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Handling Time Sales
By the Retail Music Merchant
Second of a Series of Three Articles by P. R. Bowers, Credit Man-
ager of the Aeolian Co., New York, Discussing the Function of the
Credit Man in the Organizations of the Retail Music Merchants
HE credit manager now has before him
all the facts and proceeds with the
analysis. First, the contract or agree-
ment. Was it signed by the party to whom it
was made out? Was it properly witnessed,
dated, what initial or down payment was agreed
upon and has it been paid? Is the purchaser
of age?
All being in order, hu proceeds with the
terms. How long will the contract run? This
very important point is based on the variations
and the necessity for down payments in pro-
portion to the total bill of goods sold and in
keeping with the known depreciation of the
merchandise during the time the contract is
scheduled to run. The greater the depreciation
the larger the down payment should be and
the shorter the number of months or years
allowed. You readily see the reasons for this.
Using if I may, the New York Trust Co.'s
Index, we find in their report:
"The theory of instalment selling is recog-
nized as sound," states the Index. "The abuse
of the method is the danger that is feared.
"It is generally accepted that the article pur-
chased on instalments must have more than
ordinary value and permanence. Its value, for
example, throughout the instalment period must
be always greater, despite depreciation, than
the remaining instalments. Also the initial
payment must be large enough to be an in-
centive for meeting the remaining part of the
obligation."
Mr. Sloan, president of the General Motors
Corp., says, in part:
" . . .
We do not believe in down pay-
ments so small, extension of credit so long
or the selling of cars on conditions that mean
in reality the renting of the car rather than
the selling of same.
"The cost of such a procedure is an economic
loss and a substantial one, and must, like all
such losses, be borne by the public. Neither
do we believe that the carrying of terms so
far results in any permanent increase in the
total number of cars in use."
H. B. Tremaine, president of the Aeolian Co.,
in his communication to the Farmers' Loan &
Trust Co. on instalment buying, said:
" . . . ' The initial payment should be suf-
ficiently large so that it would be to the interest
of the customer to complete the purchase."
The credit manager, having satisfied himself
thus far that everything is proper, proceeds
with the application and supporting replies and
reports on the applicant's desirability as a cus-
tomer.
The Address
A well-informed credit manager knows the
various localities, he has a mental picture of
what might be called the east side of his com-
munity, the west side, he will know the slums,
the streets of the wealthy and the various for-
eign colonies or quarters. While you cannot
always judge a person by his neighborhood,
the address plays an important part in the
application and should be carefully rioted.
Stability
While character should be of first considera-
tion, we will make this the next order of
business, as a glance at the application without
T
any study will quickly classify the purchaser as
the "floater" or the "permanent type," about
which I spoke of earlier in the evening.
Character
This word alone speaks for itself and any-
thing I might say would be superfluous.
Reports
The findings of the outside investigator—the
7
7
/ / / 8 series of articles is based on lec-
tures given by I'. R. Bowers, Credit
Manager of the Aeolian Co., before the
School of Retailing of New York University;
this being his second year as lecturer before
that school. He has been connected with
the credit department of the Aeolian Co. for
nineteen years, is a contributor to the "Re-
tail Charge Account" and chairman of the
Instalment Activities Committee of the
Credit Men of New York.
clearance bureau's report and replies to refer-
ences furnished.
Rating of Account
At this point the credit manager should rale
the account while all the information is fresh
in his mind. This extra step requires but a
moment, but saves time and trouble later o\i,
and in doing this he reduces to a rating the
mass of information on which the account was
opened. I have used as a key the letter "A,
15, C and D," applied to responsibility, refer-
ence and risk. This is how it works.
Responsibility
A—1. Those who are possessed of means
other than that derived from their business
connections.
2. Proprietors, partners and officers of well-
established, reputable business firms or corpora-
tions.
3. Those retired from active business, who
are of unquestioned character and integrity.
B. Salaried employes. Those whose posi-
tions and places of business are permanent
(under normal conditions); whose only source
of income is their salary (or commissions).
(This class would include salesmen, department
managers, clerks, federal, state and city em-
ployes, etc.)
C. Day workers. Those who by reason of
their trade change their place of employment
more or less frequently, and whose income is
variable (due to slack seasons, trade booms or
depressions, etc.) (This class would include
carpenters, painters, bricklayers, shipworkers,
cloak and suit operators, etc.)
D. "The Profession." 1. This class would in-
clude actors and actresses, cabaret performers,
singers, artists, writers, journalists, interior
decorators. In this class should not be included
members of the above professions whose
reputations as good moral and financial risks
have been established.
2. Negroes, "East Indians," etc.
3. Men and women of questionable character,
or whose source of income is shrouded in mys-
tery. ("K. W.'s," gamblers, etc.)
References
A—1. References from established houses
who have had actual business experience wifh
the purchaser and who report bills paid
promptly.
2. References from banks, who have extended
accommodations, which have been met promptly.
B—1. Character references from banks or
well-established business houses or from officers
of these institutions.
C—1. Personal references from fairly reliable
sources, which in the judgment of the credit
men are sincere, and in which the references
given are apparently based on long personal
acquaintance with the purchaser.
D—1. References which are more or less
doubtful, but not sufficiently so to warrant can-
cellation of the sale ("chances").
Risk
A. Excellent.
B. Good.
C. Fair.
D. Doubtful.
Further Procedure
Having O. K.'d the account and before pass-
ing along the papers it is well, then and there,
to decide whether or not a "hotel or boarding
house notice" is necessary and determine
whether or not the contract should be filed as
a public record. This latter requirement will
be discussed later on in the evening.
Tfrms
Before leaving the application, let us again
take up the question of terms.
Many houses advertise "Pay it by the week
and you'll never miss it." Many of our large
furniture houses prefer to have the customer
pay by the week—they encourage weekly pay-
ments. First, they say and for many it is a
proven theory, "It brings the customers to the
store frequently—they see other articles they
would like, many buy our weekly specials for
cash," and, secondly, "It is easier for the low-
salaried class to pay by the week instead of
by the month." The weekly payment plan,
however, must be viewed from another angle,
the increase in bookkeeping and collection over-
head. I hear of one large department store
that changed from the weekly to the monthly
plan of collection and under no circumstances
would it go back to the weekly basis, and
another case of a large furniture house that is
working on the change. It is my personal
belief that the monthly payment plan is best,
all things considered, and I believe it will only
be a matter of time when the troublesome
weekly payment plan will be a system of the
past.
A. B. Lane in Finance Field
Allan B. Lane tendered his resignation as
president of the Shoninger Piano Co., New
York, in order to devote his entire efforts to
the direction of the Jeslyn Finance Corp. of
which he is president.