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COLLECTION LETTERS

"In credit and collection letters it is good tactics to assume at the beginning that the customer will pay.”—Better Letters Conference.

"It is a rule in this concern that all collection letters—and, in fact, all other letters that leave this manufacturing establishment—must be free from anything that might offend or antagonize. The collection department particularly realizes the importance of retaining the good-will of its trade and therefore endeavors to get in the money due us by friendly persuasion rather than by force." -Norman Lewis in "System."

THE

HE collection correspondent should strictly conform to the following two principles of business conduct:

(1) Adhere strictly to the policy of prompt collection of all money owed to the firm.

(2) Make every effort to retain the good-will of the customer.

(1) A house that adopts a lenient, haphazard policy of collection of accounts can not long keep pace with its competitors. The business concern constantly needs cash for the purchase of raw materials, and for factory improvements and extensions, and for increased salaries and commissions. If your competitors are more insistent than you are upon prompt collection of accounts due, they will be better able than you to buy raw material in quantity and, in consequence, to sell the finished product at a low price. For this reason, successful business men insist upon prompt payment of accounts.

It is an accepted principle underlying all business relations that a customer obligate himself in good faith and meet his obligations timely. Based upon this accepted principle, the request for payment is a just one. This in mind, the collection correspondent consistently avoids a "begging tone," conveyed by the use of such expressions as: "We regret very much to trouble you again concerning this overdue account.

He

eliminates, too, excuses and explanations calculated to convey the impression of his asking a "favor." The tone of the letter is straightforward, dignified, firm-courteous. He conveys clearly to the customer that his delinquency is a serious matter, that his obligation to pay the account promptly is one not to be lightly dismissed, that his delinquency marks the exception, and not the rule, in business practice.

(2) Concurrent with his policy of prompt collection, the correspondent makes every effort to keep the customer's good-will. He makes him feel that the firm is acting in all fairness in the matter; that it is willing to do and desirous of doing what is right. Rarely does it profit the firm to collect a debt at the expense of a customer's good-will.

This, however, does not apply to a very limited class of debtors whose good-will is of no value to you; debtors who make a practice of avoiding payment of their just obligations, who going from city to city with no forwarding address, leave in their crooked wake a trail of bad debts. Exact credit information, timely gained, will forestall entry of their names on open account in your books. In the vast majority of cases, the good-will of delinquent customers constitutes an important business asset; when they purchased your product, they had the honest intention of paying the bill when it should fall due.

It is safe, then, at the outset, to assume that the customer is a man of integrity; one who takes a just pride in his business standing; a man of sensitive human feelings, as jealous of his good name, and as resentful of any reflection cast upon it, as are you yourself, under like circumstances. If he does not respond to an appeal based upon this ground, proceed with sterner measures. But in doing so place the responsibility fairly and squarely where it belongs. Make it clear to him that his own neglect. compels you to draw a sight draft against him; that it is not your desire. to do so, and not your desire to resort to collection by legal means in any wise.

It is the usual business practice to write four letters before taking drastic steps to collect. The first collection letter ordinarily is sent out. a week after the account has fallen due; then, at intervals of about ten days, succeeding letters are mailed, each growing more insistent in tone.

In case delinquent petty accounts are numerous, the collection series is likely to consist in form letters, the same appeal being made to each of a number of customers. This exception aside, many firms find it worth while to do away altogether with form collection letters and to

write the customer personally, varying in individual cases the interval between letters and, as the case requires, shading off or intensifying the insistence of the request for payment. This course enables the correspondent to make use of credit information he may have at hand. He thus is properly in position to make a liberal offer of time extension to one customer who hitherto has met his bills promptly; or to reach a satisfactory agreement with another, worthy of trust, but, for some valid reason, temporarily without funds; or, to press his requests for payment upon a third customer who habitually neglects his business obligations. Each collection letter, even in series, must stand alone; that is, in an attitude of expectation that the customer will pay without further reminder. The debtor must feel that each letter is the last the firm expects to write in collecting his account.

The following are the first four letters sent by one business concern to another. They illustrate in brief the cardinal principles underlying the writing of collection letters.

The first letter, mailed September 10:

Gentlemen:

Doubtless you have overlooked our invoice of July 5 which amounts to $280.50. On our net 60 days' basis this became due on September 3.

If you find our invoice to be correct an early payment will be appreciated.

The above letter is a courteous reminder that the bill has not been paid. It gives the pertinent facts concerning the amount of the bill and the length of time overdue, facts which are repeated for the customer's information in each of the subsequent letters of the series. The correspondent takes the attitude that non-payment of the bill is due to oversight: "Doubtless you have overlooked our invoice of July 5 which amounts to $280.50." He makes clear to the customer that failure to pay the bill promptly constitutes an unusual, if not a serious, situation. Care is taken, however, to avoid impugning the customer's good faith in meeting his obligations.

The second letter, mailed September 20:

Gentlemen:

On September 10 we wrote you concerning your overdue account of July 5 amounting to $280.50.

Since we have not heard from you, we are wondering whether there are some items on the bill that are not clear. We are therefore, inclosing a duplicate copy of the invoice. Please check it over carefully and see if each item tallies with your records. If not, write us frankly and we shall be glad to correct any error. Otherwise we shall expect immediate payment.

Having read the first letter of the collection series, the customer is aware that the bill is overdue; it is no longer likely that non-payment is due to an oversight. The second letter, therefore, generally assumes that he must have some other reason for failure to pay. As a rule the purpose of this second letter is to open the way to the customer for an explanation of this reason. The aim is twofold:

(1) To eliminate any possibility of misunderstanding that might affect adversely the friendly relations between the house and the customer.

(2) To impress upon the customer the fair-minded attitude of co-operation that marks the effort of the house to collect the bill.

Note that the tone of the second letter is more insistent than that of the first. The more urgent expression, "we shall expect immediate payment," has replaced the milder, "an early payment will be appreciated."

The third letter, mailed October 1:

Gentlemen:

Up to this writing no answer has been received to our letters of September 10 and September 20, requesting payment of our overdue invoice of July 5 for $280.50.

The material invoiced in this transaction was shipped to you in good faith, and payment for it was arranged for on definite terms, which, in fairness to our many other good customers, should without exception be lived up to.

We do not feel that we can allow you a further extension of time on this account and request that you send us your check for $280.50 to be received not later than Monday, October 7.

By the time the writing of the third letter is taken up, the cor

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