Generally speaking, close collecting is highly efficient in the world of business collections. When money is due it should be paid. Many debtors think that if they pay interest on their accounts the concern with which they are doing business should be willing to carry them indefinitely. When, however, it is taken into consideration that a business can and should make from 10 to 20 per cent or more on the cash capital employed, it is clear that 6 per cent from a customer is not an adequate consideration for carrying the account. Nor does the ordinary mercantile concern desire to engage in the business of loaning money. The debtor should go to the bank if he wishes such accommodation.
The advantages of close collecting
Among the many advantages of close collecting is the obvious fact that the money is better employed in discounting bills, which means to many concerns a yearly saving of thousands of dollars, than in carrying overdue accounts. Buy right, discount bills, and it is easy to sell at a profit. But, unless the merchant has unusually ample capital, it is impossible for him to discount his bills unless his accounts are closely collected. A good system of collecting, rightly managed, is the equivalent of increased capital, and it is the lack of capital which causes no less than 32 per cent of all business failures.
Also, close collecting helps to retain good-will. A man who sustains large losses yearly because of failure to collect must charge a higher price for his goods in order to show a profit. The wise buyer is fully aware of this fact, and has much more confidence in, and is a great deal more willing to do business with, a man who insists on his money when it is due. Also close collecting often increases sales, for a delinquent debtor hesitates to add to a past-due account, even when this is permitted, and places his next order with the house which has compelled him to keep a clean slate.
To be sure, collections, and particularly close collections, must be handled with tact and judgment; but these are merely the ordinary qualifications of a successful collection manager. If the accounts are properly handled, the “worth while” customers will not object to close collections — in fact, as soon as they
understand that this is the rule and the custom of the concern, they will cheerfully fall into line, and will, as a mere matter of course, pay when payment is due.
This is true for the most part, but some men will always be found who can pay if they must, but who will not pay if they can avoid payment, and, if they must pay, will postpone the evil day to the uttermost. For this reason “keeping everlastingly at it” is necessary for success in the collection department.
No account is uncollected until the debtor has passed through bankruptcy, has died without leaving assets, has left the country, or has avoided payment until the account is outlawed — and even then the good collection manager does not entirely despair.