Frequently, however, the question of the amount of credit desired is in some way asked at the outset, and the time of payment is also briefly discussed. The customer may go away from the interview with the understanding that monthly purchases are not to exceed fifty dollars, and that payments for the month's purchases are to be made on or before the tenth of the month following. She may buy within that limit during the first month, but may exceed it materially during the month following. At the same time, as experience shows, she may have forgotten or wholly ignored the agreement that payment was to be made within a certain date. As a matter of fact, initial agreements and stipulations of that nature are soon forgotten, or if not forgotten, at least freely ignored. It depends, accordingly, upon the skill and efficiency of the collection department whether such a customer is to live up to her agreement.
So long as the fear of losing the customer is greater than that of losing the firm's money, no really vigor ous collection methods can very well be followed. Courteous reminders in the form of periodically mailed statements and pleasantly worded letters have to be relied upon to bring the money; and only when these means fail must somewhat sterner measures be adopted. The latter may consist in turning the let ter-writing over to the "legal bureau," which usually is a part of the collection manager's office, tho the sta tionery and the address given suggest that the bureau is an independent organization, chiefly operated in the interest of the buying public for the protection of their credit standing. These letters are, as a rule, extremely courteous, and assume the tone of an im partial adviser, in which the possible in jury to the customer's credit resulting from an inferior credit reputation is gently pointed out.
If this procedure is found unavailing, the creditor has his choice between suing for the amount and con tinuing his dunning methods. The former course is frequently ineffective, since there may be no property beyond the legal exemptions upon which the creditor could levy. It is also undesirable for another reason. A reputation for readily suing delinquent debtors is one that repels trade—at least from customers who desire to have a charge account. Legal measures are generally resorted to only when there is certainty that a judgment can be satisfied, and when it is patent that the debtor has no intention of settling the account amicably.
Lax payment-habits could often be avoided if a right attitude toward the subject were definitely taken at the opening of the account and persistently main tained thereafter. Such a course now generally
adopted by wholesalers in their credit relations with the retail trade demonstrates that bad payment-habits are not incurable, and that a creditor's insistence upon fairness and justice does not drive away desirable trade. The success of this movement gives ground for belief that a similar effect would follow a similar attitude on the part of merchants in the retail trade.
4. The apologetic attitude.—The present general practice in a majority of the larger retail stores is to send a statement once a month unless otherwise di rected by the customer. In some stores, however, un less the account is materially in arrears, a statement is sent only once every two months. Such statement is, of course, merely an itemized list of the month's purchases, added to the balance remaining unpaid from the preceding month. When repeated state ments fail to bring a payment, a brief note is usually sent.
A second letter may be sent after an interval of two weeks or more, if the first brings no response.
As soon as word is received from the customer, the next letter is phrased to meet the attitude revealed therein. If she is annoyed, the letter usually becomes apologetic, and assurance is given that there will be no further cause for complaint. If promise is made of payment, the letter expresses gratitude for the promise given. If the customer writes an evasive letter, the house collector may be directed to call, in order to learn, if he can, the actual reason for the non-payment of the account.
From this point onward, the tone and frequency of the missives are wholly governed by the customer's attitude and action.
5. A correct collection attitude.—While conditions differ and while stores that cater to the better class of customers can probably afford to maintain a liberal • collection policy, there are other houses in which such a policy would be almost ruinous. The merchant with limited capital who allows accounts receivable to become unduly large, incurs the grave danger of be ing himself unable to meet his merchandise bills when these fall due. He should adopt a policy that is both sound economically and practical commercially.
That policy consists in making every charge cus tomer understand from the beginning the mutual aspect of a credit transaction, and in fixing not only a definite credit limit but also the time and manner in which the account is to be paid. On the first day following the due date, in case payment has not been received, let a letter be sent to the customer re minding her that the omission is in violation of her own agreement.