RETAILERS' COLLECTION METHODS 1. General principles.—While the collection of ac counts past due involves the same principles in retail and wholesale establishments, there are, nevertheless, some important differences in the methods employed in effecting the collections.
The basic collection principles are, of course, the same. These arc, as we have seen (1) that every credit transaction is a contract the terms of which arc binding upon both parties thereto, and (2) that the creditor is entitled to all necessary information re lating to the debtor's ability to make payment accord ing to the terms of sale. While the wholesaler deals with men who themselves are in business, and who therefore may be supposed to understand business principles, the majority of the retailer's credit cus tomers are not in business. Except in certain lines of business they are chiefly women, and this fact neces sitates different methods in collections. Not that women are less honest than men—probably the re verse is true—but they are not always so punctual in payment of bills. The creditor's reminder of an elapsed payment date often seems to them a reflection upon their integrity; and they do not consider the fact that payments withheld involve a loss to the merchant in depriving him of the use of his capital.
In large department stores, such as Wanamaker's in New York City, where the charge accounts are said to number well over one hundred and fifty thousand, the total amount of outstanding capital is of course very large ; and unless collections are made with regularity, the financial burden placed upon the house becomes a heavy one. When, moreover, it is consid ered that customers who have charge accounts pay no higher prices for their purchases than those who pay cash at the counter, the justice of insisting upon regularity in payments is readily seen.
2. Prevailing collection policies.—From the stand point of the house, prompt collection is a matter of great importance, yet fear of offending a customer often dictates a collection policy that, viewed from any other standpoint, is wholly unwarranted. In some of the larger retail stores the rule obtains that an account must be sixty days overdue before the customer's attention is called to the matter, and then only in the mildest form possible. Subsequent no
tices are usually apologetic, and generally give the impression that the customer need not be in the least disturbed about the account, but may consult his—or her—own convenience in the matter of making pay ments. The collection policy of such houses may be said to be, in effect: "Get the money, if you can; but under no circumstances offend the customer!" Frequently, in such houses, a customer will ask that no monthly statements be sent. His (or her) wishes are promptly complied with. Others—and their number is much larger—do not wish to be called upon by the store's collector. Again, the customer's wishes are respected. Still others do not wish to be reminded of their indebtedness oftener than once, or at most twice, a year. If the customer is believed to be financially responsible beyond a doubt, this conces sion too is readily granted.
It is somewhat surprising to learn that despite this apparent laxity in collection methods, the actual losses from unpaid debts that are finally written off to profit and loss, represent only a very small percentage of the total volume of yearly sales. But the indirect losses caused by customers who disregard payment terms, who pay only "when they get ready" and who thus tie up part of the merchant's capital for months and sometimes even for years, are unquestionably very large. Such habits of the customer are in a great majority of cases simply the result of indiffer ence and in no wise caused by inability to pay, but this does not mitigate the economic result.
3. Importance of correct initial attitude.—Tardi ness in payment is often induced by the credit man's own attitude at the time when the account is opened. If he asks merely perfunctory questions and makes no reference to a credit limit, as is often the case, tho a limit is always put upon the account in the books, the customer carries away the impression that the house has no anxiety whatever about payments, and promptly adjusts himself to this attitude. Under these circumstances a good share of the blame for subsequent tardiness or delinquency must be placed on the credit department of the store.