How To Collect Debts

"The man who is in debt carries a world of trouble." - Burke.

HOW TO COLLECT DEBTS.

Pay as you go, or a strictly cash business, is the best and safest method of doing business.  But certain conditions or customs in trade make this sometimes impractical or impossible and credit must be given.  Under this method dishonest, careless or unfortunate people contract debts, then refuse, neglect or are unable to pay them, and collections, peaceable or forced, become a necessity.

The requisite steps to collect such debts are a matter of great importance and should be understood by everybody, but they are not, and much unpleasantness and heavy losses are often the result.

Methods by Which Debts are Contracted

Goods are bought on credit, to be paid for at a definite or indefinite future time.  Labor is employed, to be paid for at certain periods.  Lands, houses and other property are purchased under contract of future payment.  Money is borrowed, under notes, mortgages or other securities, and many other transactions in business and trade call forth occasions or present temptations to contract debts.

Suggestions for Avoiding Debts

1. Do a Strictly Cash Business. — Better small profits and quick sales, than large profits and long credits.

Mark your goods as low as possible and adhere unswervingly to your cash principle. This is best for buyer and seller. It avoids collections and prevents losses. It saves the time and labor of keeping accounts. This enables the seller to sell cheaper and the buyer to buy for less than on credit.

2. Cautions. — Goods sent abroad should be paid for before the purchaser takes possession.

The time of credit should be as short as possible and the bills collected when due.  When working for others collect your wages weekly or monthly, in accordance with the agreement to pay, unless your employer is quite responsible, thus making your dues safe.

In renting lands or houses, a duplicate lease should be made, one for each party, the rent paid promptly when due, at the house or business place of the landlord, and the payment credited on the back of the lease.

In receiving or making payments, a receipt should always be made out; it is a voucher and may save trouble.

Hotel and boarding-house keepers cannot be too prompt and strict in collecting their dues, as their customers are mostly transient, making forced collections sometimes impossible.

Never loan money without requiring a note or a duebill, if the amount is small; this is safest even between the most trusted friends.

When the loan is large, have the note secured by a mortgage on real estate; but see to it that the same is not encumbered by previous claims, which would render your security worthless.  It is safest to require an abstract of title and then have your mortgage recorded immediately.

This precaution should also be observed where a chattel mortgage is taken on personal property.

If a small amount of money has been loaned without security and it can apparently not be collected without legal process, it may be best to drop the matter and consider the loss so much paid for a lesson in business prudence.

First Steps in Making Collections 

These depend very much on circumstances.  The debtor may have met with reverses or a misfortune, rendering him unable to pay at the time specified, and deserving of patience, others may be careless and need a sharp reminder, a third party, inclined to be dishonest, may need close watching.  Thus discretion is necessary as to the form and tone of the letters requesting payment.

The composition of a letter requesting payment of an account is often a perplexing task, particularly if the person or firm is capable of paying, but careless about it. Such a letter, to be perfect, must not only obtain the money due, but do so without giving offense. Such letters should not, as a rule, be blunt or abrupt, but should courteously and clearly state the reasons for the request. If it becomes necessary to suggest placing the account in the hands of a collector, the suggestion should not be put in the form of a threat but in such language as will show your reluctance about using such means.

Generally speaking, a statement of the debtors account is usually all that is necessary to remind him that payment is expected when due.

If necessary to request prompt payment, something similar to the following may be used:

                                                                                             New York, N. Y.,  May 1, 1916.

Mr. D. C. GOWAN,
         Oswego, N. Y.

Dear Sir:—Inclosed please find statement of your account for April, which we trust you will find correct.

We would appreciate it if you will kindly check same at your earliest convenience and send us a N. Y. Draft for the amount.

Yours truly,

Smithson & Dewsnap.

If the debtor is tardy a second request might be worded as follows:

Mr. J. G. Homes,
          Newark,  N.J.

Dear Sir:— We respectfully call attention to your account, which is now some time past due, and ask if you cannot favor us with your check by return mail.

or

Not hearing from you regarding the amount of your account, now past due, we take the liberty of drawing on you at three days' sight, and trust that you will kindly honor the draft when presented.  
Thanking you in advance, we are,           Yours truly, 
                                                               Connor & Blaine. 
 

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Examples of Writing A Business Letter.

EXAMPLES OF BUSINESS LETTERS

Letter containing a Remittance

Canton, Ohio, Feb. 10, 19-

MESSRS. WILLIAMSON & CATON,

                                                   Williamsport, Pa.

Gentlemen:-- Enclosed please find N.Y. Draft for Sixty-five Dollars ($65.00), in settlement of your invoice of January 13th, which you will kindly and return.

                        Yours truly,
                              PETER SCHRADER.

                

 Letter Acknowledging Above

                                                                     Williamsport, Pa., Feb. 12, 19-

MR. PETER SCHRADER,

            Canton, Ohio.

     Dear Sir: Yours of the 10th inst., containing N.Y. Draft for sixty-five Dollars ($65.00), came to hand this morning.
     We enclose bill properly receipted, and wish to thank you for prompt settlement of your account.

                       Yours respectfully, WILLIAMSON & CATON.

 Letter Ordering Goods

                         120 Penn St. Scranton, Pa., May 1, 19-

MESSRS. GEO. M. HILL & Co.,

        110 W. Jackson Blvd., Chicago, Ill.

    Gentlemen: Please ship by freight over the Penn. Line the following books:

     50 copies Handy Encyclopedia, Cloth Binding

     10 copies Handy Encyclopedia, Half-Morocco Binding

     27 copies The Business Educator, Cloth Binding

     13 copies The Business Educator, Morocco Binding

     10 copies Bible Symbols, Cloth Binding

  Enclosed you will find P.O. money order for Fifty-seven Dollars ($57.00) in payment of above. Kindly ship as promptly as possible, and oblige.          Yours for success,

EDWIN LEWIS, Agent.

Calling Attention to Error in Invoice

Hamilton, Ohio, Jan. 27, 19-

MESSRS, DAVIS & HOLT,

    Cincinnati, Ohio.

Gentlemen:-- I find in checking your Invoice dated the 10th inst. for shipment of biscuits that you have overcharged me 15 cents per box on the plain sodas.  I herewith return said invoice and ask you to kindly send me a corrected one.

Respectfully,

 JAS. DOYLE.

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Financial Panics in America

Financial panics in America were common before the adoption of the Federal Reserve Act of December 23, 1913. They were chiefly due to the want of a centrally controlled banking system. That there had long been a movement among American bankers to remedy this deficiency is strikingly shown by the following extract from an article by the Hon. A. Piatt Andrew, published in the "American Academy of Political and Social Science" for November, 1910.

"No phase of recent American banking is more striking than the groping of over 25,000 independent banks toward some coherent organization and leadership. This is shown not merely in the consolidation of great city banks and the affiliation of banks and trust companies, but in the development of association and joint control through the clearing houses, and the absorption on the part of these institutions of new and far-reaching functions. The adoption of methods of mutual supervision through clearing-house bank examinations which has been so much in evidence in western and middle cities during recent years is one step in this direction. The more careful regulations governing the conduct of firms which are admitted to membership in the clearing-house, and with regard to the non-member institutions which clear through members, about which so much controversy has centered during, recent years in New York, is another instance of the same tendency. Above all, the resort to clearing-house loan certificates in times of unsettlement which became so surprisingly general throughout the country in 1907 is the best illustration of the way in which our banks are forced at times to act together under common leadership. It shows, too. how an ingenious people can improvise a needed institution if it does not already exist.

"The operations of the clearing-house associations during the panic of 1907 were essentially akin to the ordinary functions of the Bank of England, the Reichsbank, and the Bank of France. With the banks as customers, these clearing-house associations made loans on collateral, re-discounted notes, and made the reserves of all of the banks available for each other in practically the same way as do the great national banks of Europe. The operations were of an identical nature, but there were two essential differences in form and in measure of effectiveness. First, the arrangements had to be devised in the stress of an emergency, and only began to operate after the panic had become acute, and it was no longer possible to forestall the general collapse. Second, there was no general clearing-house association for the country as a whole, and even though the banks of each locality were able by a belated expedient to pool their reserves and transform their commercial paper into available, liquid assets, there was no arrangement for a similar settlement of accounts as between different cities. Hence the struggle which was witnessed, of each locality endeavoring to fortify itself at the expense of every other locality — a spectacle which could not have occurred in any European country and which we ought to make impossible of recurrence here."

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FINANCE, CREDIT AND COMMERCIAL EXCHANGE.

Money and Credit are so closely interwoven with the commercial life of a nation that it is essential for every person engaged in business to have some knowledge of the part which they play in it.

The Part Played by Banks.-- As generally understood, bankers are merely middle men who borrow from one set of persons at a rate in order to lend to another set at a greater rate, the difference between the two rates being their margin of profit. But in reality they are much more than this. They are conservers of a nation's capital and promoters of its trade and industry.
The most common function of banks is the discount of commercial paper running for short periods of time and representing actual transfers of property in the business world. In this way the bank exchanges its well known credit for the less known credit of merchants and manufacturers.

How Banks Increase the Potency of Capital.-- By means of banking, a given amount of wealth acquires nearly the same potency when diffused among millions as when concentrated in the hands of a few. Banks take the place of large capitalists; they gather into one fund the small savings or reserve-wealth of the masses, and thus render these as available for the employment of labor as if they belonged to a single possessor. And also they supply the knowledge and enterprise requisite for the employment of that wealth, which is in great part wanting on the part of the actual owners of it. Hence the banking system accomplishes the same results as if the wealth of a country were concentrated in the hands of a few large capitalists, and yet allows of that wealth being actually diffused among tens of thousands of owners. The banking system, in short, immensely increases the potency of capital, which has quite as much to do with national progress as the actual amount of national wealth.

Banks, as before stated, take the place of large capitalists; so that the money expended by the wealthy and enterprising portion of the community in trade or industrial works, such as railways, etc., although dispersed in wage payments among the laboring classes, who do not themselves employ the money thus acquired in reproductive industry, is not thereby withdrawn from production, seeing that it immediately finds its way back into the banks, who employ it just as a large capitalist would.

If there were no banks, a large portion of the money employed in the construction of a railway would stagnate as small hoards in the hands of thousands of owners, and a very long period would elapse before it became again available for production by returning it into the hands of large capitalists; whereas, through the agency of banks, the small sums are quickly re-united, and become disposable anew for industrial investment. In this way capital is re-collected as soon as dispersed, and hence, by means of Banking, the reserve-wealth of a country, although ceaselessly dispersed in industrial expenditure, practically remains massed or concentrated in compartively few hands and therefore in the most effective condition for augmenting production. In this way a very large amount of capital which would otherwise become "fixed", in consequence of its being employed in industrial enterprise, immediately reappears as "floating" capital, available for similar investments by other parties.

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COMMERCE.

"Commerce is King," remarked Thomas Carlyle, and if the aphorism was true in his day, how much more truthful and pertinent is it at the present time! To it England owes her wealth, power, dominion and influence, and by means of it America bids fair to outstrip all history in the achievement of commercial success and importance.

The close and steadfast pressing of our material interests during the past twenty years; the wonderful inventive genius of our people, so richly productive in labor and time-saving devices and processes of manufacture, and their aggressive, inquisitive and enterprising spirit have combined to place this nation in the front ranks, if not in the lead, of the great civilized powers of the world. The political expansion of the United States is only a visible and symbolical representation of the growth in commerce, manufacture, art, education and general progress. With our varied climates extending now from the tropics to the frozen north, our vast seaboard, expansive lakes, broad, rolling rivers, exhaustless mineral and agricultural wealth, no argument is necessary to establish beyond peradventure the manifest destiny of this nation.

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