which permits all credit informa tion relating to the new customer to be instantly avail able and so arranged as to serve as a guide for the credit man in passing upon subsequent orders from the same source.
3. Requesting a signed statement.—Frequently the information obtainable from outside sources is so meager as to be wholly inadequate for the purpose of granting credit. Frequently, too, the information at hand is too old to assure us that it accurately repre sents the credit-seeker's condition at the present mo ment. Under such circumstances, it may be deemed necessary to obtain a signed financial statement from the credit-seeker before the credit department can check the order. It is important, of course, that a request of this nature be made as tactfully as possible, lest it should offend the recipient and cause the loss of a profitable customer.
If, on receipt of such a letter, the customer ignores the request for a financial statement it is safe to assume that he has ample reason for withholding the information. Very likely he has something to con ceal. It is safer, under the circumstances, that his trade be permitted to go elsewhere. If he sends a statement, the credit man proceeds to analyze it, and bases his judgment upon such statement either with or without corroborative information.